Tu and Lei begin the podcast with a brief discussion about the double holiday being celebrated in China - National Day & Mid-Autumn Festival.
Lei then transitions the discussion to September sales and it wasn't very pretty for many EV companies. Tu reminds everyone that new vehicles were just launched by some brands and that those sales vehicles sales wouldn't be reflected until Q4'23.
Tu and Lei key in on XPeng and NIO to disuss their particular situations and move onto a few other surprise EV companies whose sales numbers stood out including BYD's continuous solid monthly numbers.
Tu and Lei turn their attention to the US market, the current UAW situation and the low take rate that has created more EV inventory than expected for US automakers.
Tu and Lei end the podcast with a discussion on the recent Cruise accident in SF and US EV startup INDI EV's bankruptcy that further complicates Foxconn's entry into the EV contract manufacturing space.
Tu and Lei begin the podcast with a brief discussion about the double holiday being celebrated in China - National Day & Mid-Autumn Festival.
Lei then transitions the discussion to September sales and it wasn't very pretty for many EV companies. Tu reminds everyone that new vehicles were just launched by some brands and that those sales vehicles sales wouldn't be reflected until Q4'23.
Tu and Lei key in on XPeng and NIO to disuss their particular situations and move onto a few other surprise EV companies whose sales numbers stood out including BYD's continuous solid monthly numbers.
Tu and Lei turn their attention to the US market, the current UAW situation and the low take rate that has created more EV inventory than expected for US automakers.
Tu and Lei end the podcast with a discussion on the recent Cruise accident in SF and US EV startup INDI EV's bankruptcy that further complicates Foxconn's entry into the EV contract manufacturing space.
CEM #136 Transcript
Recorded 10/5/23
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. To our loyal listeners, welcome back. We ask that you please help us get the word out about this podcast to other enthusiasts and tune in again next week.
My name is Tu Le. I am the managing director at Sino Auto Insights, a global management consultancy that helps organizations bring innovative and tech-focused products and services to the transportation and mobility sectors. I write a free weekly newsletter that we pull many of our discussion topics from. You can sign up for it at sinoautoinsights.com, which I encourage you all to do. Lei, a patient Lei. Can you please introduce yourself?
Lei Xing:
Good evening. It’s been a while since I said good evening.
Tu Le:
Yeah, right?
Lei Xing:
I think since back to Beijing, right? And I know exactly how you feel because couple of episodes, I was driving through Beijing traffic at what, 8:30 pm to get on a 9 pm show. So this is your co-host Lei Xing, former chief editor of China Auto Review. This is episode #136, a special late night, double holiday edition.
Tu Le:
Can you explain to folks what, for those that don't know what the double holidays are?
Lei Xing:
Yeah so it's the Mid-Autumn Festival and the China's National Day rolled into one 8-day holiday, one extra day because of the Mid-Autumn Festival. So right now China time, it’s the last day of that break, so the 8-day break, and where they'll get back to work on the weekend. So they'll have a 7 day work week following…
Tu Le:
Which is always weird to me.
Lei Xing:
Yeah I know, and supposedly, so here are some numbers I’ve seen. So 900 million trips to be made when it's all said and done. And also a number, 20 million passenger trips on the train, on the first day of the break alone.
Tu Le:
So, as a veteran, both of us, we know to either go one or two days early or one or two days later, so.
Lei Xing:
Or just stay around. Not bothering with the traffic.
Tu Le:
Or just stay local.
Lei Xing:
Especially nowadays with what you're seeing on the highways, people fighting for charging, right? Beating each other up. Because they have to wait for charging now rather than…
Tu Le:
Yeah you saw some of those WeiXin videos or Weibo.
Lei Xing:
My dad sent me in my family group, he sent me like 45 videos of all the different crowds, you know, like older people they like to share this type of stuff. I was like, oh man…
Tu Le:
So you know the newest trend? So last couple summers and last couple of years it's been glamping.
Lei Xing:
Glamping. Yeah.
Tu Le:
But now, people actually have RVs and they trail them and park them at those areas near the Great Wall. So I've seen a couple of videos where it's like a typical RV where an SUV would pull it along, and then you park in a park and live there for a couple of days. So that's new. Have you ever seen an RV like one of those, not the actual whole thing, but the one that is…
Lei Xing:
Put on a towbar?
Tu Le:
Yeah.
Lei Xing:
I think, once or twice.
Tu Le:
Yeah not very often.
Lei Xing:
That was very very rare, but I figured it's probably become a fad now.
Tu Le:
So now, basically, it's going to be a thing where there's going to be a million of them sold, right? Like that's how China works. Like there's a couple of videos that leak out of people doing this stuff, and then next thing you know, a couple million of them sold. So.
Lei Xing:
All right, back on topic. I mean it's kind of slow, but it wasn't slow. I mean there's a lot of things going on. I mean, so sales, like I said, right? It wasn't a golden September for everyone.
Tu Le:
It was not.
Lei Xing:
Especially on the first of every month, for the two of us, I think it’s probably safe to say that every morning, every, on the morning of the first of every month, the first thing I look at is these bar charts, right? Of all these smart EV brands. So I was flipping through, ok, everybody is doing well and then seeing NIO fall back down to the 15,000s, my heart was like, oh no, not again. I don't know, right? It’s…
Tu Le:
So for those wondering, August was 19% higher than September, sales wise.
Lei Xing:
Yeah, so overall industry?
Tu Le:
No, no, NIO. So September sales were 19% less than August sales. So month over month.
Lei Xing:
Yeah. So August was just a tid bit below 20,000, right? And I was like, ok that's fine, right? And then bam, like this roller coaster continues. And if you remember earlier in the year, I said 180,000 that would be a win, they are at 100,000 after September, even if they do 20,000 a month rest of the way, it’s only 160,000. So I’m going to say 160,000 is going to be a win.
Tu Le:
We know that due to the price war, we could probably expect more price cuts from the struggling automakers, which will pull a lot of the non-Tesla, non-BYD vehicles down as well.
Lei Xing:
Yes. And I believe BYD and Tesla in order to get to their respective 3 million and 1.8 million, I think each of them will pull out another rabbit out of their hats before the year ends. I think so. Because BYD still has room to play even with their cheaper models, the Seagull and the Dolphin. Because I think they've launched several Champion editions for the other models. I think those may be coming. And Tesla, right? They launched the Model Y here in the U.S. and they launched the new, not new but kind of new Model Y in China, which is still a lot cheaper than the new one launched in the U.S. So I think there will still be cards that will be played out.
Tu Le:
And remember that Lotus, Polestar, JIYUE.
Lei Xing:
AITO M7, I just tweeted today.
Tu Le:
There are a number of new vehicles that just launched. So the hits keep coming, right? Like I wrote today in the newsletter that we will probably see a tail off on the brand side, but the product side, there's going to be a consistent onslaught of refresh product every 6, 9 months.
Lei Xing:
And it's interesting, like, it's so interesting to see nowadays. Before it was like, I think before it was lots of BYD cover stories or reports coming out recent times. And I feel like all of a sudden, there's a little bit of over coverage.
Tu Le:
Too much coverage?
Lei Xing:
Yeah all of a sudden, right?
Tu Le:
The EU basically sounded the alarms. And so, with…
Lei Xing:
Officially, or formally launching the anti-subsidy investigation on October 4.
Tu Le:
Within 13 months, we should have an outcome, right?
Lei Xing:
The MOFCOM (Ministry of Commerce), CAAM (China Association of Automobile Manufacturers) and some other organizations basically put out a few statements voicing opposition, but that's it, you know. We'll see what happens.
Tu Le:
I'm sure Ralph and who is the China Mercedes head and who's the China Audi head? I'm sure they're all reassuring the Chinese government that this is more about trying to appease the European, trying to appease European consumers, but there's probably not going to be anything significant that comes out of it.
Lei Xing:
So not yet, at least not this year.
Tu Le:
I don't know, I just keep on hearing that there's going to be more bark than bite, so.
Lei Xing:
And then quite a few other ones are actually doing ok. I think Xpeng is okay, at least they're on the way up. Li Auto, right? I mean, my goodness.
Tu Le:
Well, we always agreed that it was a 3-month that would make a trend that we could feel confident that they were going in the right direction. NIO has never really gotten three consecutive months of consistent growth. Li Auto, yes. Xpeng has kind of been a bit schizophrenic as well.
Lei Xing:
Xpeng is only back to what they should be. It's not anything significant in my mind.
Tu Le:
And with Xpeng, it seems clear that their products weren't significant enough in this mass market segment to compete. So Xpeng management kind of knew what they had to do. But with NIO, what I wrote was that I think there's just too many products in their product lineup, and there's not enough space in between all of them. The second thing is I'd alluded to this earlier that there are just this huge onslaught and more recently on the premium side. So it's taking attention away from the incumbents that have been there a while with products in the market for more than 6, 8, 9, 12 months.
Lei Xing:
It's interesting if we look at this relatively the NIOs and the Xpengs they’ve become the incumbents compared to the Deepals, compared to the AITOs, compared to the upcoming Xiaomis and JIYUEs.
Tu Le:
Deepal is aka Shen Lan, so.
Lei Xing:
Yeah Deepal is Shen Lan, which is a great example of how you can still be successful launching a new brand. Not the same for everyone, but there's one right?
Tu Le:
It also kind of point to resiliency because Shen Lan at the very, when they first launched, it wasn't, it didn't really catch, right? Just like LeapMotor, it didn't really catch, but they're still around. So.
Lei Xing:
Yeah, and interesting. So I tweeted some charts that I did myself that there's this new group of 50,000. So the GAC AION, Geely Auto, plus Chang’an, they're all in this group of 50,000 a month, group rands. And then at the very top, BYD obviously, Tesla we don't have the numbers yet. And then Li Auto is kind of alone and a bunch of these 15,000, 20,000 players and then the thousands players, right? So that you see these buckets. And overall, so China is probably going to get to 6 million when the CAAM numbers come out. So that means 6 million in the first 9 months. And in order to get to 9, basically, you do the math, right? A million a month the rest of the way. So that's one of the, I think, suspense that we can look forward to is whether we'll see a million-month. Now, that's including export. And the share of export has been growing, right to stress.
Tu Le:
So we could actually have a weaker 4th quarter year over year with the numbers still being higher due to the increased export numbers.
Lei Xing:
Yes. So, this year, there's no benefit of the subsidies.
Tu Le:
So there's no mad dash is what you're saying that buyers will try to pull in sales from January and February, because there's no subsidies that will go away starting on January 1, 2024 like there was in January 1, 2023.
Lei Xing:
It looks like the export numbers are getting up there.
Tu Le:
So it's almost this self-fulfilling prophecy for the EU because, there's going to be a lot of scrutiny on exports. But there was a chart, I believe that Carnewschina had posted. And the number one exporter is MG which is a British brand that is solely, I believe, solely manufactured now in China. So it's not a BYD, BYD I think the registrations were really small like 800 units or something like that for Q3. So BYD has a ways to go to become a major player in the European markets.
Lei Xing:
Interesting bunch of comparisons of BYD versus Tesla, right? So I mean, it's great.
Tu Le:
Let's go over the numbers because production numbers and sales numbers were a little bit different.
Lei Xing:
Yeah so, I think you had tweeted, I think that was…
Tu Le:
Production numbers.
Lei Xing:
The caveat was that it was production, not the deliveries. But deliveries was just what, few thousand units, BEVs?
Tu Le:
3,456.
Lei Xing:
BEVs, Q3 BEVs, below Tesla. And also, if we want to get into the details, right? Every detail matters. Tesla reports deliveries, BYD sales numbers they are not actual deliveries. Okay, that's one of the caveats, right? And the other bunch of caveats that the Tesla stans will make is, which I don't disagree is if you look at the revenues, if you look at the profitability, margins, Tesla is still the king, right? I don't disagree, but there was a tweet that I kind of got upset about was saying BYD was golf cart. And I said, frankly, I don't disagree, but BYD is no golf cart. That was, we can have a healthy debate. But that was just…
Tu Le:
And I had to, I tweeted because somebody had said this is wrong number on your post, right? So I tweeted that NEVs, China, it's a unique acronym that China uses. NEVs new energy vehicles equals BEVs+PHEVs+FCEVs, so. If you look carefully, your chart says NEVs for the China market. So it’s correct, it’s 100% correct.
Lei Xing:
We can debate on this all night long, right? But and then also interesting to see that in order for both Tesla and BYD to get to their numbers, 480,000 is the magic number for both of them. It'll be interesting, while Taylor he is quite confident that BYD will do half a million in Q4, BEVs, BEVs, to stress.
Tu Le:
So the excuse that, the excuse or the reason, however you want to look at it that Tesla was lower this quarter was because they retooled for Highland.
Lei Xing:
Yeah which Elon talked about in the previous earnings call. He warned. Yeah, so.
Tu Le:
So Elon believes that they will not be outsold by BYD in Q4.
Lei Xing:
This is interesting to watch and obviously it's not apples to apples comparison, because BYD in fact, does sell, I mean I think their Seagulls were like, was it like over 40,000 or 30,000 units alone, the smaller, cheaper models? But like I said, sales bragging rights, no matter how you look at it, if purely from a sales point, a volume point of view, it's very psychological, right? It's, you can brag about it.
Tu Le:
So with that being, sadly, I think we should talk about or at least let the folks know that BYD the brand became the 4th largest automotive brand of the world surpassing Ford last month as well. Ford brand, because Ford Motor, you have to include Lincoln. BYD is primarily the brand. But Yang Wang and Fang Cheng Bao is on its way. So I think that was to your point about significance and psychologically, that's huge. And just tonight, I had mentioned that BYD overtook Ford. And people that I spoke with at this event were kind of incredulous. Like what? What are you talking about? Like they were clueless.
Lei Xing:
We're too spoiled, as you say.
Tu Le:
We definitely have more of a global view on what's going on in. I also think that there are certain challenges that Ford has that I don't know if Western media generally are picking up on. So.
Lei Xing:
Well was it Ford or was it both GM and Ford that had their latest counter offers for the UAW, it was Ford, right?
Tu Le:
I think it was Ford.
Lei Xing:
It was Ford, it was like 26%, and before it was like 21%, something.
Tu Le:
Word is that Stellantis and GM are upset at Ford, because the offer is more generous than they're offering, okay? And so if I had to guess Lei, I would think that the UAW strike lasts till, let's say, just before Thanksgiving.
Lei Xing:
So GM had that new $6 billion of line of credit. They said they probably lost $200 million in Q3 because of the strike.
Tu Le:
So the UAW is being very surgical, because the plants that are not working, none of them are the high revenue generating factories. So there was an article, I winna say it was a Wall Street Journal or Bloomberg article that said the pain for the automakers is not that intense. So until it is, they, and the fact that GM announced that they secured a $6 billion line of credit was as much a marketing and PR tool and PR trick than anything else.
Lei Xing:
It looks like that the sales for the U.S. market has been pretty strong in September, overall sales. Not the, well, not the EVs comparatively to Tesla, right? I mean we've seen some quarterly sales of BEV numbers and they are, I mean…
Tu Le:
So the U.S. market is at around 8% take rate, I think, and inventories are ballooning for EVs at the dealers. And so I think there is a product or lack of product challenge. I think there's a lack of charging infrastructure challenge or awareness, at least, because yeah people are still a bit hesitant to take that dive, to make that purchase. There's no issues like that in China. That's for sure.
Lei Xing:
I drive a hybrid which I feel like it's a great transition, because by the time, I'm still paying a loan. In two years’ time, probably all of these companies or brands have announced that they will get onto the, Hyundai Kia being the latest, get onto the NACS, I think that may be the perfect time to switch to an EV like for someone like me, right, putting on my consumer hat. Hopefully, right? Like I could change over to a Hyundai and let's say IONIQ 7 that's coming out. And I could charge at a Tesla super charger and I'll feel great. Right?
Tu Le:
Yeah I actually think that's going to be the sweet spot probably the next 20 to 30 months. Because 2025 Ford is supposed to come out with more clean energy vehicles, but they've also recently announced that they're going to be leaning into hybrids, too, because I think they see gaps in their product plan or their product portfolio over the next few years. So I think they're going to try to fill those gaps with hybrids.
Lei Xing:
Yeah. And China is going also going that way, not the HEVs, but the EREVs. And Xiaomi is rumored to be working on an EREV as well because of Li Auto.
Tu Le:
I think they are trying to mitigate some of that risk because I don't see as much competition intense competition at least on the EREV side as I do on the BEV side. So.
Lei Xing:
Yeah it just seems like every, I mean GM, right, they have this, obviously, the Big 3, the strike and GM has this 20 million vehicles with potentially dangerous airbag parts. So that's another thing that's happening. And then Cruise with that accident.
Tu Le:
What do you think about that?
Lei Xing:
You know, it's like Cruise, they've been just…
Tu Le:
Beaten up.
Lei Xing:
I mean people are throwing cones on the vehicles. And then now for this to happen is just like…
Tu Le:
So for those that do not know, in San Francisco, on Market Street, a pedestrian, there was a hit and run and the pedestrian got hit by a car that was being driven by a person. And they were thrown over to the next lane. And at that very moment.
Lei Xing:
It happened to be a Cruise robotaxi that…
Tu Le:
Cruise that basically ran the person over and the person had to go…
Lei Xing:
But braked hard.
Tu Le:
So the person had to go to the hospital with serious injuries. Now I don't know, I haven't read, followed up to read up anymore, but…
Lei Xing:
I haven’t either. There’s no official verdict or of exactly what happened.
Tu Le:
If we're talking edge cases, I think that's the epitome of an edge case.
Lei Xing:
That's the epitome of an edge case. Exactly. I mean, how do you stop? How do you…
Tu Le:
You know, I mean, yeah, that's just an impossible thing because, the thing is, first of all, these are still cars, right? So with the same brakes, so inertia won't allow them to stop in order to avoid that accident. So even if the algorithm knows to stop right away, to avoid an accident or running over that pedestrian. The vehicle, I don't think, is able or capable of stopping that quickly, right?
Lei Xing:
Or let's just say that the Cruise robottaxi was at the wrong place at the wrong time.
Tu Le:
Yeah without question. Yeah. So.
Lei Xing:
I think this goes back to GM’s three zeroes, right? Zero emissions, zero, what fatalities and zero something else, but I forget. But and how hard that is to achieve when you have a corner case like this.
Tu Le:
But it also points to Kyle Vogt writing in the New York Times or every major media outlet that humans are bad drivers, right?
Lei Xing:
Which this proves that is the case. Not only bad driver, what hit and run is, reckless.
Tu Le:
Criminal drivers, basically.
Lei Xing:
Right. So it's just one of those edge cases where you go, man, I mean we had fun, right? A year ago, almost a year ago. I mean we had a great time in the two rides that we had was, it was very human.
Tu Le:
No I mean it's kind of in the middle of the night, but whatever. Wanted to get your thoughts on INDIEV going bankrupt or INDIEV. So for those that are wondering, Foxconn acquired a factory Lordstown from Lordstown Motors. And part of the agreement was that Foxconn would invest in Lordstown Motors to help them start begin building their Endeavor. And Lordstown declared bankruptcy a few months ago or 5 months ago. And now, and Foxconn had Lordstown, INDIEV, Monarch and Fisker as the four EV companies that would be building vehicles, or they would be building vehicles on behalf of
Lei Xing:
At the Lordstown, is that correct? It's like a contract manufacturer for four brands or something, right?
Tu Le:
Yes, Monarch is actually a tractor company, so it's not a passenger vehicle company. Two of the four companies that Foxconn had originally agreed to build EVs for are now bankrupt. And Lordstown is actually suing Foxconn for breach of contract. So if Foxconn was naive enough to think that building cars, especially in the United States was going to be that easy. They probably deserve this. Like because putting your eggs in a basket with all startups was going to be a challenge in and of itself.
Lei Xing:
So one small detail. So I first got to see INDIEV at an auto show at the New York Auto Show in 20, April, 2022. And that detail is that they were showing this skateboard, right? And the motors they were using were from Jingjin Electric. So that's another China factor in it, which…
Tu Le:
INDIEV was effectively a Chinese company.
Lei Xing:
Yeah, so and actually talked to one of their designers I remember and chatting about prospects of China smart EV startups. And…
Tu Le:
The first time I saw them, I heard about them. The first time I saw them physically was when we were at the LA Auto Show last year.
Lei Xing:
LA, right. That was also, but it's one of those just shaky, like I said, any time, it's difficult to understand really who the investors or the people behind the company is, something is wrong, right?
Tu Le:
Yeah man.
Lei Xing:
And a company like Rivian, right? Their stock, not tanked, but because of that convertible notes offering.
Tu Le:
They actually, their production numbers were up. So good for them. But I think Rivian eventually will be fine.
Lei Xing:
I've seen a lot more Rivians recently in my neck of woods.
Tu Le:
I think they're great cars, great trucks and SUVs. But remember the Ford Fortrack a long time ago? It reminds me of the Ford Fortrack.
Lei Xing:
So they also they're trying to raise to build the R2, I believe, in Georgia, right? They had that plant decided.
Tu Le:
I think the R2 will sell pretty well if they can figure out how to actually manufacture them. So anyways, hey, everyone, thanks again for being flexible and apologies for my tardiness. Please join us again next week. Hopefully will be normal. Actually, I mean shit, dude, 10 o'clock. There's good crowd here. So anyway. Something to think about.
Lei Xing:
Something to think about again.
Tu Le:
But join us again next week. Good morning, good afternoon, good evening. We will talk with you all next week.
Lei Xing:
Alright, talk to you all next week, have a good weekend. Byebye.
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.