Lei gets right to it with his update that 13 ministries have combined to initiate measures to boost auto consumption as the economic growth is China has still gotten past its Zero COVID funk. Tu and Lei then take a few minutes to go over some economic data over the last few months.
Tu and Lei then move the discussion over to whether Audi can turn it around even after the announced partnership with SAIC for its EV platform. Tu then broadens out his discussion to all of ABB (Audi, BMW, Benz) and their chances to turn it around in China.
The discussion moves over to BYD and their ambitions in India and the challenges that still lie ahead of them as they make are looking to manufacture locally there. Tu spends a few minutes to give a history lesson the automotive sector's previous inroads into India.
Lei closes the podcast with a summary of NIO's Power Day. Tu and Lei share their thoughts on the statistics and accomplishments that were communicated for both the NIO charging infrastructure and swapping stations.
Lei gets right to it with his update that 13 ministries have combined to initiate measures to boost auto consumption as the economic growth is China has still gotten past its Zero COVID funk. Tu and Lei then take a few minutes to go over some economic data over the last few months.
Tu and Lei then move the discussion over to whether Audi can turn it around even after the announced partnership with SAIC for its EV platform. Tu then broadens out his discussion to all of ABB (Audi, BMW, Benz) and their chances to turn it around in China.
The discussion moves over to BYD and their ambitions in India and the challenges that still lie ahead of them as they make are looking to manufacture locally there. Tu spends a few minutes to give a history lesson the automotive sector's previous inroads into India.
Lei closes the podcast with a summary of NIO's Power Day. Tu and Lei share their thoughts on the statistics and accomplishments that were communicated for both the NIO charging infrastructure and swapping stations.
CEM #125 Transcript
Recorded 7/21/23
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, lots of news this week, 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. For those that are new to the show, welcome. And to our loyal listeners, welcome back. We ask that you please help us get the word out about China EVs & More to other enthusiasts and tune in again next week.
My name is Tu Le, I am the managing director at Sino Auto Insights, a global management consultancy that helps organizations bring innovative and tech-focused products and services to the transportation and mobility sectors. I write a free weekly newsletter that we pull many of our discussion topics from. You can sign up for it at sinoautoinsights.com, which of course I encourage you all to do. A Beijing bound Lei. Can you please introduce yourself, sir?
Lei Xing:
Good evening from Beijing. I've been here for just over a month, almost exactly a month yesterday to the day. This is your co-host Lei Xing, former chief editor of China Auto Review, and this is episode #125. So let's talk about what just happened today: 13 ministries and commissions and what have you, announced this latest measures to boost auto consumption, and especially emphasis to support NEVs yet again? What do you call that, another carrot? And this comes earlier…
Tu Le:
And a bit of concern. It sounds like they're pretty concerned.
Lei Xing:
This comes, earlier in the week when the GDP numbers for Q2 and the first half of the year came out. And there's obviously different angles to look at the economy. But when you combine these two things, I mean this is throughout the first, what 7 months of the year, we've seen several announcements come out voicing basic support for consumption. Not only NEVs, but autos in general, so I think it's what we've been talking about pretty much, quite often of this economy and what the government is thinking about boosting the consumption side of it, not only, I mean, parallel, there was another notice that came out on electronics, same day today. So that's the big news of today, if not the week.
Tu Le:
So a bit of background and for those that follow the Chinese economy or global economy pretty closely, the Chinese economy has had difficulties restarting completely since getting out of zero COVID strategy in January, effectively, or would you say, January or February?
Lei Xing
December.
Tu Le:
Yeah, December. And so the numbers, according to global economists, looked weaker than they had expected. China is looking at around a 5% growth rate for 2023, which is pretty low. Now, they're growing much faster than most other countries. I think the United States was at 2% or something like that. But remember that we're talking about two different, completely different economies here. And we also know that price war has really, really boosted the NEV sector. And I don't know if the government believes how much longer the price war can sustain, these boost in sales, at least on the NEVs side. I was reading today just this morning that ICE sales in 2023 have fallen by 8%. What we're seeing is a lot of concern because NEVs really need to make up for a lot of those lost sales on the ICE side, which is currently happening. But they obviously believe that there needs to be more stimulus in order to finish 2023 stronger than it started. But we should be paying attention to the overall Chinese economy. Because if people aren't confident, if people aren't feeling good about what's going on in China from an economic standpoint, they're going to keep those checkbooks closed, so which is a concern. Real estate pricing has been going down in China for quite a bit now. And a disproportionate amount of Chinese people's wealth is wrapped up in real estate. So, more so in China than a lot of the other established economies around the world. So.
Lei Xing:
Yeah, so in Beijing the real estate has been pretty stable, I would say, but some other areas have been worse off in terms of housing prices. But I think for the GDP or the economic numbers, the western media I think focused on several, the 6.5% growth was kind of inflated because of what happened in Q2 last year, right? So that's the caveat, and it was lower than consensus. I think it was like 7.3% or so for Q2. And then the quarter on quarter, Q2 over Q1 was 0.8%, right, growth, then June retail sales compared to May was actually down. And not only the western media, but me being down here, being in Beijing and talking to family friends, the issue of unemployment often comes up among the young. So 21.3%, I think was another record for the 16-24 year old group. So it is really a serious situation. And back to the measures announced today.
Tu Le:
Let me stop you there for a second Lei. Daisuke Wakabayashi, a New York Times journalist who's based in Seoul was interviewed for the New York Times Podcast. And he speaks specifically about real estate and the unemployment rate for those that are interested in learning about what's going on with the Chinese economy overall, less about cars and electronics, but just generally speaking, I think it's a 25-minute podcast and it's worth a listen for those that are wondering about how influential the real estate market and how dire for young people, the employment market looks. He, and one statistic he stated was that for the government jobs because in, when we lived there Lei, most young people didn't want to go to work for the government, and there are many opportunities to work in tech. That's changed now. And Daisuke said that for every one government job, there's 80 applications, on average. So anyways, moving back to EVs.
Lei Xing:
Yeah to the consumption boosting measures announced today. So any time when you have 13 different ministries and commissions jointly announce something on auto consumption, now that's very serious and significant, because there have been so far this year…
Tu Le:
That’s an all hands on deck kind of thing.
Lei Xing:
There have been individual announcements from MOFCOM, from NDRC, MIIT, but I mean taxation, customs bureau, finance, this is pretty significant, although there's still yet, you're talking about the ICEs because ICEs are still 70% of the market. And the only remaining wild card is whether we're still going to see some kind of a purchase tax incentive for the ICEs so that happened the second half of last year. And I mean that's, whatever have been announced, concrete measures, we already, right, we already know the extension of the NEV purchase tax exemption, that's one thing. And and this, I thought interesting some of the details. One thing I thought was interesting. So I’ve been driving the AVATR 11 and charging, there's two fees involved when you do a charging. So there's the electricity fee and then there's the service fee that combines into how much you pay, so let's say I pay RMB1.6 for fast charging per kWh. So in this measure, they talked about reducing this kind of service fee. And so these are all minute details.
Tu Le:
But it creates this more frictionless environment for new NEV buyers, which is trying to encourage them to buy.
Lei Xing:
And I think they're, out of the 10 measures, 10 points, I think two or three at least were on specifically on the support for again battery swapping.
Tu Le:
One of the ten, Lei, which, again, this is kind of an English translation. So I don't know you tell me how accurate this sounds. But they talked about accelerating the phase out of ICEs. I don't know in Chinese language, what, did you read that same thing?
Lei Xing:
No, I think there's a couple of things, so there's the used vehicle transactions, make it more convenient, but I think the bigger picture is really trading in for NEVs. So that's probably the kind of the wording that I would see.
Tu Le:
And so about the used car market, it's definitely not as mature as a Europe or the United States. And so that's another threat to the OEMs who are still trying to churn out millions and millions of cars. A robust used car market puts pressure on new car sales, obviously. And so if it gets built out, which it has been growing significantly over the last several quarters, that's another concerned for CEOs, specifically foreign CEOs.
Lei Xing:
Yeah, specifically on the mentioning of China 3 emissions and below vehicles, there's still vehicles running. And you can still upgrade to a latest emissions standard ICE vehicle. There's no problem, but the other thing was really, I thought, really number one out of the ten is to increase quotas in regions where there's restrictions in place. So that's a sign, really, I think whether it's economy as a priority or something else as priority. Let's say, restrictions, let's say, traffic. So that's pretty clear, I think to me, was…
Tu Le:
Or keeping the factories going, right?
Lei Xing:
Yeah.
Tu Le:
Let's differentiate between what the central government has, wanting, is wanting versus at the provincial level at the local level and municipal level. Because how it's interpreted should be different in Shanghai versus a Beijing versus a Changsha, Chengdu. And so there could be great intent from the central government in order to boost the economy. But a lot of these provincial leaders, they might be 3, 4, 5, 7 years, and they're wanting their promotion. And so the system is made so that sometimes it can be gamed, right? And so I think it's important to really kind of bring that up, because the central government might have these new policies to encourage X, Y and Z then they're interpreted differently, or because it's just really difficult to kind of have these checks and balances at the local level. So.
Lei Xing:
The other ones are really just the use and purchase of NEVs, the support of that on the public sector, right, transport and all that stuff.
Tu Le:
So I’m going to throw this out there Lei because if I'm the central government, I want to increase consumption and purchase of NEVs, then in the back of my head, I kind of want the price war to continue, but outwardly, you're saying that you want competitive companies, you want strong companies, but in order for, an easy lever is to keep these NEV pricing or MSRPs low. But the fear and the problem and the risk is that if they stay low for a prolonged period of time, these OEMs and these China EV first companies will not be able to get that margin back, because the consumer will expect razor thin margin.
Lei Xing:
That's the thing. In Beijing, for example, the last few times that I have checked out these showrooms every single time they tell me that before the end of August, there's this RMB10,000 incentives to trading a vehicle of 6 years and more, which I have, I have a car or my dad used to have a car that's a 2010 car and it’s a China 4 standard. And with the purchase tax exemption with that incentive trade-in and with also individual brands offering these, when you go to the showroom, they have these monthly incentives. It really makes you want to get an EV, because there’s these incentives going on.
Tu Le:
If you're trying to be thinking like a Chinese consumer, it would make you gun shy, though, a little bit too, because there could be more incentives. It's just a crazy time in the EV sector because we're still seeing price cuts. If you're buying or if you're wanting to buy, you might want to wait. You might do it and then have regret because there's another price cut. So.
Lei Xing:
Then again, the ID.3, the ones, the 7,000 units, I think that went on sale, they're all sold out. So the RMB120,000 ID.3.
Tu Le:
Can you imagine that? RMB120,000, so that's a $20,000 car?
Lei Xing:
Yeah. You know if you get down to a certain point.
Tu Le:
How much money did Volkswagen lose on each of those cars? It is what it is. Let's move on Lei, to the other kind of big pieces of news, Audi SAIC. Can you comment on that a little bit?
Lei Xing:
Yeah, I guess we're just waiting for the official announcement on how exactly that deal is structured. It’s not an if and when, it's not if, it’s when, right? That we know and again, right, we talked about this last episode that this market for technology has now become technology for market, the times have changed and desperate, right? You use it in your newsletter desperate. We talked about this last episode.
Tu Le:
Because I, they, the media kind of pointed to and I don't want to take away anything from Shanghai Auto’s tech stack, right? It might be great. But to me, I look at it more like a tough pill to swallow for Audi. They looked objectively and they realized how desperate they are. If they are to remain relevant in the Chinese market, they need to do a lot of things really quickly. And I'm hammering that theme Lei over the last several or the last 6 months, 7 months about the make or buy decision. This is a buy, instead of every single legacy, specifically legacy OEM, whenever it’s a major hardware decision, a major software decision, they're looking at it like, how much time do we have? How much budget do we have? How fast do we need it? And so everything is a make or buy decision. And Audi at this point decided to buy.
Lei Xing:
And the fact, the fact that Volkswagen signed those MOUs last week with FAW is a precursor, because one, it’s showing commitment to your one partner…
Tu Le:
And in the public too, publicly showing.
Lei Xing:
Yeah, and I was like, as soon as that MOUs, that the pictures came out, that the news release came out, I’m saying, uh oh, Audi SAIC is not going to be too far behind. Now we know, right? That it’s coming. So Audi, I think, in China will have two routes. So the PPE with FAW that's still continues, but with SAIC they're utilizing this, this buy let’s say, route. But is that going to help? I don't know, I mean…
Tu Le:
So this is the thing about Audi Lei, and I’d love your opinion because I firmly believe I'm right, so I don't know if you're going to be able to convince me otherwise. But the digital natives in China who grew up seeing Audi as the government vehicle. I don't know if they can get that out of their head. When they're going to buy an EV or buy a vehicle, I just think it's really difficult for them to do that. What do you think?
Lei Xing:
I think differently, I think it is past that legacy, but at the end of the day it’s really the products, design, tuning to customer needs and…
Tu Le:
And cost, because the Germans, one of the things that the Germans have not been great about is reading the room and figuring out the pricing strategy for their EVs, because they are super expensive in China. So.
Lei Xing:
Yeah, I mean Audi really in terms of branding and marketing, I mean they use Andy Lau, right? This is Hong Kong singer/actor as a brand ambassador.
Tu Le:
I was in a movie with him. I told you that right? Anyways. That’s my claim to fame.
Lei Xing:
So they have a lot of assets, but just the…yeah.
Tu Le:
And don't get me wrong. I love the e-tron, the RS, it looks great. The coupe thing, but it has terrible range. And so it's a great and beautiful car. It's just not a great EV and it's super expensive. And I, it's it is burned into my brain at the Shanghai Auto Show going to ZEEKR and just three or four people deep to wait in line to get into the X, and then heading over to Audi and not having to wait at all to get into that e-tron. And so that kind of influences my thoughts on the whole, I think Audi makes beautiful cars, but the image that's burned into the younger Chinese consumer is that ok, it’s a black A6 that a government official is using. So anyways.
Lei Xing:
Yeah, we'll see how this deal is set up when it's announced, what platforms going to be used.
Tu Le:
Do you think this automatically turns Audi around?
Lei Xing:
No.
Tu Le:
I don't think so either.
Lei Xing:
It's going to take some time, if at all, in comparison, what BMW has done with the i3 is they are actually pricing, I believe the i3 below the ICE 3 Series on some trims. And this is something that Mercedes won't do, but the thing is also really with all three ABBs, all of their current EVs are based on ICE, let's say, kind of the platforms and models. So that is probably something when the new platforms come out, when these new vehicles come out, will it change? We don't know, we’ll see.
Tu Le:
And let me give you something from last week. I presented to a group of folks, a decent number of Mercedes employees in Michigan at their R&D facility, just outside of Detroit about the global EV sector with an emphasis on China. And it was eye opening for them. And I was just throwing out simple statistics that you and I have talked about probably a number of times over the last several episodes. And throughout the time we've been doing this podcast. But the rank and file outside of China don't know really what's going on. I'm talking about German experts living in Michigan working for Merc. And so when I told them this, I think a little bit they were a bit incredulous. But I challenge them to Google all this information because it's out there. But they don't know and I'm not trying to cry wolf and I'm not trying to run around yelling that the sky is falling, but the big three, the ABB, they have a disproportionate amount of reliance on the China market. When times were good, it was awesome for them. But to your point, they're still using ICE platforms. Audi finally conceded that they need help signing an MOU or agreeing with SAIC to use their EV platform. But that's step one. That doesn't guarantee anything. Because if Audi doesn't put something on top of that platform and inside that platform with the proper software, so there's still a lot of constraints now. Does Audi become a design house for SAIC and Huawei in China? I don't know. That's an extreme case, but I still don't believe their software capabilities at all are going to materialize in the next 18-20 months. I mean that's not going to happen.
Lei Xing:
And you and I have been talking to a good friend over at JIDU. And look for some, I guess surprises, we don't want to share too much of.
Tu Le:
For the listeners JIDU is the 55% owned Baidu and 45% owned Geely joint venture JIDU Auto. And they are planning to deliver their first vehicle, the ROBO-01 later this year. And Geely has really, Geely only responsibility is manufacturing and Baidu’s only responsibility is providing the tech stack and the machine learning system. I had the pleasure of visiting in April and super impressed, aiming directly at the Model Y all this stuff with the ROBO-01, all this stuff is on the internet. So no secrets that I'm telling you, but there are no buttons, there are no knobs. A lot of commands are going to be voice controlled or gesture control. If everything works out and I've said this, in the past, if everything works out for JIDU Auto, they're going to be pushing and pulling everyone forward because they have an advantage because Baidu they should be by far the best at the voice recognition and the engines that would drive all that stuff in the vehicle. And so I'm really excited because I don't think we're going to see, I don't think there's, let me say full stop if the potential is reached, there's nothing out there in the market that's close.
Lei Xing:
So let's just say from what I feel that pushing boundaries is probably an understatement for JIDU, and all facets of whether it’s design, how things work, pricing.
Tu Le:
And you need to do that to differentiate yourself in the China market because
Lei Xing:
In this day and age yeah.
Tu Le:
Any incremental improvements gets copied in at a lower cost within 6 months. And our friend Jiri, the Carnews China guy, he had written a deep dive into what, how the China EV Inc. can move at China speed, right? And our friend at JIDU said, I appreciate China speed, but we have JIDU speed. Yeah. So for those that are wondering, we had interviewed Frank Wu, who is the head of design at JIDU for one of our MAX episodes about a year ago. And he was really open, and he's got a great story, super smart guy, went to design school here in Detroit, worked at General Motors for about 7 years and then went over, was it BAIC, he did BAIC for a little bit.
Lei Xing:
BAIC.
Tu Le:
And then he became the head of design, told us that he wasn't getting paid for the first, 30 or 60 days while working with JIDU and he's super proud of what they've been able to accomplish. From a design standpoint, they've won, he said, seven Red Dot awards. So the design team kicks butt. So anyways, I invite and remember, Xiaomi is still out there, JIDU is still out there. What other brands? BeyonCa has been death, deathly quiet. So are there any other brands that are coming?
Lei Xing:
We just saw the pictures of the Bao 5, right?
Tu Le:
Fang Chengbao
Lei Xing:
Fang Chengbao, Bao 5, right? So looks pretty sweet.
Tu Le:
Defender, Land Cruiser had a baby. And that's what it looks like, basically. I think it's going to sell really well.
Lei Xing:
Yeah. And just no time to breathe, right?
Tu Le:
I don't know how BYD does it, because as you can see, I mean they have exponentially more employees than the Xpengs, the Li Autos, and the NIOs. But man, they're a machine, and just crushing it and to reflect on some of BYD’s accomplishments for the second year in a row, Wang Chuanfu is the No. 1 CEO in China as…
Lei Xing:
You are talking about the Forbes or?
Tu Le:
Forbes. Why he isn't the top two or top three CEO globally is beyond me, probably a little bit of I won't say it too much, but some yellow bias, maybe. But and this week, and let's move on to this next topic. So BYD is looking at partnering with the current JV partner they have for electric buses in India, which has been their partner for several years and building electric vehicles in India. So a little bit of background, India became the third largest car market in the world last year behind China and the United States. They overtook Japan, they overtook Germany. They are at around 3.8 million units. So on a base of 1.5 billion people, it's mice nuts. It's a rounding error, but it tells you about the growth opportunity. And so BYD and let me take a step back. So China has also had a challenging relationship with India, and we're talking about governments. And so India passed a law that said bordering countries needed, if they wanted to start businesses in India, they needed a joint venture partner.
Lei Xing:
You mean THE bordering country?
Tu Le:
Yeah, well, hat's the thing, right?
Lei Xing:
There's only basically one, right?
Tu Le:
Yeah it's like saying, exactly. But they didn't want to obviously say that in the law, right? So bordering countries and so and Tesla has famously been trying to enter India as well and trying to bully India into signing a deal with them. That is probably not India’s best interest. And they've been unable to do that. And the rumor was, is that Tesla wanted to build a factory, but they wanted approval and a reduction in tariffs in order to ship Chinese made 3s and Ys into India. And India was like, yeah, no way. With BYD now adding pressure, you better believe Tesla is probably reducing some of their requirements for getting into the Indian market.
Lei Xing:
So yeah, both BYD and Tesla have their own respective leverages. So the recent, what we've seen with Modi being in the U.S. meeting Elon, I think geopolitically relationship is great, but not on China, but on the flip side, BYD is not a stranger to India. As you said, they've worked with this Megha Engineering for a number of years. So that's their leverage of having been on the ground.
Tu Le:
And they're shipping kits currently.
Lei Xing:
And having worked with a local partner, which Tesla do not have, you have this kind of a race going on.
Tu Le:
And which is similar to BYD strategy in the United States.
Lei Xing:
Yeah, so that's interesting, because India could be a kind of a hub, not only because of the nascency of the EV sector. It's almost like more than a decade ago in China when it started, right, in the early part of the last decade。
Tu Le:
And the foreign companies all invested billions of dollars about 15 years ago, or 10 years ago, or you know, nine or eight years ago into Indian capacity, knowing that the per capita GDP was continuing to grow. But because India is a pretty corrupt country, it's democratic and so things are slow to move. Let's say that India speed is a little bit different than China speed.
So the thought from the foreign automakers was, okay, we can be patient because what we'll do is we'll build a beachhead factory in India, we will sell as many as we can domestically from that capacity and then export the rest of it. But what happened was that market never materialized. So after 4 or 5 or 6 years, most of those foreign OEMs kind of abandoned the Indian market. But what we're seeing now, again, this has a lot more to do with the current political situation domestically for India, because for those of you that have been there recently, exactly what I'm talking about, I haven't been there recently, but I have a lot of friends and classmates that live there. And the pollution is choking. And it's like 2013 through 2016 in Beijing Lei, where you can taste it at airports and that kind of thing. So if Modi wants to stay in power, he's got to clean those air, the air in India. How do you do that by cleaning up the vehicles? But for India, just like the rest of Southeast Asia, the mode of transport private passenger vehicle is normally two wheels, not four wheels. And so the opportunity is still there because with even with that low take rate from a number of vehicles per thousand people, even with the low take rate, we're still talking about 4 million cars, right? So it's a significant market, even though it's still very small.
Lei Xing:
Even from a product perspective, BYD has the leverage over Tesla, because BYD has the Dolphins, the Seagulls, which are better suited for the Indian market, because it's a small car market, right?
Tu Le:
For sure.
Lei Xing:
So that's another leverage.
Tu Le:
And we have to remember Lei, that India for India is important, but India to Australia, India to Southeast Asia is also a huge opportunity, so.
Lei Xing:
There's many ways you can break this down.
Tu Le:
I would argue Lei that if I am in Tesla board meetings and I'm looking at global manufacturing footprint and thinking about increasing capacity of Shanghai Giga at a 2-2.5 million, I want to de risk all of that capacity being there by building in Mexico, building in India so that if there are any problems or any challenges in China, then I can still increase capacity in these other lower cost countries and still build vehicles, still build profitable vehicles. And another reason, if the Model 2 launches in the next 3 years, perfect. Mexico, Latin America, South America, is a perfect market for a $20,000 Model 2. India, perfect market for a $20,000 Model 2. So always, in the back of my mind Lei, is this 20 million by 2030. So if that is the number one rule for Tesla, then they need more manufacturing and they need this model to be built in several places around the globe. So.
Lei Xing:
Yeah, so the only way this will work is India maximizes their own interest. And BYD agrees on some of the requirements. Then probably it'll work. But I mean there's a lot of beef going on between China and India at the geopolitical level.
Tu Le:
Which and this is the challenging thing for these companies, these Chinese companies because they are, now, the shoe was on the other foot for the longest time, right? Foreign companies in China, but now its Chinese companies trying to do business outside of China that are kind of caught in the crossfire between the governments.
Lei Xing:
And I don't know if you've heard this. So I just saw this afternoon that there's some talks of the robotaxi companies, the China AV Inbc. running in the U.S., there's some scrutiny over that reports about Pete Buttigieg, some I don't know senators are talking about the potentially of not allowing China AV Inc. to run these robotaxis who've gotten the permits from DMV, the California DMV, I don't know whether you've heard this or saw this.
Tu Le:
I've heard it, but I've heard it for a year or two. But, nothing has happened.
Lei Xing:
So because of the information they collect, right? The same for Tesla FSD in China and everybody else. So and going back to Li Bin's, the Tesla red carpet comment last week right?
Tu Le:
Well, but Li Bin has a one-sided comment because there are no Wayoms in China, there are no Cruises in China. So I think it's important that we just kind of look at this objectively, right? It's also the reason why Pony, AutoX, WeRide, Baidu, I think it's less so in the United States, but that's why they're deathly silent, right? In the U.S. market, they don't really advertise or do anything, right? Unless you're in Milpitas, you can see them with their Pony badges and stuff like that because Pony is also, has a commercialization pilot in Southern California, Orange County who was delivering groceries from Asian, what's that?
Lei Xing:
Was it Fremont? Or I think I’ve seen some in Irvine also.
Tu Le:
So they partner with the Asian online supermarket and were delivering groceries in Irvine, I believe so, it's funny that you bring this up Lei because this week was also in San Francisco, where they wanted to, I think Waymo or Cruise wanted to start charging for non-safety driverless robotaxis, and California and San Franciscans push back, because the current crop of Cruise, two of which we've ridden in, Ant, and what's that second one I forget. But they are causing a lot of traffic jams, supposedly. And one of the ways to stop these robotaxis in their tracks, at least on the Cruise side, is throwing a cone on the hood. The robotaxi will stop immediately and throw its hazards on.
Lei Xing:
You asked me about it last week.
Tu Le:
But I wrote about this in the newsletter because there was an article in Axios and it said something and on the title, I added a little bit to it, because we should be talking about the global autonomous vehicle sector. So the title said robotaxis face their moment of truth. And then I said she forgot a couple of words, and I put … “in the U.S.” and so, because you and I know that there are several pilots across several cities, Changsha, Shenzhen, Guangzhou, Beijing, Shanghai, quite a few of which we've tried, right? And it's still very limited in the United States. The only way this is going to work and the push back from the city of San Francisco prompted Cruise to take a full page ad out in a lot of newspapers.
Lei Xing:
Safer than humans or something.
Tu Le:
Yeah 42,000 people die a year. Cruise was like humans are terrible drivers.
Lei Xing:
Cruise pulled out a Elon Musk. That's what Cruise did.
Tu Le:
Cause and this is the thing, right? Because GM doesn't have Google money, GM doesn't have Waymo Money. And so they really want to commercialize this, because I've said before every legacy OEM wants to have a robust mobility platform with the two signature services being eVTOL, long term anyways, eVTOL and robotaxis. That's where that margin is going to be driven. They're going to have grocery delivery, food delivery. They're going to have micro mobility sharing, but that's to increase the install base, so that their signature services can be accessible to more people. And that'll, that won't happen for another 15 years. But this is where ultimately the OEMs really want to go. And I think to see that transformation is going to be awesome. All the disruption that's going on in the United States, specifically, because you were talking about billions of dollars. And let's do this. It's 9:53 Lei, let's open the room up for anyone who has any questions. We'll continue to talk for a few minutes, and then try to close out if no one has any questions at around 10 o'clock, 10:10 or something like that. But I'm not sure and shame on you if you haven't Lei, but I’m not sure if you got a chance to see the newsletter this week, but Arkansas is like this lithium hot bed now.
Lei Xing:
Yes in Arkansas. Is that the Wall Street Journal article you're referring to?
Tu Le:
It was the Times article? I think it was the New York Times, yeah Wall Street Journal article.
Lei Xing:
Wall Street Journal also had one, right, about the lithium.
Tu Le:
ExxonMobil is investing $100 million. Yeah, so we're seeing a gold rush. And where I think data that data gold rush is kind of a wonky, kind of anomaly, kind of how they say data is a little bit different. But lithium, I think there's a lithium rush in North America for sure. You can point to Canada protecting their minds. You can point to Mexico protecting their lithium mines.
Lei Xing:
Again, it's only a small piece, the availability of it, where it's found, it's only a small piece, small link of the entire value chain. We've got to remember that, right? Processing, refining all of these things.
Tu Le:
Yeah and I think…
Lei Xing:
You know what I'm trying to say.
Tu Le:
Yeah whenever there's huge investment, there's also innovation. So I'm looking forward to innovations in refining. I'm looking forward to innovations in mining. I'm looking forward to new use cases for mobility. And there's two things that I also want to bring up to close this out. Cybertruck first, pre-production vehicle off the line. When I say that, let me explain that a bit further, because assume that every Cybertruck to this point, prior to that one that they tweeted about this week comes as handmade. So it's in a big room, and these parts are being shipped from prototype shops in order to check the fit and finish, in order to make sure that everything works together. And then they'll go through EVT, and DVT, and PVT, engineering validation, and then production validation. And so once everything has been approved, meaning that they have final approvals, then these parts will be ordered from the supplier who will supply them. And they'll have to build it off of production tooling. And it might be the first 20, it might be the first 50, it might be the first 100, they might be, they're called pre-production cars, alpha, beta, and then pilot and pilot vehicles are saleable, but they're normally marketing cars. So they'll get shipped around, take pictures, media cars.
Lei Xing:
It's the same as the ZEEKR X I saw the other day. It's not the final production vehicle.
Tu Le:
Right.
Lei Xing:
At least in the showroom.
Tu Le:
So this Cybertruck was the, I believe the first one off of the production line using production tooling and so we're still a good quarter probably before job one rolls off the line. Job one is always the first saleable vehicle of that product off of the factory line. So like four years in the making.
Lei Xing:
And as soon as that picture came out, Ford dropped prices of the F-150.
Tu Le:
That's the other thing that I wanted to talk to you about, because to me they relate, they are relative right? And there was a, there was a chart in one of the, I think it was New York or it was Wall Street Journal that showed that when the lightning launched, it was $40,000 and it went to $52, then it went to $57. Now it's back down to $50. And I've always rung that bell that said we don't get to mass adoption until there are many products under $50,000, many EV products in the United States under $50,000. So we also have to remember in order to be eligible for the $7,500 tax incentive, it has to be under $88,000. The average price of an F-150 is like super sky high. It's like $70, 80, crime. I wrote about this a little bit in the newsletter as well. They, I think Cybertruck is going to be pretty successful in the United States. There's going to be a market for it, 50, 60, 70, 80,000, 100,000 units easy in the United States. Once they ramp up easy annually, no market for it at all in Europe. And then difficulties if they wanted to sell it in China. So what do you think? I think it would sell in China?
Lei Xing:
Yeah, so I this is a topic that often comes up about me talking to some of the industry people here that they ask about the U.S. market. I say to them that unlike China, where the Model 3 and Y plays, in the U.S., there's no, not a single, even as of now, there's not a single competitor that can challenge 3 and the Y, not one, but in the pickup market, which is almost like the same as the micro van market, it's people's product, right? It's not a luxury product, it's pickup, its people everyday life.
Tu Le:
It's renmin, middle class.
Lei Xing:
They drive pickups and the electrification of that segment, this is where the competition is besides Tesla, right? It’s pretty hot right now, that's why you see that F-150 Lightning dropping prices and it's a completely different segment, competition wise, U.S. and China.
Tu Le:
And for our non-U.S. listeners, that's why GM is launching the Silverado, that's why RAM is launching the e-RAM, because it's such a lucrative and important market and product for the U.S. for them, because without the F-150, Ford is nothing effectively in the U.S. and for GM, so Jim's a little bit weird because they have more brands, right? Ford has Lincoln, and is that it? They have Lincoln and for GM has GMC. Go ahead.
Lei Xing:
No, the thing is for the Big 3, the American companies, including Stellantis, they make their most profit out of North America, their trucks or their cream of the crop products that make the most of the profit for them. So that's why that the competition, the EV electrification is in that segment.
Tu Le:
The F-150 is the best-selling truck in in the United States, in North America.
Lei Xing:
For how many years in a row.
Tu Le:
So in and of itself is a larger business than the iPhone is to Apple. And with GM it's a little misleading because they have the Chevy Silverado and the GMC Sierra. And so both of those sell about…
Lei Xing:
Hummer EV and pickup, right? Those type of…
Tu Le:
Which is just launched like a year and a half ago. I'm starting to see them a bit more. I did see a Blazer EV, Blazer this week Lei. So that was pretty cool.
Lei Xing:
They're launched in the summer, right? Later in the summer.
Tu Le:
Hugely important vehicles for GM because the Equinox is supposed to be $30,000 EV, the Blazer should be a $40,000 EV, how they will maintain that pricing, I have no idea. But let's see how popular they are. So where the U.S. government needs to be careful is describing, we're going to catch up, we're going to overtake, that's they're chasing a ghost if they keep on saying stuff like that, the U.S. market trying to market completely different entities. But the challenge for the foreign automakers is that over reliance on the China market really creates a lot of risk. Because and I'm not talking because the government might change their attitude. I'm talking because Chinese consumers could change their attitudes about the brand, which we're seeing with the Volkswagen Group. So.
Lei Xing:
So it's a little bit past 10, I did want to talk a little bit about NIO Power Day a little bit quickly.
Tu Le:
Five months away, right?
Lei Xing:
My thoughts is, sorry?
Tu Le:
Five months away, right?
Lei Xing:
No, NIO Power Day, not NIO Day.
Tu Le:
Power Day, ok, sorry.
Lei Xing:
So that which happened yesterday. So my general impression is they threw a lot of numbers of accomplishment of their, let's make this clear: of their power charging and swap network. First of all, and I think many people when they think of NIO, they think about power swap, but after Tesla, they have the most of their own branded chargers operate in China. I think people may not realize that, but NIO, it's NIO. I think that they threw a lot of numbers. It was great for the, it was fantastic, it's great for their customers, but it did nothing to pump the stock and the value of NIO. What I'm trying to say is, I think what NIO is betting on, is they're still trying to have, see and have their power swap network, or the power swap itself become the de facto standard in China. So that, like their chargers, somehow, this network could be utilized akin to Tesla’s NACS, I think that's what they're betting on.
Tu Le:
They have a lot less leverage on the charging, though the swap is pretty much exclusively theirs, except for, I think SAIC and BAIC have, no, Geely and SAIC.
Lei Xing:
Aulton.
Tu Le:
But the charging stations, they already have one standard plug in China competitively.
Lei Xing:
They just said those nine benefits, right? They counted and explained in detail in the press conference. And then following what, the SAIC Rising Auto did, with adding features, such as when you do the power swap, you can actually do other things in the car, which you can't right now.
Tu Le:
So they change their changing their updating software to allow you to access the entertainment system.
Lei Xing:
So that because somebody else is doing it, I have to do it. I have to have the same feature. That's the competitive environment, that if you don't have something you lose out. FOMO. The word is FOMO, right?
Tu Le:
I will make two quick other things that I think worth noting, Dojo computer for Tesla is in production now. And big difference, Dojo is the training computer supercomputer for effectively getting FSD right. So I think that was an important milestone when the Tesla had articulated distinction between what they were doing before with training versus now they were using NVIDIA ASICs or silicon. Now they're using their own designed silicon. So I think that's an important distinction. The last thing I wanted to say was GM hired an external chief marketing officer. Why aren't other people doing this Lei? This is, it boggles my mind that they're not bringing in external parties to become managers. So.
Lei Xing:
Hometown wins. Hometown Detroit wins. Two numbers I wanted to compare is back to the Tesla and so they have 300 million miles of FSD in their earnings call, right? And that could quickly become billions of miles. And then today Li Auto came out with an interesting number, 200 million km, not apples to apples, but 200 million km of NOA mileage accumulated over the last, let's just say, a year and a half. That number is expected to reach 500 million by the end of the year.
Tu Le:
For our American friends, we're talking about 120 million if it's 200 million, so.
Lei Xing:
That's interesting. So who knows? Li Auto may even catch up on some of the Xpeng USPs, right?
Tu Le:
That's the secret race to watch the stand-alone autonomous vehicle companies, the WeRides, the Apollos, the Ponys the Waymos, the Cruises versus the OEM ADAS race, because ADAS is going to eventually merge into Level 4, Level 5. So.
Lei Xing:
Yeah, so I think it has advanced features. L2+++ is the race to watch among these smart EV startups other than the products themselves.
Tu Le:
And GM is unique, because they have Ultra Cruise for Cadillac, and then they have Cruise automation on the robotaxi side. I don't know. And this is a good question. Maybe I'll do some due diligence and research here. I don't know how much of that tech overlaps, do they have a separate team at GM and then Cruise is also separate. I'm not sure I’ll try to find out more about that Lei, but everyone else is, well DeepRoute, WeRide, tey are partnering with some of the state owned enterprises that don't have that capability or technology in house. So we are seeing some of the standalone AV companies work with OEMs, but the Xpengs, Li Autos, NIOs, they have robust teams, right, in Silicon Valley, in Europe, and in China that are working specifically on the ADAS stuff. So that's all I have man.
Lei Xing:
Yeah, when and also seeing BYD in recent times, talk more about their advanced smart driving capabilities.
Tu Le:
And I’m still not sure whether or not they have outsourced that completely to DJI or if they are supplementing their inhouse with DJI, there's not been anything else written about that. So still wondering about that.
Lei Xing:
No. I haven't seen that.
Tu Le:
Congratulations to the United Kingdom. They finally got a win. Jaguar Land Rover has committed…
Lei Xing:
JLR?
Tu Le:
￡4 billion.
Lei Xing:
It's JLR.
Tu Le:
It's not Jaguar Land Rover, it’s JLR. Ok. JLR has committed ￡4 billion to build a Giga factory. And that's the first major win, I believe, for them in quite some time, because their national champion for battery cell manufacturing, BritishVolt blew up. And so the uncertainty with Brexit, it being a right hand drive and labor market or the labor rates being pretty high made the UK fairly unattractive relative to the rest of Europe to be building beachheads from a manufacturing or battery cell manufacturing standpoint, but that's a big win and JRL it should be noted that Jaguar and Land Rover are both British companies and so it makes a ton of sense. Anyways, that's all I had this week Lei. I think we had a good chat.
Lei Xing:
Same here man. And so I’ve been here for, in Beijing for a month, so I have another month remaining, so I might plan a couple of trips, maybe one to Hefei a bit. And then obviously, Shenzhen, I wanted to go down there. NIO and Gotion, they're all there. So to check out, you know have a couple of visits. So planning that. China is not Beijing, China is many places, right?
Tu Le:
I would argue that China is not Beijing because it's so different.
Lei Xing:
But China is not Beijing, exactly.
Tu Le:
Yeah, but I was going to join you, but I don't think that's going to happen anyway. So. Okay, everyone. Hey, thanks for listening. Please join us again next week and apologies for my snafus on the spaces room. You might work. You were probably trying to find it on the invitation, but I turned it off and then turned it back on and it's totally a different room, anyways. Again, good morning, good afternoon, good evening. We will talk with you next week.
Lei Xing:
Likewise, talk to you next week. 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.