CEM #132 Transcript
Recorded 9/8/23
Tu Le:
Hi everyone and welcome to China EVs & More where my co-host Lei Xing and I will go over the week's most important and interesting news coming out of the China EV, AV and mobility sectors. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. For those that are new to the show, welcome! And to our loyal listeners, welcome back! We ask that you help us please get the word out about this podcast to other enthusiasts and of course tune in again next week.
My name is Tu Le. I am the managing director at Sino Auto Insights, a global management consultancy that helps organizations bring innovative and tech-focused products and services to the transportation and mobility sectors. I write a free weekly newsletter that we pull many of our discussion topics from. You can sign up for it at sinoautoinsights.com, which I encourage you all to do. Lei, can you let everyone know what we're doing? And please introduce yourself?
Lei Xing:
Good morning from Munich. Tu and I are currently in a NIO ET7, and we're driving to the Munich airport where I will be dropping Tu off. And we've just spent roughly 5 or 6 days, just less than a week in Munich for the IAA Mobility 2023, simply known as the Munich Motor Show, previously known as the Frankfurt Motor Show. And this is episode number 132 or 133, and a special edition where we're recording this episode in a NIO ET7 and Tu, he is driving. And we're heading to the airport and we're going to talk about the sights and sounds of IAA Mobility 2023. Where should we start?
Tu Le:
So let's start with last night. We got to see some friends. One in particular that will be notable to our EV community. And maybe you can tell them who that was.
Lei Xing:
So last night, we were at the WOW Day 2023, which was organized by carwow, and carwow for those that listen to our show, we had just dropped our latest MAX episode with Philipp Sayler von Amende, the CEO of carwow Germany. And a couple of months before that, we had recorded an episode with James Hind, the founder of carwow.
Tu Le:
Who we got to meet last night.
Lei Xing:
And we got to meet both of them last night at the carwow or WOW Day 2023. And at the WOW Day 2023, we met Dr. Daniel Kirchert, in Chinese he is known as Dai Lei. And he is the former, I guess he is the former founder, co-founder of Byton, one of the early casualties of the China smart EV startup space.
Tu Le:
What a great guy. He has so many cool stories to tell.
Lei Xing:
Yeah and he's spent more than 25 years in China. He was formerly one of the executive VPs of BMW China and the Brilliance joint venture, he was head of Infiniti China before founding, co-founding Byton in, I would say, 2015, 2016. And it was funny because yesterday it was September 7, and it was exactly 6 years ago in Shanghai on September 7, 2017, they announced the Byton brand. So I thought that was, I mean what a coincidence that we meet him again in his hometown of Munich 6 years, exactly 6 years later. And he just founded another company called NOYO Mobility, which is a kind of a sales and service partner to help sell Chinese EV brands. And one of the brands they are helping to sell in Europe is the VOYAH, and the VOYAH FREE, and they had this pop-up store in the Funf Hofe…
Tu Le:
Hey there's a Lotus.
Lei Xing:
Ah, there’s a Lotus Eletre, two of them! All right. It looks like a test ride vehicle. Yeah, so they had this pop-up store in Funf Hofe right in the downtown, I think it's Marienplatz, where they were showing a VOYAH FREE and doing test drives. I had an opportunity to test drive the VOYAH FREE the other day. And now having met him, we spent a lot of time, I think reminiscing histories of where he was, what he was doing in China and what he's doing with NOYO, can’t share too much, but it was just good to see him. Last time I talked to him was 2020 at CES.
Tu Le:
It's notable that he also spent some time at Evergrande.
Lei Xing:
Yes, right before.
Tu Le:
Before moving back.
Lei Xing:
Yeah this was after Byton. So it was good to talk to him and…
Tu Le:
It was great to meet James and Philipp for the first time as well.
Lei Xing:
Yeah, they are awesome guys, cool guys, and…
Tu Le:
So let's press rewind. Let's start with Monday, Media Day. What’s your reflection?
Lei Xing:
Let's do this. Let's break this IAA Mobility into a few parts. So I arrived a bit earlier to attend, you know September 4 is the official press day. But here's how it went. All the German manufacturers, BMW Group, Mercedes, Volkswagen Group, they, before September 4, they took care of their business, because they knew, right? They wanted the spotlight to shine on them beforehand. So they had these pre, launches or brand nights. So BMW Group announced the new MINI, the battery electric Cooper and Countryman on September 1. On September 2, the Neue Klasse was, had their global debut. And on the 3rd, Mercedes had the Concept CLA Class debut at their event which I attended. And simultaneously Volkswagen Group had their brand group night, where they announced the ID.GTI Concept, and the Cupra, I forgot the model, the concept that they showed. Before the show even started, the German automakers, they were done. All the announcements were made. So that was before the media day. And then once we got to September 4, it was time for the China EV, AV, mobility Inc. to shine, because I mean we said BYD, I mean I said, I tweeted BYD took over Munich because BYD had one of the biggest crowds which we were at the press conference.
Tu Le:
So when we got there, we were about 10 to 15 minutes early. There was Wang Chuanfu and Stella Li were already sitting, but the crowd hadn't gathered yet. I didn't realize how large it was.
Lei Xing:
And the funny thing is, I was at the Volkswagen Group press conference earlier in the morning and standing a few spots down next to me was indeed Wang Chuanfu listening to the press conference. There was a guy behind him doing the translation while Oliver Blume and all the brand CEOs were speaking. And he was actually, listening quite, so he was paying attention. So I thought that was interesting and right afterwards. I think BYD press conference was a little bit later, so they moved over.
Tu Le:
And so a there is a picture of the presser that I shared on Twitter that can illustrate visually how much interest the IAA, the folks at the IAA had. We were lucky because we were at the very front. We didn't have to fight and get on our tippy toes to see what was going on, but there was tremendous interest. And it was probably the most full press event that I was at this week. I'm sure it was. But to your point, there were a number of battery companies, CATL, EVE, Sunwoda, CALB. They weren't shy about trying to find customers. There are two autonomous vehicle companies, DeepRoute and QCraft. We know them. They're friends of ours. It was nice seeing Maxwell for the first time because, so we've interviewed these people on the podcast, but we haven't been able to meet them in person. So that was really cool. Great people. I think that's the common thread.
Lei Xing:
That's the thing I think when we talk about these auto shows, I think if we put it at a 30,000-foot level, this was, after the Auto Shanghai, if all the foreign automakers had that initial shock, this Munich, IAA Mobility, I think, provided, I wouldn't say a shock, but additional reckoning moment, I guess for them back at their home, right? So these Chinese companies…
Tu Le:
This is different.
Lei Xing:
Coming like, right in your face style like without these Chinese companies, there's probably no IAA Mobility because we, I mean I felt like it was the IAA China EV, AV Mobility 2023, right?
Tu Le:
And it was it was all EV companies. I mean it was all about EVs. There's, no one was paying attention to ICEs really. So.
Lei Xing:
And I think this format, this is the second time that they've done this. The first time was in 2021, but because of COVID there wasn't much crowd, but this is I think the first time since Auto Shanghai for a major international auto show to have a kind of normal crowd. And from the presser from the organizers, VDA, there were 750 exhibitors from 38 countries, and the most outside of Germany, the companies came from China. I don't remember the exact number of exhibitors, but I mean there was, and the concept worth mentioning is, there's this IAA Summit and IAA Open Space. So IAA Summit is where the professionals meet in an exhibition hall style, show setting, whereas the open space, all these brands, including BYD, including Xpeng, including AVTAR, they have booths right inside the city in all the plazas. And it's free for the general public.
Tu Le:
So it's a public display. And Volkswagen and BYD had huge booths, outdoor booths, outdoor spaces. So I think that to your point Lei, it was different when they saw them in Shanghai. But it was different when they saw them in Shanghai because it's China. But this is home turf. And I think it was still very unsettling for them to see that. Now we should also mention that Chinese EV company LeapMotor was here.
Lei Xing:
Dongfeng Forthing.
Tu Le:
Horizon.
Lei Xing:
SERES.
Tu Le:
Yeah. SERES.
Lei Xing:
I mean there's a couple of, if we put these companies into buckets. So the OEMs, right? LeapMotor, Xpeng, BYD, Dongfeng Forthing, SERES.
Tu Le:
And NIO. NIO & Xpeng.
Lei Xing:
Indirectly.
Tu Le:
They are. They loom large, right?
Lei Xing:
China, those are the OEMs. And then the China Battery Inc., right? CATL, EVE, Sunwoda, CALB, Farasis, I think six or seven. And then the China AV companies, DeepRoute and QCcraft and the China chip companies, the Horizon Robotics, Black Sesame. And then also SenseAuto is another company from China, cockpit screen AGI type of stuff and then there's three LiDAR companies: Hesai, Innoviz, and Luminar, and two of these LiDAR companies, we've interviewed their CEO or CFO. So hopefully we'll get David Li from Hesai soon enough. And there's a bunch of others, obviously, other China companies exhibiting.
Tu Le:
The one thing I do want to mention was that the World New Energy Vehicle Congress was…
Lei Xing:
Which I missed, but you attended.
Tu Le:
A huge huge event that for the first time was held outside of China, it's normally held in Hainan. But this time, the event organizers decided to have an IAA with the keynote coming from Wan Gang who Lei you know…
Lei Xing:
Godfather of China's NEV, battery revolution, if you will.
Tu Le:
Yes. So…
Lei Xing:
And he came back from, guess where? From Germany, he went back from Audi to be the Tongji University’s, was it president or some other position.
Tu Le:
Tongji University is also coincidentally where Blume went.
Lei Xing:
Yeah and had a degree. And Wan Gang was the former Minister of Science and Technology for many years.
Tu Le:
Now, he's the chairman of the World New Energy Vehicle Congress.
Lei Xing:
And you said he basically gave a road map of how China got to where it is.
Tu Le:
So he started with a snapshot of where China is, number of vehicles, number of, how the market has evolved over the last couple of years. And then he went a little bit broader, talked about hydrogen, and talked about more charging stations, how the amount of investment that. And it's almost like and he didn't do this on purpose. I'm interpreting this, but he just seemed like he was like, hey, Europe, try to keep up. What was notable was that that the gang was there. The whole gang.
Lei Xing:
The whole gang. Exactly.
Tu Le:
Zipse presented. Blume presented. Ola presented.
Lei Xing:
Li Bin.
Tu Le:
Who else. Wang Chuanfu. So. if we're wondering about how important both countries feel, the automotive market is, this should leave no doubt. So, and Blume’s, I was star struck. I'd never seen them all in one place like that. So I took pictures, posted them, and Blume, Blume’s presentation. It seems, sounds like you've seen a version of it. So not surprising to Lei, but…
Lei Xing:
Fitness center, that's what he said, right? China is a fitness center and they need to get fit.
Tu Le:
So he said, China is our fitness center because we need to work hard to keep up and that's very appropriate, but also…
Lei Xing:
Make sure you get to do the 200 km/h thing. When there's no speed limit.
Tu Le:
Yeah I’ll try to do that.
Lei Xing:
Because Daniel told us there's stretch of autobahn that we can get to do a gun it. Yeah, continue. Blume.
Tu Le:
But his first slide or second slide, he said that our China position is very strong. I don't know…
Lei Xing:
With an asterisk.
Tu Le:
I don't know if I would call it strong.
Lei Xing:
Shaky. I think shaky is the word, the best to describe…
Tu Le:
Which is the opposite of strong, but especially after the ID.4 was reduced to a RMB129,000?
Lei Xing:
RMB149,000.
Tu Le:
Yeah RMB149,000.
Lei Xing:
And that was after the ID.3, which was reduced to RMB120,000.
Tu Le:
So that's less than $20,000. And this tells me that they're just trying to hold on to capacity, keep factories open. It's better for now to lose a little money on each of these vehicles than to shutter the factory for 2, 3, 4 or 5 months. So dire situation for Volkswagen, I feel, for Volkswagen, I don't feel any better about their situation after walking around their booth in Munich. The only thing that they had to show us was the ID.GTI which is still not going to come out until 2027 I think. So that's a lifetime away if you're an EV maker, especially if you're an EV maker in China. And the other thing that, as a tangent, Tesla was quietly at Munich with two booths, an outdoor booth and an indoor booth, both had the refreshed made in China Model 3.
Lei Xing:
They had the booth where there is a white board with a white illuminating Tesla logo. So it was very, not the red Tesla logo, so it was a little bit like very low key, understated. And then I did see the new Model 3, sat in it. The fit and finish is quite better than the current one.
Tu Le:
It’s a refresh. It’s not, it doesn't…
Lei Xing:
But everything else I mean, it's, right, it's not significantly too different.
Tu Le:
But there was a lot of foot traffic.
Lei Xing:
Yes, there was. I had to wait to get in. And then I think another perspective is, it's just greatest to. I mean it brings everybody over, right? Especially a lot of the Chinese media that came over with these companies. They haven't been attending these international events since early 2020.
Tu Le:
So I'm glad you brought that up. There's a gaggle of Chinese media that were coordinated by a German company here.
Lei Xing:
Theresa, right?
Tu Le:
Theresa. And so I was able to sit through press conferences, with Horizon, with LeapMotor, with Xpeng. This is really their first opportunity to address western media in such a way that is all about what they're doing. They're not playing defense, they're communicating. This is communication. So I think that was very important. And this reminds me of us being at the Xpeng press conference. And Brian mentioning that, I think he specifically said we're going to be very aggressive entering markets next year.
Lei Xing:
So they had made the official announcement that they're entering Germany. So that was their major announcement, and additional markets. And they're looking to team up with local partners. So now they have what, the G9 and the P7i, and then they're launching the G6 next year, I believe. And even with the right hand, drive version in some other markets.
Tu Le:
So he said by the end of next year, they should have a right-hand drive version.
Lei Xing:
Of the G6.
Tu Le:
But it doesn't make sense, he said for them to retroactively turn a current vehicle into a right-hand drive vehicle.
Lei Xing:
And then so Xpeng made the announcement. LeapMotor made the announcement that the C10 was their first global car. They are planning to enter Europe, but they're, right? So beforehand they are have been rumored of maybe working with some foreign OEMs on platforms, right? So we talked about that earlier.
Tu Le:
There's two potential European. There's Stellantis and there’s Volkswagen. SO those are the two rumors.
Lei Xing:
And then BYD obviously, with a huge press conference, announced the launch of the BYD Seal at around 50,000 euros. So what do you think? Is that a competitive? That's before subsidies, right?
Tu Le:
They specifically said that in the press conference.
Lei Xing:
So for a sedan, what, Model 3 style sedan?
Tu Le:
But a reminder to everyone that the seal is a $28,000 car in China. This is almost 2X. I'm not sure, they've been very conservative with pricing in Europe with and even before with the Han and the Tang.
Lei Xing:
And remember that their current Tang and the Han sells for 70,000 Euros.
Tu Le:
So I, this is where I think we'll see BYD dominate in some of the more emerging markets, like a Southeast Asia, Latin America, but may struggle a bit more in the western markets unless they sharpen their pencils.
Lei Xing:
And then some of the chatter from the, Olaf Scholz, the CEOs of German automakers, I think what Ola Scholz said was, don't be afraid of the Chinese companies. I mean right, we as Germany, we are competitive, right? I think that was his point. And then…
Tu Le:
Speaking of which, I was at the Volkswagen booth on Tuesday. And next thing I know, there's a bunch of police, a couple of dogs. I just get shoved into the outer section.
Lei Xing:
At least you didn't get kicked out like last year in Detroit when Biden came, kicked everybody out.
Tu Le:
And then so I'm far away. I can't see very well. And I'm like, who is this guy? I'm by myself. So because it's still, he's instantly recognizable, but he has this patch on, so I’m like who's this guy talking?
Lei Xing:
The German local call him the pirate now. Priate Scholz.
Tu Le:
So Olaf stopped by the Volkswagen Group booth. Everybody, everything was at a standstill, talking, Blume was there. So that was pretty cool to have the president of Germany.
Lei Xing:
Prime minister.
Tu Le:
Or the prime minister of Germany.
Lei Xing:
An then just the experience I had was the 1st, when I arrived, I checked out the NIO Hub in Munich, and I test drove the EL7. And then they had this big vault in the NIO Hub. It's actually like a 4S Store. They have a big vault of parking space where you can park about 200 NIOs right behind, and then they have the service bay. And then I tried out the VOYAH FREE. Yesterday at the show, I test drove the XEV, that's another China factor that I think it’s under, I guess we don't talk enough about it, is this Stanley Lu, he founded his company which sells these two-seaters to fleets, and they are battery swappable, but they are manually battery swapped batteries, with three batteries in the back. So each about 20 kg and 3.4 kWh, so total of just a little bit more than 10 kWh. But these little cars, they can go maximum range 150 km. They're pretty popular in Italy, fleets, and they sell about 15,000 Euros.
Tu Le:
Which is not cheap.
Lei Xing:
I mean cheap enough and they're trying to enter other markets. And these vehicles they are made in JAC I believe, contract manufactured. Yesterday also after the XEV, I test rode the HiPhi Z which Hesai is organizing because Hesai upplies the AT128 LiDAR on the HiPhi Z and they just opened up the HiPhi showroom inside the Munich Airport, right? So you might want to check it out.
Tu Le:
I will check it out.
Lei Xing:
I'll check it out tomorrow because I'm leaving tomorrow. So I mean there's so many different ways China, let's just say China Inc. are playing this game of, branding, trying to enter Europe. But I would say this wolf (is) coming cry, maybe a little bit overblown because at the end of the day, if you look at the volumes, BYD and all these brands that are showing up, right? They are still very low. And in Germany specifically the top selling China EV brands are MG and Polestar which we call them half-Chinese brands because they have their own British and Swedish heritage. So I say they're not really Chinese brands, but they're kind of Chinese brands, but they're really not, I would say.
Tu Le:
And upon reflecting over the last several days, a couple of things, I didn't see many Chinese EVs on the roads. I took pictures, I saw a P7. I saw a BYD.
Lei Xing:
I saw a few BYDs, I saw some SERESs, maybe test riding vehicles, saw quite a few MGs, saw here and there a NIO or two.
Tu Le:
I didn't see many Teslas either, but one thing that stood out to me was that there's just a lack of charging infrastructure in Munich.
Lei Xing:
It's not like China.
Tu Le:
So that can be a current challenge that will last for quite some time for Munich. I don't know how the rest of Germany is with regard to charging infrastructure, but it's more or less the investment into building that out. So I think the threat is there, but it's not going to be a 6-month thing. It's not going to be a 9-month thing. But China EV Inc. and I don't think it's any coincidence that they are here and en masse because of the Inflation Reduction Act. So I think that looms large over why, the Chinese companies had such a large footprint.
Lei Xing:
I will put it this way that over the last 3.5 years, the rise of the China EVs and these companies, smart EV startups, what they've been launched, able to launch in the market, what they have done have had definitely influence on what Mercedes, BMW, Volkswagen, what they've showed at IAA Mobility. But let's say the wolf is coming, taking over the market. I think it's going to be a long way. And it shouldn't be surprising because Ola said, I mean when Mercedes was founded 137 years ago, a few years later, they started thinking about global ambitions. It's just natural for the Chinese brands to go global. And right now, Europe is the first destination, right? So. One of the first destinations.
Tu Le:
It's important to remember that scale creates flexibility. So and if your domestic market isn't that big or is too competitive, you try to find that scale somewhere else. So I think, but that's what China EV Inc. is trying to do, to be quite frank. And for at least the Xpengs and the NIOs, they have shareholders in the west that have expectations. And so up until now, they've been disappointing their investors a little bit, but it's a long, long game, right?
Lei Xing:
So the other influence is, so Mercedes, their China R&D team is responsible for the global rear seating infotainment. That's one example of China leading the way. And the other is these tier-ones: the ZFs, the Contis, the FORVIAs, some of the products that are being shown, some of the tech, they're going to be adopted on China EV products first. For example, the steer by wire from ZF is going to go on a NIO first, that's coming in 2025, I think. But other than the show itself, Munich, this week, the weather was perfect. For a show like this, I mean Open Space, and then just meeting a lot of people, right? Talking to the old contacts, new people, new friends.
Tu Le:
I met Edison for the first time.
Lei Xing:
Edison. You met Edison for the first time. Oh right, we had that nice dinner the other day with the…
Tu Le:
With leaked pictures.
Lei Xing:
Yeah. That's how it should be, right? Leaked with the NIO gang.
Tu Le:
You know, it's always. I think one of the highlights for me going to these shows, and this stuff is seeing people that we probably regularly correspond with or talk with, share rumors with. So I think that's pretty cool, because we're just kind of nerds. We're all kind of nerds. One thing that I did want to mention was that I went to that Assembly Ventures event at the beer garden. A friend of mine works as a battery analyst for McKinsey, and Mujeeb Ijaz was at this event because Assembly is an investor. And he and Johan sat down for about 30, 40 minutes just talking about batteries and got to appreciate Mujeeb’s enthusiasm. So for me, it was well worth it. Met up with some clients, met up with some potential clients, and got a feel for how the auto show circuit outside of Shanghai and Detroit should be. I thought LA was okay last year. I'll go again. I'm thinking about Toyota or Tokyo.
Lei Xing:
Tokyo Mobility Show. That's end of October.
Tu Le:
And it seems like it would be much more expensive. So unless there's a specific need, I might skip Tokyo Motor Show.
Lei Xing:
I probably won't go. But so after this, we head back to the U.S. and then next week it’s…
Tu Le:
Two days later.
Lei Xing:
It's the Detroit, the old, and how do we describe this, old and outdated Detroit Auto Show where it's becoming a local show, becoming the Big 3 auto show, plus Toyota, plus Hyundai Kia, that’s it.
Tu Le:
It's challenging because the dealers run it. I think that makes it a little bit weird, but last year there was.
Lei Xing:
Last year we had a great week, but maybe this year…
Tu Le:
Only one major announcement, the Mustang. But, you know, we’ll get to see friends.
Lei Xing:
I think this year probably will be underwhelming.
Tu Le:
I hope not.
Lei Xing:
Especially after I think IAA Mobility, it was pretty close to overwhelming for me.
Tu Le:
Yes and it's so fresh in our memory. So I don't, one reminder housekeeping for those of you that are in Detroit for the auto show. On Tuesday night, lei and I again will host a happy hour at the Brakeman at 5:30, starting at 5:30. And one of our, one guy that, a friend of the show, friend of ours, will be coming in from Washington. So I think that would be exciting to see him, but that's all I had today Lei. How about you?
Lei Xing:
Well, we are, you are almost at the terminal. I mean there's so much we can talk about, but it's.
Tu Le:
I'm finding it hard to focus on driving.
Lei Xing:
But this is cool, I mean, right, driving a NIO ET7 in Munich and recording an episode on China EVs & More, I mean this is once in a lifetime I think.
Tu Le:
Yeah that’s….
Lei Xing:
We will get to do this, maybe in another China EV in 2025.
Tu Le:
Yes. And we made some bold proclamations last night amongst our friends. Hopefully, some of those do come true. Anyways. I am a huge fan of Munich now, and would like to take my family.
Lei Xing:
Same here. Likewise.
Tu Le:
And I'll definitely be going to the show in 2025 when it happens next. So anyways, everyone. Good morning, good afternoon, and good evening.
Lei Xing:
Likewise, we'll talk to you next time.
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.