China EVs & More

CEM MAX #18 - Philipp Sayler von Amende, CEO & Co-Founder carwow Germany

August 21, 2023 Tu Le & Lei Xing
CEM MAX #18 - Philipp Sayler von Amende, CEO & Co-Founder carwow Germany
China EVs & More
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China EVs & More
CEM MAX #18 - Philipp Sayler von Amende, CEO & Co-Founder carwow Germany
Aug 21, 2023
Tu Le & Lei Xing

Tu & Lei had such a great response from their MAX episode with Founder of carwow James Hind it ONLY made sense to sit down and chat with Philipp who's running the show for carwow in Germany. 

carwow is an online marketplace for buying and selling new and used cars and started in the UK but have since launched in Germany in 2016 and Spain in 2018. 

For those of you outside of Europe that aren’t yet familiar with carwow - in 2022, there were over 109 million visits to carwow sites with over £5B worth of cars bought and sold on the carwow platform. 

But not only does carwow make it easier for buyers and sellers to transact, it has the largest automotive YouTube channel in the world providing some of the most compelling and entertaining automotive content on the interwebs. 

The carwow YouTube channel which was launched in 2014 has over 2.6 billion views from it’s more than 8.2 million subscribers and growing. 

Philip takes us through his career progression, how carwow works in Germany, tells us how Germans shop for cars, and most importantly he gives 🇨🇳 EV Inc some advice for entering the ultra-competitive German market. 

With IAA Mobility Munich being held this week, there wasn't a more appropriate time post this conversation Tu & Lei have with Philipp - Enjoy!

Show Notes Transcript

Tu & Lei had such a great response from their MAX episode with Founder of carwow James Hind it ONLY made sense to sit down and chat with Philipp who's running the show for carwow in Germany. 

carwow is an online marketplace for buying and selling new and used cars and started in the UK but have since launched in Germany in 2016 and Spain in 2018. 

For those of you outside of Europe that aren’t yet familiar with carwow - in 2022, there were over 109 million visits to carwow sites with over £5B worth of cars bought and sold on the carwow platform. 

But not only does carwow make it easier for buyers and sellers to transact, it has the largest automotive YouTube channel in the world providing some of the most compelling and entertaining automotive content on the interwebs. 

The carwow YouTube channel which was launched in 2014 has over 2.6 billion views from it’s more than 8.2 million subscribers and growing. 

Philip takes us through his career progression, how carwow works in Germany, tells us how Germans shop for cars, and most importantly he gives 🇨🇳 EV Inc some advice for entering the ultra-competitive German market. 

With IAA Mobility Munich being held this week, there wasn't a more appropriate time post this conversation Tu & Lei have with Philipp - Enjoy!

CEM MAX #18
Philipp Sayler von Amende, CEO & Co-Founder, carwow Germany
Recorded August 10, 2023

Tu Le:
Hi everyone, Tu Le from China EVs & More. Lei and I are always kicking around ideas for new ways to inform you, our audience, about all that's happening around the world in the EV, battery, chip, connected AV and mobility sectors. When I approach Lei about launching this podcast a couple of years ago, I had anticipated that what happens in China in these sectors would have huge implications globally. That's precisely the case, especially in Europe and the United States, the two other largest automotive markets in the world. Despite all the drama of 2022, China was still able to lead the world in NEV sales at around 6.5 million units. That's almost 100% year-over-year growth from 2021. What's more, China exported over 3.2 million vehicles in 2022, growing 57% from the year before. In addition, between January and April of 2023, exports surged another 73% to almost 1.5 vehicles with many of those landing in the EU and UK. That number will keep growing, with a larger percentage over time will be NEVs. That's why it's so important to learn and know more about these companies, executives, brands, products, features and services that are already hitting your shores. Whether you're a consumer, analyst, consultant, anchor, but especially if you're a legacy OEM or tier-one. I'm pretty confident that there isn't anyone else out there that can provide you with the type of detailed up to date and accurate coverage, insights and opinions that Lei and I do. Most of these so-called China experts haven’t been to China in years. So make sure you check their receipts. China EVs & More is the one and only. When that’s not good enough, we use these MAX episodes to supplement our knowledge and expertise with others in the space, again with the goal of making you better informed. 

I’m very pleased to introduce our latest MAX episode where we bring you conversations we've had with special guests from the EV, AV, chip, battery and mobility sectors. As we head into the second half of 2023, BYD and Tesla still dominate the China market, while companies like NIO and Xpeng are showing signs of turning a corner. New brands and products still seem to be introduced each week while the intense price war shows no sign of stopping. Despite these domestic challenges, China EV Inc. wants to have its formal coming out party this week duri IAA Munich. How will they be received? How have those companies that have already entered the market been doing? Can they be successful long-term in the EU? Which brands have the best chance to succeed? For these questions and much much more, we turn to Philipp Sayler von Amende, co-founder & CEO of carwow Germany. For those wondering, carwow is Europe’s largest new car market place and boasts the largest automotive channel on YouTube with over a billion downloads. It’s a trusted source for buyers to research, compare and ultimately connect and transact with sellers of new and used vehicles. In our last episode, we interviewed James Hind, the recently ex-founder and CEO of carwow, which was founded in the UK. This podcast was so well received we thought it would be a great idea to have Philipp kick us some knowledge about the German market. We hope you enjoy our conversation with Philipp. 

Tu Le:
Hi, Philipp, thank you for joining us. It's very apropos on the eve of IAA Munich 2023. We were able to have a great discussion with James about the UK market and how that's evolving with increased EV adoption. But you're living, working, and I argue, are huge catalysts and source of information for Germany and their increased interest in EVs, and in particular Chinese EVs. So we're going to talk all about that in the next hour or so. But first, can you give us a little bit about your background, how you started in the space and what you've done in the past and how you got to this point working at carwow?

Philipp:
Sure. Thank you very much Tu and Lei for having me here today. A bit of my background, I’m actually a real car child I would say. I grew up in a car dealership. My parents are car dealers. They have three dealerships, and I started working there pretty much as a child. Back then, it was a Renault dealership and a Chrysler workshop. And it evolved into…

Tu Le:
Chrysler!

Philipp:
Yeah, Chrysler back in the days. It evolved into, nowadays it’s Peugeot, Volvo, Mazda. They're also looking at adding a Chinese brand, but that's really where I started my career. Realized I can't work with my dad, though. I think we had some cultural clash. That's why I went, I actually went abroad. I was living in the States when I was 16 for a year. And that for me started my international career, but I could never leave cars. I was starting my career with Porsche as an intern back in 2001, I think. Then I spent all my life somewhere within the car industry, started in management consulting after my MBA, which I gained from the Chinese University of Hong Kong. So I studied in Asia.

As a consultant, I was consulting all the German manufacturers’ marketing sales strategies, and then I did something very different. I went to the World Economic Forum and leading their automotive, yeah, program, so to say, and I met Scott Painter, the founder of TrueCar in the States actually. And that is how I actually found a solution to all the problems I always heard from my friends: hey I'm getting a new car, but they all want to rip me apart, right? What's the right price to pay? And I saw Scott had a solution for that in the States. For about 2 years, we discussed that this is an international problem, how do we bring this to Europe? How do we take this to China even, we discussed back in the days. I ended up 2014 to join TrueCar to build their European business, which we never built, by the way. That is pretty much how I got involved in the online ecosystem where I learned a lot.

I actually met James Hind back in those days when there were eight people building carwow. I was like, listen, this is amazing what they have been doing in the UK, I followed them. And after we didn't go international with TrueCar, I built their OEM and advertising business. But then I left because the family was still here, was going back and forth between Munich and LA, and I was about to found a carwow equivalent in Germany when James approached me and said, listen, we now have another fundraising round. We got the money in the bank. Why don't you join us and lead Germany? And I think I said no twice. Before I then said, it actually looks interesting. Let me, why don't we meet and talk a little bit more in detail. And I met him and his co-founding team. I was really impressed by the technology, really impressed by what they built. And I realized that I could just run so much faster working together rather than building that all from scratch. And that is how I ended up end of 2015, to say I’m joining carwow, I'm building up their international business. We then initially launched the beginning of 2016 with Germany as the first market, two years later with Spain as the next market, it was a crazy ride from, like really first international employee to building a company in another market, building it to the absolute market leader now in new cars in Germany, the market leader in new cars in Spain. That's pretty much how I ended up at carwow.

Tu Le:
How many employees are there in Germany right now?

Philipp:
So pure employees in Germany is around 65. But it's difficult to say because we run product and marketing and a lot of functions out of London. So we have tech centralized, we have marketing centralized. So the people on the ground in the markets are normally the commercial teams. All the teams that work with the dealers, that work with manufacturers and some interface functions. So some local marketing functions. So we have like purely dedicated market functions and we have then in London also people working for the different markets.

Lei Xing: (8:24)
Okay, so Philipp, so the key word I got out of your introduction was technology. So what is the secret sauce when it comes to carwow technology, what makes it tick or click?

Philipp:
I honestly like, I could sell you this like it's all of the amazing technology, in the end, like any startup, the idea is one thing. It is how you bring it all together. How do you bring a good tech team that is fast, that is flexible, that is adapting together with the right commercial people to make it happen in the market, right? And I think, what I found is when I saw carwow is that they were incredibly fast in building new things, we launched Germany three months after we incorporated the business, which is unprecedented for a tech company, like they normally build for a year before they go live. But we pretty much had this attitude on, build an MVP, go out, fail, fail gain, we launched a configurator about a color, I said you can’t sell cars that way, well we sold cars that way, and then we added color and guess what we added options, and options, one of the most important things for a German consumer, it is just a matter what is your expectation, you cannot be a market leader about that function, but you can start quickly, learn and then adapt to the market. And I think that has been our secret sauce. We have a good global flow, so to say, but we then also learn from the markets. What elements do you need to localize and what elements do you also put a compromise on because it works better across all European markets.

Lei Xing:
I didn't know there was a Germany speed. There's a China speed, but there's also a Germany speed. 

Tu Le:
We're going to circle back to that. We're going to circle back to that. But hey, Philipp, can you give us a brief history on how Germans historically have shopped for cars and how that's changed or evolving because of carwow, because of the digitalization and e-commerce and things like that in Europe. Can you tell us a little about that?

Philipp:
Yeah, absolutely. I have to be really careful not to annoy my German fellows, because I’m not a typical German, right? The reason I'm not working at car dealerships at my parents is exactly that, I don't like the German conservative, traditional culture, but I’m more on like the American positive and fast-moving failing element. But I would describe the traditional chairman car shopper while they go to their VW dealer and they buy their 5th, 6th, 7th, 8th Volkswagen Golf, right? You go to your dealer, you look at the car, you drive it, you buy it there. That was the traditional model. I think like we're going back like online is not that new I mean the market, the classic, the original classifieds started what 20 years ago in the 90s, already before that like 30 years ago when Auto Trader started in the U.S., like in Germany, the equivalent Mobilit-E and auto scout started. So this is not a new thing. So people got used to research online. I think that is something that has happened 10, 15 years ago for like anything. People go online more and more and more. And I think ever since we founded carwow, there is not that big of a difference. I always started, like when we launched this already, 85-90% of people started their research online. That is something that is common nowadays already. What is still not common is…

Tu Le:
Let me stop right there. Is there a like a line of demarcation from an age standpoint? Or is it just kind of across the board Germans have started shopping online? Or at least researching online?

Philipp:
I think there is, we haven't seen a real difference on the researching side, it is really across the board and I look at the typical carwow car buyer. There's no difference. I mean a new car buyer is mid-50s and male, and that is the same on carwow. I was actually shocked in year one when like I still talk to a lot of customers directly to get feedback when on that launch phase, and you were talking to a 72-year-old man who was like oh this is going to be my last car that I'm buying, but I really want this Skoda and I was surprised. Because I was expecting the 35-year-old, but now it is absolutely across the board research moved online. And what I would say in Germany is still less than in other markets is buying online for a good like a car is not common at all. We see that all the time, I think again, back to the secret sauce, you ask Lei, I think the secret source of carwow is that we didn't expect people to go straight online and buy, but that we connect the online on the offline world. So we bring consumers online together, the dealers, we make it way easier for consumers to shop and experience prices and get offers, everything automated, fully automated while it feels not automated. And for a dealer to get access to that online shopper, but then convert them in their dealership. Pre-COVID, 99% would go to the dealership and buy there. Now post-COVID I would say there's probably still 80% go and do the deal at the dealership. But they open up way more and say, you know, can you send me a contract on WhatsApp or email or whatsoever? There was huge hesitation before COVID that changed quite a bit, but it's still the majority will visit a showroom at some point of the buying journey. And mostly it is to sign the contract.

Lei Xing:
Well you know, the 70-year-old is the new 35-year-old. Great point, because I think everywhere in the world, nowadays, consumers have gotten a lot more knowledge about cars, and EVs. I think they have that understanding more than before. So I think that's playing into this new…

Tu Le:
To your point Lei, there was definitely arbitrage on the dealer side, on the seller side before, but your platform really kind of equalizes that and creates this opportunity for the consumer to come in, being very informed, right? So I think that's amazing. I think that's the best part of it. And I'm a little bit surprised because stereotypically, the thought is that Europeans and Americans, the younger Europeans and Americans might be more open to research and doing a bit of shopping online, but the older generation are not. So you're actually saying, you know what, be it 35 or 70, they're very open. So I think that's kind of smashing a stereotype or at least for Germany, so.

Philipp:
I always tried to find that clue because we had that a TrueCar, right? You were very interested for the younger shopper for the younger generation. I never found it every time I tried. And it's the same for UK and Germany and Spain. We saw that actually, we track pretty much the same shopper that you have offline. It's a typical new car shopper. There's few differences, we over index on premium, we over index on new or on EVs for the fact that people that are online normally, they all also have a higher disposable income and they are more technology open, right? So yes there is that bit, but in terms of age, we've never found age or even when we look a male or female mix, we never saw any difference from the traditional shopper.

Tu Le:
So basic question, how does carwow work in Germany? James had kind of gone through the process of how it generates revenue, but can you tell us in case the folks that are listening right now didn't listen to James podcast, number one. Number two, and can you tell us if there's any differences between the German business and the UK business?

Philipp:
I mean, to the first question, we have pretty much a tradition, our traditional business, our new car marketplace, so users shopping for cars, either they know what they want, they come in, they configure a vehicle in order to get offers that they can compare and they get transparency on pricing. So what you said before we take this entire arbitrage out. At the moment, were you as a user, you have received all those offers, you have compared those offers, at the moment, you're contacting a dealer or a manufacturer, because we now have more in Europe, more manufacturers selling directly. At that moment, we are pretty much creating a lead to our partner. And that is what we monetize. So they pay us for their customer contacting them on a specific offer. That is the core business store on new cars. And then on top of that, what we have built and what I've built internationally for three countries is our car manufacturer advertising business where we started not putting bling bling ads on, right? But putting natively integrated, a retail media solution. So when you're shopping for a certain car, we can give you a very targeted ad from a competitor and say, hey have you also considered a Polestar when you're looking at a Tesla, right? And it doesn't feel like an ad because it is integrated into your journey and you then also cross shopping to that vehicle and they give you an opportunity, position your vehicle there. And that business has grown significantly and has become a huge growth and profitability driver for us. So that is the second big business that pretty much generates revenues for us. And that is it for Germany, I would say. In the UK, we are further ahead because we have two years ago acquired a company and started to sell my car or like the reverse auction so to say, users can sell their car to dealers and be auctioned out to dealers where we again do pretty much the same thing but the other way around where we say a user can sell their car online to a dealer, and we also launched used cars, and we absolutely have the same vision in Germany to launch it in future. But for the moment, it's just a matter of maturity, right? We are further ahead in the UK, we are approving our unit economics in the UK and whenever we have proven that, we take it to our global markets and roll it out there.

Lei Xing:
Let's move away from carwow a little bit and talk about the buzz on the ground in Germany. And what is this current sentiment? Because recently there was this Economist article that Tu and I just shared. And the title was “What if Germany stopped making cars.” So I'm asking…

Tu Le:
Very provocative, very, I’ll send it to you Philipp if you don't have it yet, I'll send it to you.

Philipp:
I’ve not read it yet.

Tu Le:
I'll send it to you. 

Lei Xing:
So I’m wondering, tell us the buzz on the ground, especially leading up to IAA Mobility in Munich, the Chinese are, many Chinese, China EV Inc. is exhibiting. On the ground, is it this sentiment, is it one of uneasiness, is it one of worry, is it one of apprehension? What is it, like, tell us.

Tu Le:
Hold on, because I'm going to add on this, Philipp and see if you can remember my question and then answer Lei’s, because I want to understand when did the trend of EVs begin? Was it just 18 months ago? Was it 5 years ago? How has and this rolls into Lei’s question, the sentiment now that a dozen, 15, 16. Chinese EV brands have entered Germany.

Philipp:
That’s a very very good and very broad question. Oh my god, I don't know where to start. Let me go a little bit back, right? I did for me and I'm not representative, right? I did for the very first time as a consultant in 2008 worked with BMW on their crazy Project i right? Which became BMW i and they were actually leading. They were one of the first ones seeing besides Tesla, we need an EV. Then they completely gave it up a few years later, oh it's too expensive.

Tu Le:
That's a discussion topic for another time, because like you said, they were still leading.

Philipp:
But you know like they saw this early, and it was too early for the market, because the market was just not there and EVs were not a thing. I would say until probably 2019, that's when we discussed it internally and we said 2019 at carwow is that we got to be leading in EVs, we got to be the first ones. People told us we are crazy and like it’s not a market, it's so small, it's only Tesla, every German manufacturer would have still told you Tesla will go away, they'll fail. I was horrified in all my roles before whenever you talk to anyone at the board level on Tesla, they're like oh they'll go away. And that was a mantra, right? They're not big enough, you know like it's that thing from Silicon Valley that will go away. And nobody really took electric serious until I would say, until just before COVID, when like everybody was like oh shit, we need to do something about the environment, and oh it looks like Tesla is getting successful, so maybe we should do more there. And then VW put that huge effort behind on, we need the ID., the ID.3, we need the ID. series, and that's when pretty much the government started pumping money into it as well. So that was, I think it was end of 2019 beginning of 2020 when they launched their first government incentive and they launched it just before COVID and you could get like, what was it, around 6,500 Euros when you bought an EV from the government, it was a combination of government and the industry had to pay some of it as well. And then COVID hit, everyone and everybody was afraid oh the car industry is going to die, nobody's going to buy cars anymore and the government pumped more money into it. They doubled their share on the incentive. So you could get up to 9,750 Euros on an EV. That's nearly 10,000, right? That's nearly 10,000 Euros on an electric vehicle. I think that, like I was back then saying that's crazy. That's not needed. Why do you throw more money at that problem? It’s not the problem that you don't give enough money. It's a problem that at the moment dealerships are closed, and then there was a chip problem. But that meant that pretty much the second half of 2021 and 2022 EV sales were flying. And you didn't see it in the numbers because it was orders were flying, but the actual deliveries like we still living first half this year we still living off the tree from last year because it's cars that get delivered that were ordered last year. And we had at carwow, we over indexed on EVs, I told you that before. But we had last year, we had moments where share of configuration of 58% EVs, that was last year, summer. And everybody was like, I need to order my EV now. So I get it by the end of the year, so I get the big government grant because it's going to be reduced 1st of January, 2023 when from 9,500 to 6,750. And that is for under 40,000 Euros list price. There's a tiering beyond that, it gets, you get less. And as the government is phasing out the incentives, people always go crazy and I need to order it now. So I get the higher incentive, but that incentive has pushed EVs big time. But you saw the sales numbers always lagging. And that is where the biggest problem at the beginning was there were all these EVs available. I mean you had one car per segment, right? You could get an ID.3 or a Hyundai Kona, and then you were like, and what else, right? There was no more options. While on combustion engines, you have what, like 40, 50 models in each segment, and you were very limited in what you could get. I bought an EV myself last year, and I was like, oh my god, you don't have the choice that you have on combustion engines. You go to BMW, the choice is outrageous, it's huge on every single segment. And on the EV you then have, oh I can get the i3, that's pretty old. I can get now an i4, or an iX, and that was it, the three models. And you're like and then they are not. And then you start comparing you are like, actually, the battery management system of some 

American player is much better and the range is better. And by the way, you also get a charging network out of it. Why should I go for BMW, right? And I think that happened a lot, and then the ID.3 actually had a really, really good start. I think it really sold well, then they ran into chip problems. You had a year and a half delivery times. I think that is where the first China EV which is only half a China EV company in my opinion, MG, started to come with really attractive pricing. And they had that one promise, the car is available, you can actually get one, right? And that's where people started really switching and go into MGs, Tesla hugely successful. Polestar really started growing during that time, but it was really…

Tu Le:
Let me stop you right there Philipp. For our listeners who do not know this, SAIC or Shanghai Auto owns MG which is a British brand and that's what Philip is talking about. So sorry about that. 

Philipp:
Thank you for stopping me.

Tu Le:
Something I just wanted to briefly explain. So please continue.

Philipp:
No. I think that, but that is very true, right? There is the China EV companies that are Chinese Chinese. Then there is the ones that actually use a European brand like MG or Polestar…

Tu Le:
Lotus (cough cough)

Philipp:
Lotus now as a new one that are owned by Chinese and are manufactured in China, but they are not perceived, and they don't want to be perceived either as a Chinese brand in in Europe. Also I think it's part of their success because they use pretty much their European heritage and their name as well to not be directly associated. 

Tu Le:
Let me stop you there. How many consumers know, like, is it, do you know, is there a thing on carwow from an information standpoint that says manufactured in Wuhan or anything like that?

Philipp:
Well, consumers do know that they are manufactured in China, but they also know that the Dacia Spring is manufactured in China and BMW manufactures cars all over the world, right? But there is still this and I think it is not, it's an invisible fact that it's a brand you've heard before, it's been around for decades, even though yes it went bankrupt and was sold somewhere else. But there is this association on you've heard this many times in your life versus my biggest, the thing that makes me laugh all the time, I’m really sorry for the Chinese, for yourself, I had a new head of marketing start last week. She was in a meeting and somebody was saying BYD and she's like, what is BYD, oh it's Build Your Dreams and she was laughing out loud. You want to, really, you're kidding me? like, no, it's Build Your Dreams as a Chinese brand and she did not believe I was like, true about it.

And then you tell her that the cars the Atto 3 is an okay name, but you say there's a Dolphin and a Seal and like Germans go like this is a joke, this you're kidding me, there's a Funky Cat, really, that's a car? And so they really don't believe that because they're so serious. Like in Germany, they love numbers, like an A6, A3, a 3 Series or 5 Series. They are used to very engineering driven terms, and suddenly somebody comes with really funky names. And they don't believe you in the first instance. And it's so unknown to them that concept of having funny names or like other names around that they are really struggling with that, to believe it's true, while you come to the Polestar 2, 3, 4, it's more of a concept on MG4, which is like yeah it is the used terminology, it’s something you're used to, something that you have known for decades. You've bought cars for decades, I think also big difference, a European or American car buyer versus Chinese car buyer is you, it's not your first purchase, your second purchase or third, but you have bought cars your entire life and you have some habits and some knowledge in the background that it's just different for them. But coming back, Lei, did I answer your question actually?

Lei Xing:
Yah, no, you haven’t answered my question, No, I was thinking the statistics you sent us, right? I mean the half-Chinese brands are doing well. The MGs, the Polestars and the true Chinese brands, I’m like, this is like crying wolf, right? Or crying Chinese EV Inc., the volume is not there yet. But like I was saying, but, the threat is there because we know all of these companies, the CEOs, the board, they visited China back in April, right? And what has transpired with the Volkswagen Xpeng, I mean I said that was a super blockbuster event of the century for something to happen like that. So I'm asking you on the ground, what's the buzz?

Tu Le:
Let me ask you this, so fast forward now to late 22, early 23, because you said that the MG was available, so people bought it, but now more electric vehicles are available from European brands. Is it, do you think, so from your data, is it pricing? Is it features? Is, what's making the MG now still be the best seller by far and then some of these Chinese brands starting to gain some traction. So.

Philipp:
I think it is a very simple answer. It's price. It's pricing and technology. We have asked, actually let me maybe state some facts. Because I did this, we did the very first survey last year in December and we repeated it in May this year because I was also like you mentioned Auto Shanghai and this event, right? How this really influenced. When I asked in January, when I asked execs at big German manufacturers about Chinese brands they are like laughing, they are like it’s not a threat, come on, they won't ever like, we have Germany, Germans will buy German brands, they won't live up to the quality, etc. Very different answer you get nowadays. But so we did a survey to our users on the platform. So anyone that was researching cars, we asked a few questions. And we were asking them if they would consider a Chinese car brand for the next car purchase while they are in the research process. And in December 2022, 30% said I can imagine buying a Chinese brand. In May 2023, 42% said they can imagine buying a Chinese brand. I bet you we ask…

Tu Le:
Did that surprise you? Did these numbers surprise you?

Philipp:
They didn’t surprise me because there was not many brands available. I mean in all honesty, you had the MG, again, the MG and Polestar are not seen as Chinese brands. I think the real proof comes if NIO, BYD, Great Wall, brands they haven't heard of before, and that are truly Chinese. And they are increasing price as well. You go in half a year from 30 to 42%. I bet you I do this end of year when there is small buzz around it after IAA, and after like more Chinese brands available and on the road. And that's one very important fact that cars need to be on the road they need to be seen. Then you'll be at….

Tu Le:
That’s the best marketing right there.

Philipp:
Then you'll be about 50%. And so that was actually a surprising moment for us all that, even though there's very little availability and very little seen so far, it’s already that many people would consider it as a purchase. But then even more interesting, what do they associate with Chinese brands? I give you the top three. The top three is better offers, better rebates, more value for money, and a better choice or selection of EV range models. So it is exactly what they do, right? The big problem they've done except MG, MG came in, and they got it so right in my opinion, they came in, they sell the MG4, starts at 30,000 Euros. While the ID.3 and all the competitors are at like 40,000 Euros plus. BYD came in, selling the ATTO 3 for 44,000 Euros, Great Wall came in, selling the ORA Funky Cat for 41,000 Euros list price. I mean like, that's a joke. Like, why would you think you can charge a premium for a brand where everybody associates them with great technology, but it needs to be cheaper. It needs to be value for money. Nobody buys an ID.3 because it's cheap. It's a premium still. It only works because you have a 10K government grant on it. So you bring it down to a competitive price to an ICE vehicle. But if they would still buy a German car, if it's the same price, they will not opt for another car. And I think we've learned this, the Japanese have learned this, the Koreans have learned this. How did, why is Kia and Hyundai so successful? The first 10 years it came in purely through price, and over time they've worked themselves up. But what the Chinese at the moment are trying is oh we come into this premium market as premium and see where it goes. It goes nowhere. It really goes nowhere. The only numbers they now are hitting is fleet. And if you look at the numbers, their share, it’s like appalling, it’s miniculous. You don't even see them. And if you look into the details of those numbers, 80% of them are fleet. So it's actually rental car company cars. So there's actually in terms of pure retail, it’s really single digit numbers what they're selling at the moment. The problem, in my opinion, is pricing. 

Tu Le:
But you know what the weird thing is, Philipp, is that if you look at BYD in Southeast Asia and some of these Chinese EV brands, they're really, the pricing there is really competitive. These brands have become, the ATTO 3 is the number one vehicle in Israel, in Thailand, and so it's mind boggling. It's a bit of a head scratcher that BYD would price it, so, let's say, uncompetitively relative to the other markets that they sell it in. And so if they do reduce the price, I think it'll sell like crazy in Germany. Because to your point, there's a little bit of nationalism, but it's not going to trump price. So.

Philipp:
And that's what I’m, I mean their number one thing is pricing. If you have a great price with a good technology and a good car which the ATTO 3 is, right? And if you cannot compete Volkswagen, absolutely, you'll sell that car. But you cannot come in expecting people to buy a Chinese brand, a brand they’ve never heard before at the same price as Volkswagen where they have heaps of trust in that company. And even if the technology, the software or like the entertainment and car entertainment is not as good. They don't value that as much anyways, by the way. And that is another thing. So they only can compete if they come in with competitive pricing, they need to be better value for money. They started doing that now on leasing. They suddenly went from like the 400 Euros per month to 199 on the ATTO 3, which the MG4 is also 199. And that makes it competitive, right? Because that takes it down from like the 40K to the 30K segment. So you certainly get the ATTO 3 of the same price as an MG4 while the list price is 10K difference. But they need to get that list price down as well, because guess what Germans still love to buy their own cars. So it's only, the leasing share is only around 25% in the market and 75% still get bought or financed, because people still have this concept of ownership. It's moving, leasing is growing fast, but you need to be seen as a very competitive on the list price as well.

Tu Le:
So in the united states, leasing is growing, has grown, because the average vehicle price is increased, and it's become less affordable to own. That's why leasing. I don't know if the same situation in Germany. 

Philipp:
It’s absolutely the same here.

Tu Le:
The one thing that I will point out and you know this, is that whereas the traditional legacy automakers, the last thing that they want to do is cut pricing on a product. This Chinese EV, China EV Inc. is the Tesla model where I’ll price it and I'll test it and I'll price it. And with Tesla, it's really only been down because they don't have new products, but this is where I think a BYD is really going to take back that data probably. They're going to start working with you if they're not already, and they're going to have these insights and guess what they react very quickly. And you know this.

Philipp:
I think that is a big advantage of the Chinese, they are more flexible at China speed and you see it, as I said, leasing you already see it. I'm 100% certain they have those conversations as we have them at the moment and say oh we need to adjust pricing. We've seen it. NIO did it right away on the ET5 when they launched, they changed it immediately to also be available for the bigger brand. And they are much faster. They also, NIO launched with subscription only. And Germans are, I don't want subscription. Two weeks later, it was available for sale. So you see that and I can't wait for that change, because that will help them to accelerate. But at the moment, I was surprised they all came with this attitude on, everybody knows us. So the first time I talked to all of them, like we don't need marketing, everybody knows us. We are like a huge player. We are the biggest EV player in the world, why would I do marketing? We come at a premium. I was like these are two things. You really got to change if you want to be successful. And if you want to do volumes.

Tu Le:
So, here's an interesting one. The Inflation Reduction Act for the United States has been in place. I know you talked about the German government having some subsidies, but the Inflation Reduction Act is much more comprehensive. We're talking about giving or helping fund battery cell manufacturing investment. And so we're because most people don't know that Volkswagen Group is highly reliant on the China market to be successful. And they've been extremely successful over the last several years with the exception of, let's say, post-COVID, post-2020, where the ICE sales have fallen off significantly in China, while ID. sales have not gained any traction. Recently, the ID.3 was reduced in price by another 16%. And so now they're starting to see a bit of traction. But with Chinese exports increasing into Europe significantly and a good portion of those being MG and EVs, do you think that Germany and the EU broadly will try to create something more comprehensive to protect the domestic market? Because the crazy thing is, and you probably heard this, Volkswagen is going to start importing into Europe from China. So what are your thoughts? And what's your best guess?

Philipp:
Yeah, now you go really political.

Tu Le:
Do you not want me to talk about that? 

Philipp:
No, absolutely, I’m fine. No. I understand. Fine. I think it's a very, very difficult one, right? I think there is the EU and then there is individual countries. I think the EU and there are those members of the EU like France. And Carlos Tavares has been very outspoken about this. We need protectionism otherwise the Chinese going to kill us. Yes. If you own Stellantis, you are exactly that because that's your biggest threat at the moment. But then let me talk to you about Germany. German Chinese relations very different, walk through any manufacturing plant in China and look at what machines they have there. I mean the German economy has been so, has benefited so much from China over the last two decades. 

Tu Le:
Everyone has.

Philipp:
It's not only Volkswagen, right? It's all our SMEs that exported all the machines and built. I mean I was walking through one of the car plans in Chery when I was there in Wuhu and I was like you go through, there's robots, there’s machines, all of, like half them are German brands. And I’m like, how can Germany stop that, right? The moment they would start protectionism, China would do it, and then you end up in a war which really doesn't benefit anyone. So I think, especially Germany has a huge interest not to put protectionism in, because they also benefit hugely from the relationships in China if it's exporting their own technologies or their own machines to also producing EVs in China, because they can produce them cheaper there and then it import them back in. And I think that is a struggle we always have in Europe that you have different interests. And it's not one market. It's not like the U.S. it's one government, but it is all the member states together and those are very different interests.

So it is, I don't have a clear answer that EU probably wants to push more for it, but Germany is going to push against it. And that's why I think we also as Germans we are stuck, because we are so dependent on China that we cannot limit it either. I think it's a give and take, and I personally don't think protectionism is great. What I can say, though, is like you have in the U.S. this huge Inflation Reduction Act, and you have a lot of investors. We have that too, but it's not done by the EU, it's done by the countries like we have huge government grants on EVs. We have huge grants at the moment on exchanging all your heating and house heating, etc. to get away from unsustainable stuff. We have huge subsidies in all areas already, but we don't have like this one big program that we advertise outside. It is more like there's so many things going on and so many investments into like climate neutrality and CO2 reduction. And it's on all different fronts. We are, though, on the EV side, we are phasing out, right? We're phasing out, we phase out this year. They're going to phase out more next year. They are, that is one thing I’m really worried about EVs at the moment, because they're not price competitive if they now take more and more government grants away or they at some point take it completely away, they won't sell, because in the end, we are also in a very difficult economic situation where people can't afford and they won't ever, again, we come back to pricing, people won't ever pay 5K or 10K more for car because it's like climate friendly, they can't afford it. You opt for like your best option, and they've lived the grants in place, there is a good alternative, but we also saw that interest. I've been talking about last year above the 50s. It heavily declined, first half this year. It heavily declined. We are back down at like 35%. That is the mark. You see that right? In sales numbers as well. EV sales are down. First of September. So what is that? Three more weeks? They'll phase out all the grants for companies, companies can’t get the grants anymore, it's only on retail, anymore. And companies make up 50% or up to two-thirds of car sales in Germany. So if you can put it on your company then it is only down to retail market it’s one-third of the market. And they're reducing everywhere. I think that is a risk if the car industry can't offer cheaper prices because production costs are too high. I know, but that's the opportunity for China Inc. In my opinion, that's the opportunity if they get their prices right. That's where they will win. And that is where I would be so afraid as a German manufacturer at the moment. 

Tu Le:
That's the perspective, right? You say that's the opportunity for China EV Inc., but that's the threat for European Legacy Inc. And we're clearly seeing that the Inflation Reduction Act didn't eliminate that threat from the United States, but it kicked it down the road by a few years for sure. You got the opportunity to come to Shanghai in April. We met. We talked, we had a ton of fun didn't get to party together. So I was disappointed in that.

Philipp:
We'll do that in Munich.

Tu Le:
We’ll try to remedy that in Munich. Initial thoughts. When you hit the ground, you stall these green plates, you got into the Shanghai Auto Show. And then you saw all this foot traffic, all these amazing cars, you saw all the German executives with their white shirt and their blazer walking around like holy, jaws open, generally speaking, right? I don't want to exaggerate that, but is that what you saw and what was your experience and kind of what were you thinking about when you got to come to Shanghai for the auto show?

Philipp:
It’s extremely exciting. I haven't been back to China or Shanghai in 10 years, so that was quite a long time. I was not there, I was there.

Tu Le:
So you were like, your eyes were like this then.

Philipp:
Yeah my eyes were like this, also not car related, but also all the apps, right? You suddenly your everything is digital, completely different world than it was when I saw it last. The first surprise though, to be all honest, when I took a cab or when I had my transport from the airport to the hotel, I was really surprised how many still legacy brands you see everywhere, right? And not that many EVs and if there was an EV, it was a Tesla or it was one of the local brands, but there was also not the new, like hard to see a NIO and Xpeng, a ZEEKR, really few I was like where are they, I want to see them? So on the road and that probably is also Shanghai specific. But on the road I was actually surprised that is still, the picture is still very, very like legacy driven. But when I got to the show, I was amazed how little interest there is in the legacy brands. You like, there is no interest. I was, my wife works at BMW. I went to the BMW booth. I went up the stairs, I took a picture. Empty BMW stand and across, BYD, a big line and people couldn't get in. I was like this is exactly how it felt like, right? You saw the Chinese brands, amazing designs, amazing interior, like not what I saw 10 years before where it was copycats and cheap and quality was not there and you certainly were like ok this is gone. They are same, they are on eyesight, right? They have this stuff together and this huge interest. Everybody wanted to look at the Chinese brands and especially the new ones.

Tu Le:
And the buzz and the energy, right? The buzz and the energy, right? 

Philipp:
Amazing.

Tu Le:
I echo that sentiment because I'm a huge fan and it's a terrible EV but I'm a huge fan of the e-tron, RS, the coupe. It looks, it's a beautiful car, it's a terrible EV but it's a beautiful car. Went over to Audi. No one standing in front of me, got to go, sit in it right away, go over to ZEEKR, where the X is, and there's a 10-minute wait for a $30,000 car, $25,000 car. I mean it was just kind of a moment where I'm like. This is a turning point for legacy auto in China for sure.

Lei Xing:
With respect to the Germany market in particular, I think the German brands are still well ahead of everyone, right? Even when it comes to EVs?

Philipp:
Yeah, I think there you also see if you look at the numbers, the EV registration numbers, Volkswagen is I think they overtook Tesla again because of, just recently, but they are absolutely ahead. And I think it has to do that the fact that they are a known brand, they have always had a huge market share. People are going to buy a Volkswagen, even if the software is not amazing, because again, Germans are not that crazy about the software and in-car entertainment. It's a younger generation that will change it, but the current new car buyers are 50 years plus. They absolutely find, that by the way, Tu, that was one thing that absolutely impressed me that the Chinese manufacturers when I was in Shanghai like those screens that entertainment were, I'm a techy, I'm a freak. I love this. But I know putting my parents or my mother-in-law in that and they'll be like my god a camera looking at me, no way. I don't want to have a camera, put a sticker on it, so they don't see me. I think that is something where they won't win with that in Germany. And that is where Germans are going to buy German as long as there is good alternative. Volkswagen has a good range, it's ID.3, the ID.4, the ID.5. We don't need a an ID.7, that's a car for China in my opinion. That's also the segments. They do a good job on the segments, but also BMW has a good range. Mercedes now comes with a good range. But then again, for me, the missing piece is the volume segments. You go into small SUVs, you go into compact cars, you go to small cars. You have some good options from the Stellantis brands, but they are expensive, expensive, you're not ready to pay 30K+ for a small car like that. You want to get there for 15. And that's what I say, once the grants run out, they're going to have a problem because you're not competitive. And I think that's a segment where we really miss more alternatives. I think in the premium space 100%. That's why I also fully understand why the German Adi BMW Mercedes move up into luxury, because they say that's where we can survive. That's where we have an amazing product. But we cannot compete on the 1 Series, X1, and those with electric. Let's leave that market, right? So I fully get that, right? But that is the interest. That's where the volume is, especially when you talk retail.

Lei Xing:
Are you saying that a model like the ID.2all, what's the name, ID.2 for all or something like that.

Philipp:
Yeah the ID.2 was here. But it's not here. 

Lei Xing:
Right. It’s not here, and is it going to be below 25,000 Euros.

Philipp:
That’s it.

Lei Xing:
And you would think that would be a model that would sell?

Philipp:
Yeah because that's at the moment, that's a segment that is missing, right? That’s also…

Tu Le:
But that's going to be a loss leader for Volkswagen, though, because that's not profitable for them, it can’t be. It cannot be profitable for them. But they need to play defense and defend share. And that's the crazy thing, because I agree with you. The United States is in the same situation. There's the Hummer EV, there's that Ford F150-Lightning at 60, 70, Rivian, Lucid at 60, 70, 80,000 USD. But the average price for a vehicle last or in July was $48,000. So in order to get the take rates to 10, 15, 20, 30% like in China, we're going to need to see pricing below $48,000 across a ton of products. So that's the challenge because in China and you saw this from the Shanghai Auto Show, there are brands that you've never heard of. But in Europe and the United States, there's only a handful of startups that really have gained any traction. And most of them are having troubles manufacturing the vehicles. This is why it's and you guys agree or disagree for the time being, it's Tesla’s world and BYD’s world for the most part.

Philipp:
But let me go back to Tesla. How many Model Ss and Model Xs are they selling? Which is the premium part, very very few, is really where their success in the volumes come from this Model 3 and Model Y where you have cars like 40K and I think as well, they like the price cuts are now moving below that. But that is exactly where you need that more. And ideally you need a car that is at like the 30K level in order to really get into volume.

Tu Le:
So what have you been hearing about from your, let's say, network about the Volkswagen Xpeng investment? Are they surprised? Are they worried? Because I look at it this way. There's been two, potentially three transactions from Volkswagen Group just within the last few weeks, Audi and SAIC on the EV platform. And then Volkswagen with 5% ownership of Xpeng for $700 million. And then the third one is the JETTA LeapMotor rumor. This tells me that Volkswagen Group is a lot more desperate than they made out to be earlier. But is there shock, surprise all that it happened in Germany?

Philipp:
I think there was, media and general public was really surprised, they were caught on surprise. They were like oh my god, now, like the last 20 years, it was the other way around pretty much Chinese companies invested in Europe and now suddenly European companies invested into Chinese companies to help them. So I think it's a true turning point and that is where the surprise came. If you asked me and people in the industry, I think the surprise is not that big, because you look at the numbers, you look at the failure in China and how they have really lost share and how they are so dependent on China, as you mentioned before, Tu. Like Volkswagen, all the German brands are so dependent on the China success, or have all the growth of the last decade or so has come from that and what do they do? That is not continuing. I'm not surprised that that is a defensive move. They have to do it. And I think you will see more of that. But to be honest, because otherwise, how will you, how do they want to solve it if they don't have a solution? That is the only way they can, but it is a true turning point in my opinion.

Lei Xing:
And it's opening the floodgates for more of these to happen, probably within this year, one or two more. I wanted to get this same question that we asked James, whether I don't know whether you guys touched upon this, your suggestions, your recommendations, your advice for the China EVs. Because from again going back to the data, I mean talk is cheap, right? The China EV Inc. they talk the talk, BYD they are in 54 markets, including how many markets in Europe. But the numbers in particular that you've shown in Germany, say something else. Do we need to be more patient? What is your recommendation?

Tu Le:
Let me stop you right there Lei, because we need to qualify this. Vehicles, purchase is still an emotional buy. So there's hours and hours of research, a lot of it on carwow. And so it's not like a brand can come in in the automotive sector and automatically be hot. Tesla the instant hit took, it was 20 years in the making. Okay, so I think there's outside expectations, but they instead of making a bunch of mistakes, Philipp, you tell because I know there's people from BYD, NIO and Xpeng that listen and watch this stuff. So this is your opportunity to tell them point blank. What they need to do to take on the German market. So.

Lei Xing:
I mean just to add, when I test drove the ATTO 3 in Paris, I thought this is a perfect vehicle for Europe, besides the maneuverability, I don't know about the pricing, but…

Philipp:
I think absolutely thanks for that question as well. I think before I go into the recommendation, one very important thing you said Lei just in your question already, do they need more patience? Yes they need more patience. I think that is, as Tu also said, you're building a brand, you're building a market, you're building trust, you're building, it takes time. I think you cannot expect going into a market and boom it sells. So Tesla didn't do that. And Tesla had a crazy guy that like didn't even have to spend on marketing because he had a Twitter doing that for him. But I think it anyways, anything takes time and I can tell you from carwow as well. It took time to get Germans used to use that way of buying a car. It is not an instant success. Nothing is an instant success, especially if it's your biggest or second biggest investment in your life, buying a car. So patience is one thing. But let's go back to what you said, what advice would you need to get it right? And I think there's pretty much, there is, I think, three or four things. 

The first one is, you need the right product, the right segment. You are right Lei, the ATTO 3 absolutely hits it, but a lot of the others come with huge SUVs, big sedans, which are not for the German market. Germans want small SUVs, they want compact cars, we have small cities, small roads, so they want smaller cars, they don't want the Li Auto SUV style, right? That is for America or China, but that won't fit in like drive that car through Italy, you can't even fit through the street on your vacation. So you need to have the right product and I that I was shocked when I was in Shanghai talking to, not only the brands that are already coming, but the ones that are considering, they all think big cars, they all think premium. Stop that. Go in a segment that is hot, the segment where you can compete and that for me is a compact and the smaller car segment or the SUV segment. Really, and the second point is pricing, you got to enter and that is what customers tell us, as a Chinese brand, they expect better value for money, just like the Koreans entered when 20 years ago. It is value for money, it's a good price. They haven't done that, the ones that came position themselves premium first because they thought they can try to compete on the level the Volkswagen and the German brands, which I believe they can and customers tell us they cannot. That is pretty much. You need the right product, you need the right pricing.

And then the third thing, when we ask customers, what holds them back from buying is exactly that I don't know the brand, I don't trust the brand, hat do I do if it breaks down in 3 years and they leave the market again. So the entire network how they build up their sales and aftersales, but also how they market their vehicles. The majority of them came with very small or no marketing budgets and thought we do it like Tesla, right? We don't spend anything on marketing, they won't sell. Because people need to get used to those brands, they need to hear the brands, they need to see them on the road, they need to build that trust over time. That's where the patience comes in, but they need to be ready to spend. They need to be ready to be visible on carwow, they need to be ready to be visible on other platforms and more visible than anyone else because nobody has ever heard about BYD, nobody has ever heard about NIO or all those brands.  NIO does a good job on PR, they are very, very loud at the moment. I haven't heard much about ORA, WEY, they've been around for 2 or 3 years. You don't see anything, you don't hear anything.

Tu Le:
AIWAYS.

Philipp:
AIWAYS, same thing, and they're very quiet, they don't have marketing budgets. But no, you need to do the opposite, you need to be super loud, you need to be overly there, you need to get in front of the eyes. When people research their next car, they need to be made aware that there is an alternative from China that is actually better technology or same level of technology, better price and immediately available. That's how MG did it. They spent a lot of marketing last year on nobody could deliver cars, and they got in front of them and said our cars are immediately available they are good value for money and you can have them today, or you can wait for your ID.3 a year and a half to get it. And that's how they got in. And I think these are the elements they need to get right and really be fast as well at adapting, because otherwise it will just take really, really long.

Lei Xing:
MG hits on all those factors that you just talked about.

Philipp:
They're the only brand at the moment selling.

Lei Xing:
Right. And the heritage, that helps, so.

Tu Le:
And I think this is kind of that bridge because carwow is really the only major portal, digital portal for these Chinese brands who are pretty much only digital marketing in China. So bricks and mortar marketing, promotion, sponsorships and print is really foreign to them, generally speaking, and spending money on those types of things where it's a little bit harder to measure effectiveness, is, that's the art of marketing. And I completely agree, when they come to the United States, not everybody's going to be on the internet using their phone to buy things. And so they need to have billboard. The best marketing is obviously having more cars on the road, right? But so the three of us should do a side hustle consulting company, and then they should hire us to launch into Germany.

Lei Xing:
I got an interesting call from a ZEEKR representative, cold calling you. I don't know how they got my information. I'm like, I don't live in China. And then he's like, where are you? I'm in China but in the U.S., and he’s like, oh, we are already in Europe, hopefully we'll go to the U.S. soon. So that was funny

Tu Le:
Philipp, we're going to wrap this up in a few minutes and then we're going to give you a chance to ask us any questions. But let's do this, let's end it on a bang. What are going to be Tesla’s long term prospects? The Model Y is one of the best-selling electric vehicles in Germany right now. Why does it resonate? And what is going to be the reaction when Tesla has the largest factory in Germany?

Philipp:
I mean the Model Y hits exactly all those things I said before. It is the right segment. It's a smallis SUV or midsize SUV, the price is incredibly competitive. They just…

Tu Le:
Can you tell us what are the prices? Because it changes so much that it's hard to…

Philipp:
I actually have to check the Tesla Y price, what it is today. I need to check it as well. 

Tu Le:
It's like a stock price, right? It goes up and down. It goes up and down.

Philipp:
I mean at the moment it starts at, list price, sells at 47,000 Euros. So you take the 6,500 grant off, it’s like 40K for a like midsize SUV, leading technology, it’s still, Tesla is seen as you get an EV, Tesla is like the most experienced, best in brand you can get an EV from. I think and what they really did well, it’s the charging network. They take that piece of mind, oh range is not a problem because wherever on the German highway, you have a fast charging network and you can always charge. The reason I ended up buying a Tesla, because I was like you know, oh, everything, the entire concept makes sense. And by the way, it's actually also really affordable. It's not expensive. And I think that's what they got really right with the Model Y, they hit that. The plant, it’s a really interesting one. Every German would have told you they will never ever build that plant that quickly, they build the plant without having the permit to build it. This is like typical Silicon Valley, I build it, and if something goes wrong, I build it back. Like no German company or manufacturer would have ever done that. They would have gone 3 or 4 years through like all the process of getting approvals before they would even put the first brick there. Tesla was done by the time they got the permit. And by the way, if something would have been wrong, none of the government officials would have not given them the permit because they already employed how many people. So I think they were very smart moving really fast. Again, the German competitors totally underestimated that, and I think yeah, it's smart from them to do it in Germany, because again, that gives a German trust. They actually have a plan to Germany, they employee people here, so I'm not afraid of buying a foreign brand. It's actually part of Germany now. It was a smart move.

Lei Xing:
Are most of the Model Ys produced in Berlin, now being sold are produce at Giga Berlin?

Phlilipp:
Yeah. So when you buy a Model Y in Germany, you normally get it from Berlin.

Tu Le:
Do you have a German made or do you have a China made?

Philipp:
I have a Shanghai made.

Lei Xing:
All right.

Tu Le:
So you got standard range?

Philipp:
I got the Performance, the 3 Performance, that is still built, or that was last year was still built in Shanghai.

Tu Le:
How's the fit and finish? Are you pretty satisfied, pretty happy?

Philipp:
I mean I am happy with the finish, I'm not happy as a German driving 200 km/h on the highway, it’s damn loud. I think, but this is, again, competing in Germany is very difficult. It's the only country in the world where people go 200 on the highway, where people are very picky about interior. That's where I think Tesla was never great on interior. I still prefer from driving at a BMW because they have much nicer interior, it feels better.

Tu Le:
Sound deadner. 

Philipp:
It is quiet when I. And I put my cruise control at 210 when I'm on highway on the BMW, I wouldn't do that on a Tesla. It stops at 150, the cruise control. But you don't drive faster because it is getting loud and the EVs they use too much battery and then you need half an hour charging, so you don't do it. If an ICE you do it because you refuel in 5 minutes. Overall, I'm happy with the car, but yeah the finish and like the noise and stuff, I know this car is not built for the German market.

Lei Xing:
I think one advice I would add.

Philipp:
I hope Elon doesn't call me now.

Lei Xing:
No, I was saying that one more advice to stress is that Europe is not a one size fits all market, right? You talk about Germany…

Philipp:
Not at all.

Lei Xing:
The autobahns. What works in Germany may not work in other countries in Europe. That's the other thing that these China EV Inc. needs to really seriously think about, that’s why it takes time.

Philipp:
100%. It's also segments, you look at Germany and the UK, they are two extremely premium markets like we have a lot of premium cars. You don't have that in France, Spain, Italy, the other big European marks. There it’s small car markets. You really need to be good in the A and B segment. And there is way more volume there and the average RRP is so much lower in those markets, because the premium market is smaller. So it is, as you said Lei, every market is different, and you need to really consider which market you go into with which product.

Lei Xing:
Yeah, France, I think the Dacia Spring is like number two selling EV in France, made in China, right?

Tu Le:
So Spanish EV made in China, selling in France. So but to your point, guys, I would have never thought the Model Y it's super loud, because I'm not thinking of driving it normally at 200 km/h. So that's very appropriate because now you need a different set of tires, you need more sound deadner, and in some cars, I'm certain in Chinese EV cars that are on the autobahn at about a 150, 170 km/h the front end start shaking or something like that. So these are the things that they really need to consider from a quality standpoint for the individual markets, because what always gets me upset is that westerners say Europe and westerners say Southeast Asia, like, it's just one big country, and it is it especially in Southeast Asia, because there's 95 million people in Vietnam, there's 97 million people in the Philippines, 450 million in Indonesia. So these are individual countries, and you need to treat them that way. And so maybe the Chinese, China EV Inc., some of them are pretty naive about that as well, so.

Lei Xing:
We need to drive a NIO on the autobahn, to get to the 200 km/h and see what happens.

Philipp:
I can, I did, it’s fine, it's good. 

Lei Xing:
That’s good.

Philipp:
By the way, the Model Y’s better as well. The other day I drove the Model Y, it was much better, so I think it also depends. It could be that like because it was a China produced car, I don't know. But you consider that only for Germany it’s only Germany has that all thing where people might drive that fast. Not all the time, but you do it once in a while and you just realize this is not made for that, right? It doesn't feel good.

Tu Le:
The other thing too, is the giga casting, the one-piece, single piece front and rear end. That's going to be a game changer. Tesla is really. So China EV Inc. and Tesla are pushing prices down, because they're making things cheaper. And this is going to be because the UAW is negotiating with the Big 3 in the United States. I know that Germany has a very, very strong union. So it's just going to be really difficult to reduce costs on a, like an institutional level in order to compete. But hey, Philipp, I think we should start wrapping it up. It's been awesome talking to you, but I wanted to open this up if there is anything you wanted to talk about carwow or if you have any questions for Lei and I, please let us know.

Philipp:
I actually do have some questions. Let's though, keep it short to one or two. The one question we talk about patience Lei, you mentioned that before. I keep wondering, what do you think about the European plans of the Chinese players? How much patience do they have, right? Or I already hear lots of rumors, brands like delaying their plans, others pulling them forward. There's a lot of change. And though there is always just like and two of them, by the way, you suddenly cancel their participation at IAA, and you're like, what's happening? So what is your view on how much patience do they have with their European plans? Or do they pull out quickly if it doesn't work?

Lei Xing:
I think, if we talk about NIO, and if we hear from what William (Li) often says, and he stresses that we're not doing all-in, we are building the brand, right? And they are building the brand. I think they're probably the best at doing that right now. And then for a company like BYD, then you start talk about producing locally, right? There's been some talk about acquiring somebody's plant, let's say, things like that, right? But if you look at the volumes, it's, or the tactics, which actually one question I wanted to ask you was BYD’s tactic with Sixt. It's a 100,000-vehicle deal, right? That's a way to get your brand or your models out there. LYNK & CO, LYNK & CO subscription model, right? I think we're seeing multiple tactics being deployed to drive kind of the branding, but how much patience, I don't know. I mean, BYD seems to be the most aggressive when it comes to European market, right? They're almost, in, almost every market, right? And like I said that they have the products, every single segment, ATTO 3 is great. I think that's what they are pushing…

Tu Le:
On the EV and the PHEV side.

Lei Xing:
Yeah, but we haven't seen the volume. So I mean what are we expecting? Are we expecting, like thousands, tens of thousands? We're not there yet. So I think they need to be more patient.

Tu Le:
Well, the bottom line is that there's China speed, and then there's Europe speed and the United States speed. So they're not built for patience, number one, but the price war is going to wash a bunch of them out that had ambitions to go to Europe. And the second thing is that the ones that do survive, it's still going to be really competitive in China and the pressure release valve is, and to get some of that capacity sold rather than have it to continue to discount and discount in China is to ship it to Europe. And so there's going to be, what you're going to see is a lot of dipping the toes of some of these Chinese EV companies that most of our listeners have never heard of, but you've now seen because you were at the Shanghai Auto Show, but I still think there's probably going to be four or five brands that are going to resonate. A NIO, a BYD, and He Xiaopeng last week said we're going to enter two dozen markets next year, so they're going to get super aggressive as well. And if unless the German and the European legacies can get down to these price points and even just lose money but lose less money, then I think the bottom of the market is going to be owned by a lot of Chinese EV brands. 

Philipp:
Thank you. 

Tu Le:
Anything else?

Philipp:
My last question, what's your take on the VW LeapMotor rumors?

Tu Le:
I'll let you start Lei.

Lei Xing:
I don't know where to start, because like we said on the last episode, Volkswagen is the deepest into the rabbit hole, as far as using either China partner technology platforms or using these smart EV startups. 

Tu Le:
Let me stop you for a second because this is what we should let our audience know. So Mercedes, 37% of their sales, China, BMW, 33% of their sales, China, Audi 40% of their sales, China. So they are completely over reliant on one market and it's not Germany. Please go ahead Lei.

Lei Xing:
No, I mean, right? Volkswagen’s all in, when I say all in, meaning they're willing to try these new and unheard of tactics..

Tu Le:
Finally!

Lei Xing:
Yeah, to be to be more localized, too be, you know, Tu you describe it as a tough pill to swallow, they're willing to swallow that tough pill in order to be relevant. So.

Tu Le:
In order to try to be relevant.

Lei Xing:
Yes.

Tu Le:
Because, are they shifting engineering, technical, and R&D challenges for now organizational behavior and cultural challenges? Because it's not just LeapMotor, they're working with SAIC, they're potentially working with Leap, they're going to work with Xpeng, they're working with Horizon, they're working with ThunderSoft. So there is 5, 6, 7 Chinese companies that Volkswagen Group needs to work well with, yes, work well with, in order for them to even put a product on the road in China that can be competitive. We're not even talking superior, we're talking competitive. And I can't end the chat with you, Philipp, as someone who is a German that's very technology forward. How do the German legacies bridge this gap? Because if you believe, like I believe in 5, 6, 7 years, it's really going to be software driving a lot of features, they can't catch up to Tesla. I don't think they can catch up to China EV Inc. So I mean where does it go? Like, how does this turn out for them?

Philipp:
That is the question, right?

Tu Le:
Because if they could do the Volkswagen thing and they could potentially hollow themselves out and become a contract manufacturer if they partner their way to relevancy. It's an interesting issue. If you're a German technology company that's really good at software development and hardware software integration, you have a huge opportunity ahead of you. Huge opportunity.

Lei Xing:
So for any foreign companies, automakers to even be, let's say, not successful, to try to be relevant in China, you have to go through this path where you have to have a path that's China specific. You have an outside China path for other markets. If you want to be relevant or you leave. I think that's it.

Philipp:
I think I agree, I think what you, especially looking back to what we discussed earlier Auto Shanghai, right? To what I said about in car entertainment and all that and you're in the China ecosystem, it is so different as well. And if you want to crack that, you have to have a different way. As Lei, as you say, because especially through the digital ecosystem, they diverge so much the best and China is so different. And if you want to get that right, is that you have to localize, you have to be there have a different route for that versus what's going to happen in, OI'd say, in the west. Because there, that's why Europe and the U.S. are so much closer in terms of the digital ecosystem, the behaviors, the culture. They are just so different how people use cars.

Lei Xing:
Not the same rule, but on the flip side for the China EV Inc. going to Europe, going to Germany, what works in China is not going to work in Germany, it's not going to work in Europe.

Philipp:
Absolutely.

Tu Le:
So China EV Inc., contact Philipp, if you're planning to enter Germany or Europe. Hey, Philipp, real great talking to you. It was good to catch up since last time we talked in Shanghai. And we both look forward to seeing you in Munich. Thanks for being on the show. And I’m eating my popcorn just like you, and you and James I think we're smart enough to find this podcast early. And I hope it still helps you with what's going on over there. So.

Philipp:
Thanks again. Thank you so much for having me.

Lei Xing:
Hi, this is your co-host Lei Xing. Philipp says he’s not your typical German, and listening to him talk about his professional journey at carwow and perspectives on both the German legacy automakers and China EV Inc. definitely make you a believer that he is not. Phillip gave us great insights into the car buying habits and processes in Germany, and his recommendation or advice on China EV Inc. entering Germany or the larger European continent can best be summarized with the “4Ps:” patience, price, product and promotion. Balance these with the right amount of China speed perhaps is the secret sauce for success. We look forward to catching up with Philipp at IAA Mobility 2023 in Munich and share a few beers together. Prost! 

Tu Le:
Lei and I will be sharing more of our conversations with the men and women around the world, moving the EV, AV and mobility sectors forward as part of this China EVs & More MAX series. Some folks will be instantly recognizable, but some will just be people that are doing amazing things in the space that we think deserve to be highlighted. Don't worry though, Lei and I will continue to host our live weekly China EVs & More Twitter spaces room. That summarizes that week's most important news coming out of the China EV, AV and mobility space. For those that can't catch the live show, you can find the China EVs & More pod on all major platforms or wherever you normally get your podcasts. As EV adoption reaches its global tipping point, it'll be even more important to stay updated on everything that's happening here. Lei and I are confident that China EVs & More is the best resource to do that. Until next time, as always, thanks for listening.