Tu & Lei begin the podcast with an explanation of what Single's Day is in China and how some EV brands are participating, namely by launching promotions to help sell their vehicles.
They both then begin to talk about Q4 and the mad dash by all the automotive players in the China market to finish out the sales year on a high note. Q4 alone can sometimes make or break a brand's annual sales.
The podcast moves to a discussion on Li Auto's MEGA and XPeng's X9 MPVs and how they compare with one another and the both company's different approaches to market them.
Polestar begins the next topic of conversation and it evolves into a broader discussion about Zeekr and Geely who owns both brands, specifically what Li Shufu is trying to get out of the spate of IPOs for his companies with the Zeekr still on the way.
The podcast ends with a brief discussion about the mobile phone connection with EVs and then whether its the right time for a Chinese EV company to be IPO'ing in the US.
Tu & Lei begin the podcast with an explanation of what Single's Day is in China and how some EV brands are participating, namely by launching promotions to help sell their vehicles.
They both then begin to talk about Q4 and the mad dash by all the automotive players in the China market to finish out the sales year on a high note. Q4 alone can sometimes make or break a brand's annual sales.
The podcast moves to a discussion on Li Auto's MEGA and XPeng's X9 MPVs and how they compare with one another and the both company's different approaches to market them.
Polestar begins the next topic of conversation and it evolves into a broader discussion about Zeekr and Geely who owns both brands, specifically what Li Shufu is trying to get out of the spate of IPOs for his companies with the Zeekr still on the way.
The podcast ends with a brief discussion about the mobile phone connection with EVs and then whether its the right time for a Chinese EV company to be IPO'ing in the US.
CEM #141 Transcript
Recorded 11/10/23
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, happy Singles Day. Can you please introduce yourself?
Lei Xing:
Yes, good morning. This is Lei Xing, your co-host, former chief editor of China Auto Review. And this is episode #141. Mad dash would be the theme going forward leading up to the upcoming Guangzhou Auto Show, which is sort of like the final party of the year for China's automotive market. And until year end, I mean it's going to be a mad dash no matter how you look at it. I mean, we, right now as we speak, we have two models being launched, or the AVATR 12 is being launched. The Dong Feng eπ is a new brand out of Dong Feng is being revealed. ZEEKR just officially announced their IPO proceedings, and they teased the 007 or 007 sedan. We just heard of the numbers from CAAM, what else? I mean, Polestar had their Polestar Day yesterday. I mean, just, it’s this tsunami of…
Tu Le:
Yang Wang, Fang Cheng Bao and BYD.
Lei Xing:
BYD, yeah the Fang Cheng Bao Bao 5 was launched a couple of days ago.
Tu Le:
It is amazing the pace at which BYD, not China EV Inc., BYD, two brands, Yang Wang within a month of each other, right?
Lei Xing:
Speaking of the double eleven, I just saw a push for JIYUE 01. They're giving RMB8,000 savings on one of the packages. So I mean this is a model that was launched what…
Tu Le:
A month ago.
Lei Xing:
No, less than that. It's like end of October and they're already putting out promotions.
Tu Le:
Now, we know that Singles Day there is normally a lot of money put on the hood and for those that are new to the automotive sector. Traditionally, that's kind of an informal saying. When an automaker puts incentives on a vehicle to sell it, they call it putting money on the hood and there's always normally money being put on the hood, but this is also in defense of the price war and the new products, because each of the EV makers do not want the new brands, the new products from current brands to get any breathing room. So as things are announced, within 6, 8, 10 hours, you'll hear or see marketing from a competitor in order to try to get eyeballs away from the shiny new object. And so it is, I think the mad dash that I had written in the description is really appropriate, because with the Chinese economy the way it's going, it is going to be really cutthroat for the rest of December or for the rest of November and December to boost those Q4 sales numbers.
Lei Xing:
Yeah, the mad dash gets that, I mean it is a mad dash every year during this time, but this year because of the price war and also the fact that if we look at the numbers, the export of EVs are increasingly taking more share of the sales numbers. So you combine all that, right, so.
Tu Le:
Here’s an indication of that Lei. CNEvpost, a friend of China EVs & More, they had posted that 41% of the 11 or 1,200 vehicles on display at the GZ Auto Show are going to be NEVs.
Lei Xing:
Only 41%? I'm surprised there's still 59% that are not EVs.
Tu Le:
I know, right? I tweeted as the EU and U.S. hiccup, has a hiccup, for EV adoption.
Lei Xing:
I mean we had a good comparison. You tweeted that the LA Auto Show which we're going is lame. You compare that with Guangzhou Auto Show, it’s like…
Tu Le:
There’s literally one unveil at the LA Auto Show.
Lei Xing:
One or two, maybe just one, yeah.
Tu Le:
One that we know of so far.
Lei Xing:
Yeah, I mean, you put Tesla raising prices in the title. I think we talk a little bit about that. And I mean, to me.
Tu Le:
They're trying to creep back some of that margin that they lost when they cut prices.
Lei Xing:
Yeah, I think it's also more or less a sales tactic that they were played throughout the year. And this is a reverse rabbit hat. You pull a rabbit hat, but this is like putting the rabbit back into the hat, right?
Tu Le:
For traditional car guys, normally automotive or OEMs don't willy nilly increase decrease price like this. But in the case of the China market, in the case of Tesla, they're changing the game.
Lei Xing:
Yeah, and the asterisk on this price raise is that only two of the long range models and they weren't raised by a lot. I think it was like RMB1,500, RMB2,000.
Tu Le:
RMB1,000, RMB2,000.
Lei Xing:
Yeah a few hundred dollars. To me, one, I don't think it is meaningful in terms of margins helping with margins and two, it still sounded like, if you look at it, it's still a price cut because the other models, two or three with the 3 and Y they stayed the same, but the long range prices was kind of raised, right? I mean depending on how you look at it, other than the sales tactic, I don't think it's going to have any meaningful to the margins.
Tu Le:
I'm curious to see what Tesla numbers will be for Q4 for sure. Another thing I think that's worth mentioning is that traditional automotive, they're not normally launching new products in a Q4 time frame. So for these companies that aren't really looking at the calendar, they're just launching as fast as they can. This could be to their detriment from a product standpoint and a sales standpoint, especially as, they launched these vehicles, but are they ready to sell them right away? And this is the kind of the challenge that comes in. So.
Lei Xing:
You spoke a very good point because that's where Li Auto excels, and maybe BYD, I think are the ones that are, as well as Tesla maybe, but Tesla is not launching new products like BYD and Li Auto are doing. But Li Auto specifically right, referring to the Q3 earnings, I think one thing that really, they're doing well is launch a model, deliver and delivering in high volumes. I mean the NIOs and the Xpengs, they're right, that they look at that and they're like, we need more work to do.
Tu Le:
A good example of that Lei was back when Steve was alive, Steve Jobs. They would have two major conferences, one in January called MacWorld, one in August called the WWDC or the Worldwide Developers Conference. And that was when they would launch new products, and they would announce it, and then Steve would always say this is available on our website tomorrow. And again, in traditional automotive sense, one of the reasons they got into racing was because when you won, win on Sunday sell on Monday, that's what they used to say in the traditional automotive space. And let me separate this out a little bit, because BYD to me stands alone, the complexity of their manufacturing is, dwarfs, a Tesla, dwarfs a Li Auto, because Li Auto is effectively building the same car, just smaller sizes. Whereas BYD now that they're leaning into Denza, leaning into Fang Cheng Bao, leaning into Yang Wang, their manufacturing, the number of part numbers they're managing is a lot more. The number of factories that they are managing is a lot more. And so I'll give you an indication. A one car might have three trims. So if we think about that, so any car like a Chevrolet Corvette. There might be a Chevy Corvette, there might be a Z01, there might be a Z06, there might be a ZR1. These are effectively different cars, mainly the same, but some of the engine components might be different, some of the exterior components might be different. And then you get into colors. It's not just three different trims, but then we're talking about 15 different versions depending on the color of this vehicle. So think about that from a factory standpoint. So there could be white seats coming in, black seats coming in, gray seats coming in, and then the exterior same thing, all these different colors. You have to appreciate BYD’s ability to launch and then ramp right away.
Lei Xing:
Yeah. And that was Li Xiang’s point he made about excelling at all nine areas across the three categories, right, that he mentioned. And funny that he said, comments on Huawei, right? Because in the phone industry, there's kind of a mentality that you don't mess with Huawei, that this was like a meme going on. And Li Xiang he basically said, 80% learning from them, 20% respect and zero complaints, which is kind of another way to, I don't know if he was being serious, but the way that the competition with Huawei and the rest of the smart EV startups, I mean we've seen all these kind of beefs, right, on this AEB stuff in the last few days. But, yeah, right, BYD’s bar none on all those points that Li Xiang mentioned.
Tu Le:
And then we're moving into really uncharted territory for the Li Autos and the Xpengs who have launched MPVs. Now, Li Auto has only been a premium SUV manufacturer for, since its existence, since it started in 2014. And do you think that there's a lot of, I have an opinion about this, but do you think that there's going to be overlap with the customers? I can either get a Li L8 or a MEGA. So it'll test how good their marketing and marketing research is.
Lei Xing:
Yeah I agree, but at least the price point is different, right? MEGA is going to be over RMB500,000, right? I mean Li Auto among all the startups, I think is the easiest to predict where they're headed, because they have a good financial and cost discipline, they have a good road map, we know where they're launching in 2024. They have I mean they have a consistency in terms of these volumes. So they're the easiest to predict.
Tu Le:
That's also because they have the cleanest market strategy, stay in China and win China, right?
Lei Xing:
That's what makes them a little bit different. Next year they'll have four EREVs and four BEVs including the MEGA. The other three BEVs are all launching in the same year. I mean for the legacy autos, they're probably launching one model per year, at most two.
Tu Le:
And that's overwhelming to them.
Lei Xing:
That's the mad dash, right? And 2025 is really a magic, I guess a magic number.
Tu Le:
Because we won't begin to see whether, we'll hear rumors, you and I will hear rumors, but we won't begin to see whether the Xpeng Volkswagen Group, the Stellantis LeapMotor cooperation really works until 2026.
Lei Xing:
Right, while these newer and with better features and competitively priced models are being launched every single day, every single day.
Tu Le:
Yeah, it's a stark contrast, at least to the United States, where you and I could probably name within the next 30 seconds, the significant EV products in the U.S. market. I can't think of too many new products that are entering next year that would move the needle from a volume standpoint in any significant way. I think the GM Equinox and the Blazer if they can build them and maintain the pricing that they've announced, I think those could be winners for General Motors, but I think the Model Y will still continue to sell well in 2024 for Tesla in the U.S., help me out, man. I can't think of, the Mach-E needs a refresh for sure. We're already seeing demand wane for that.
Lei Xing:
At least from the U.S. EV startup environment, Rivian seems to be doing a lot better compared to Lucid, right?
Tu Le:
Man, Lucid can't build 1,000 cars a month.
Lei Xing:
Because Rivian, even in this little town in western Massachusetts, I've been seeing a lot of Rivians. So that kind of tells you where the market is, where the American consumer, right?
Tu Le:
That also tells me another thing, Lei, that you live in a pretty hoidy toidy part of town, because Rivians are not cheap.
Lei Xing:
No I mean this is like a college town so I don’t know.
Tu Le:
But you know what I mean, right? You're not seeing Rivians in like super urban areas where the average sales price of a vehicle is much lower, right? So.
Lei Xing:
Yeah, because almost like I drive my daughter to school sometimes in the morning and back and often see these Rivians, the SUVs and the pickups.
Tu Le:
They're quite striking. I do like them. They've aged well because the design is effectively 4 or 5 years old.
Lei Xing:
And then speaking of the products that are coming in the U.S. right? So 2025 and after is also a good time point, because like Rivian they're coming out with a smaller SUV, right? The R2S, something that could be more appealing to the mass consumers.
Tu Le:
And will fill out the volume at the factory.
Lei Xing:
Right. And then when the point-of-sale rebate kicks in, whether how that will help remains to be seen and how much you get based on the IRA language, still not clear.
Tu Le:
My prediction is by the end of Q1, we shall see much more clarity when it comes to what is in, what is out, what is considered friendly, whether or not those end arounds for instance, the LG BYD cell partnership in Seoul.
Lei Xing:
The Polestar Busan plant. That's Geely Holding resources, basically to avoid the tariff, right?
Tu Le:
Because right now Polestar is a single market brand. It doesn't sell that well in China, I think the 4 and the 3 will do well in China, but currently, the 2 only really sells in high volumes in Europe.
Lei Xing:
So the 4 is slotted between the 2 and the 3. So that's one interesting positioning. And then in terms of volumes, right? Polestar had 290,000 aimed for 2025, that is cut in half. That was announced a couple of days ago.
Tu Le:
We also have to remind the audience that Volvo was never a huge volume sales manufacturer until Geely acquired them. So.
Lei Xing:
And Volvo is launching, revealing the EM90 MPV on Sunday.
Tu Le:
And how could I forget? Because this week, the EX30 had gotten a lot of good press in the U.S. so. That, but again, that's going to be built initially in China and imported to the U.S. so Volvo or Volvo is going to have to eat the entirety of that 27.5% tariff in order to keep the EX30 down below $50,000.
Lei Xing:
Well the 3, the Polestar 3 will be made in South Carolina and the 4 will be made in Busan for the American market. So that will help a little bit, but…
Tu Le:
Here's the thing Lei, and this is that clarity that we're asking for, right? It's going to be built in South Carolina using Envision AESC batteries with rare earth metals from countries and refined in China. So how much of that subsidy is it going to get, likely not all $7,500, maybe, though? I don't know. That's the million-dollar question, right?
Lei Xing:
Yep. Exactly.
Tu Le:
Unfortunately, it has become a little bit political in the United States. There's a lot more questioning and inquisitiveness about where these brands are actually from. We've seen a lot of articles, you’ve been quoted, I've been quoted in recent articles about where is MG, what is MG, what is Polestar? What is Volvo? And two weeks ago, you and I were in New York for ZEEKR, and maybe you can talk a little bit about their IPO.
Lei Xing:
Yeah, I mean that's the mad dash for ZEEKR itself, right? I mean that event proceeding basically IPO coming in the next days or weeks, and we knew about it, right? That was pretty much public because they put out statements earlier this year. But I mean ZEEKR was, I think, in their prospectus, this is a 6 year old, what brand and really a brand that kind of shot up during the pandemic, because it started deliveries in October 2021. And two years later, they're launching and IPO in the U.S., and one of many potential Geely IPOs coming, if not in the U.S. and globally.
Tu Le:
So Li Shufu was trying to do two things. He's trying to extract value, and he's trying to make it easier to raise capital to further invest in these brands. I think that he's going to run into long term, he's going to run into a too many brands problem. A lot of that has to do with all of the brands are sold in China. With the exception of, the taxi brand also sells in China, right? The London taxi?
Lei Xing:
I think so. I think so, yeah.
Tu Le:
Which makes sense because every single brand is manufactured in China. But as you and I know, a GM, a Volkswagen Group, they know how difficult it is to manage 6, 8, or Stellantis now too 8, 10, 12 brands, especially when for Geely, we know that. And I’m not saying that all these consumer, or these market segments overlap, but if you're looking at a Lotus Eltre, you might also be looking at an EX90, a Volvo EX90 and you also might be looking at a Polestar 3. And for the individual brands that sucks, but for Geely they have much higher chance of selling a vehicle to a consumer because of those three brands. But if I’m a Polestar employee or Volvo employee, or a Lotus Employee, I'm like what are we doing here? It'll be interesting to see how they reconcile the positioning of each of these brands because you and I know because we've been following them for so long, Polestar’s the performance, Volvo’s kind of the safe vehicle, and then Lotus obviously is kind of a British heritage niche brand that they're trying to turn into a volume seller. So.
Lei Xing:
Yeah, but with respect to the ZEEKR IPO I think they're putting two things out in the front that will face scrutiny, the one the IPO itself, and two the ZEEKR’s entry into the U.S. via the Waymo route. I mean those two things are going to get a lot of scrutiny.
Tu Le:
This on the heels of Yellen and He meeting this week. And then Presidents Biden and Xi Jinping meeting in San Francisco. So I had planned some meeting because you and I will be meeting in LA on Wednesday, next Wednesday. I had planned some meetings in San Francisco, and I've kind of reassessed, and most of my meetings are now in South Bay in San Jose and Sunnyvale. So I kind of want to stay out of San Francisco because it's going to be a shit show, probably. So.
Lei Xing:
Did you sign up for that $2,000 dinner?
Tu Le:
I did not. I mean these conferences, freaking costs are ridiculous, man. So especially and we have some friends at Reuters, especially the Reuters conferences like there's this conference, remember you sent that to me like a month ago, it was like $3,000 to go to this freaking conference in Detroit.
Lei Xing:
I think I saw some headlines coming out of that from Ganesh, talking about assessing the U.S. market entry, but I mean that's been going on since two years ago.
Tu Le:
We talked about that with him a couple of years ago, so.
Lei Xing:
Yeah 25 (countries) by 2025, so. And then there's the other talk about that Alps brand being kind of integrated into NIO. I personally believe that Alps brand was still launch as a second brand.
Tu Le:
It has to.
Lei Xing:
Yeah the way how it will be done organizationally may be different than before. I think that's where the cost cutting comes into play.
Tu Le:
Yeah and it's unfortunate because the phone just launched. And so that might, in Chinese speed terms, because a lot of potential employees might get got on the phone side for NIO. Maybe we don't see updates at the velocity that we would normally see if they had kind of a healthy team, a full team are working that phone. So a few of these products that I thought they were going to try to hang their hat on might not be part of the future of NIO. So that'll be interesting to see, too. Because as like, if you're going to compete with iOS, with Apple, with Xiaomi, Oppo, and I'm not saying the NIO phone is an Oppo phone. Let me just say that, but like Xiaomi from a mobile handset standpoint is pretty premium in China market, so it's pretty cutthroat, almost as cutthroat as the EV sector in China.
Lei Xing:
So this phone play is coming into more, let's say, will be more crowded because of NIO phone what it does with the new ecosystem. So Polestar is launching a phone with MEIZU, Xingji Meizu, which is a Li Shufu company, and then Xiaomi, it’ll be interesting what Xiaomi does with their, when they launch their EV with their existing, because they have the HyperOS, so you would think that they got to be doing the same, if not more as what NIO is doing with their phone and the cars.
Tu Le:
And then you bring in JIYUE with the Geely tie up and Baidu. So there's a logical mobile handset play there. We also know that because JIYUE has dialed up the digital and AI features on their vehicle. Xiaomi needs to bring the heat next year on the feature side. Otherwise, it's just not going to be taken very seriously the vehicle.
Lei Xing:
So quickly on the CAAM numbers, basically, my prediction, really the suspense remaining of the year is a 1 million unit month, a 3 million unit quarter, and by all, I believe it's going to be over 9 million. There's no question about it, including exports. So the 7.28 million in the first 10 months is already more than all of 2022. And if they do 3 million in Q4, it'll be almost as what China sold the entire year 2021. That's the perspective or putting into perspective how the market is growing.
Tu Le:
We should have a good indication of how 1111 plays out in the next couple of weeks. The carmakers will have a good indication in the next couple of days. And on December 1, we'll likely see another round of incentives to have December finish out strong for all of these automakers.
Lei Xing:
No doubt.
Tu Le:
So one of the things we should also mention is that in January of 2023, 10 months ago or 11 months ago, year started off with a bang. Tesla cut prices. And that kept the sector going. Now, if this mad dash is going to happen like you and I think it will be, there's going to be a huge lull in January, February, on top of the already seasonal nature of the slowness of the first quarter of any year. So that means that the price war should continue well into 2024, at least the first half of 2024. We have to look at the real estate sector in China and the overall economy. And there's going to be increasing pressure for excess capacity to be shipped to Latin America, Southeast Asia and Europe, primarily.
Lei Xing:
Yeah lots of factors at play.
Tu Le:
So what else do we want to talk about?
Lei Xing:
I'm looking at my list of headlines. I’m keeping up a list every day of what's been happening. It's hard to keep up.
Tu Le:
What did you, what was your most notable tweets this week?
Lei Xing:
I tweeted quite a lot.
Tu Le:
I know you did.
Lei Xing:
The IPO, the Polestar Day stuff, right? Li Auto earnings, we talked a little bit about Li Auto earnings with what they are trying to do.
Tu Le:
So their share price reflects the strength of their sales. They surprised analysts in Q3. They were at 125,000 units or something like that.
Lei Xing:
In Q3, they were over 100,000.
Tu Le:
105,000, sorry. And this is across three products with the 7 and 8 getting the…
Lei Xing:
7, 8 and 9.
Tu Le:
7 and 8 getting the lion’s share of the sales. We should also note that Tesla has opened up their supercharging network to Buick in China. So.
Lei Xing:
Buick and Cadillac, I believe.
Tu Le:
Yeah, sorry, Cadillac, too. So basically GM basically GM, because effectively Chevrolet does not have any real EVs in the China market. So.
Lei Xing:
That’s probably going to open the floodgates like what's happening here with NACS.
Tu Le:
But if I was GM, I would have negotiated an exclusive for 12 months to get ahead of everybody else, because Buick, Mary had stated that before 2025 or by 2025, GM will have launched 10 electric vehicles off the Ultium platform for the China market. So this is an incremental win for Tesla, but it's a huge opportunity for GM in the China market. So I think this was pretty wise. Now, they were likely having this discussion with GM already, because they opened up charging, super chargers in the U.S. so I don't think this was a separate discussion, but mainly they needed to hand it over to the local Shanghai GM folks to close it out. So let me see what did I write about? So let me ask you this? What do you think about the Fang Cheng Bao Bao 5? How should we call it? The Fang Cheng Bao 5, or Fang Cheng Bao Bao 5? I can't stop saying it.
Lei Xing:
It's the Bao 5. If you look at these recent launches. So AVATR 12 being an example, the magic or the psychological pricing point is RMB300,000 pricing point.
Tu Le:
Which you and I have always kind of drawn that line, too.
Lei Xing:
Yeah and the Bao 5 is starting below RMB300,000. And that model, I think, has Li Auto directly. I mean even though it's more macho, more off roady, that segment, right? The kind of price wise or size wise, shape wise is pretty competitive.
Tu Le:
And remember that there are unintended consequences of doing certain things and going under RMB300,000 from a starting price, pulls in so many other competitors. You might be targeting one or two particular brands or particular products. But at that RMB300,000 and below, let's say, RMB200,000-300,000 price point, there are a lot of valid products, right?
Lei Xing:
Yeah and the Xpeng X9 is going to fall in that category. I wouldn't be surprised they come out with a very aggressive, I guess it would be pre-sale pricing if they do announce it, in the RMB300,000 range, I can't see it go above RMB400,000.
Tu Le:
And you saw that Tony Leung is going to be the spokesperson for AVATR. So, because my wife watches a lot of these movies and so she’s….
Lei Xing:
Wasn’t he also like Audi or Cadillac ambassador or something.
Tu Le:
I think so. For those who don't know, Tony Leung is a huge Hong Kong star, mainland Chinese star. And for the western folks, he was Shangqi’s dad in the Shangqi movie. So, super famous guy. It's him. It's like Andy Lau and like two or three other guys.
Lei Xing:
Yeah he was in that movie Wu Jian Dao with Andy Lau.
Tu Le:
So there's like two or three really old Hong Kong actors that look like they're 40, but they're closer to 60 that do all of the advertisement for the Chinese marketing. So anyways, but one thing that I will tell you guys about that we forgot to mention earlier Lei is there's a great article in the Wall Street Journal this week about Toyota and their challenges with software, how they had established a division called Woven Planet, which was akin to Volkswagen Group’s CARIAD. So for those that are wondering how hard…
Lei Xing:
That was like announced a few years ago at CES I remember, like 2018 or 2019.
Tu Le:
For those that think that software is a one off Volkswagen Group challenge. Read this article. It is a foreign legacy, we'll just say legacy. I'll pull out the description form. It's a legacy auto bugaboo that will force brands, not car companies, but certain brands to close their doors within the next 10 years. Software is not going to be something that they're going to get good at in a 5-year period, time frame. So Lei, I would equate the challenge with software and Afonso, you're European, you know how difficult software is for European companies. So I’ll equate what the legacy auto needs to do is like Lei, you're amazing at fabricating things, right? Building desks, building. Now, you need to make a computer, and you need to be really good at it in a 5, 7-year time frame. Good enough so that you can compete against Google, against DiDi against Apple. Now, how impossible of a task is that? So don't underestimate how difficult it is to become good at software.
Lei Xing:
Now I was just going to say that since the 3 months that I’ve come back, whatever I tested out in China, they feel old, because there have been a lot of updates, and that's only 3 months.
Tu Le:
So do have a comment here: your thoughts on ZEEKR’s IPO timing? Seems like a tough period for those, ARM, and in Europe AMPERE, Renault’s EV pure player to be IPOing. This is from Antoine Davien. So thoughts Lei?
Lei Xing:
I don't know, I mean, I think this has been in the works probably for, if not for a year…
Tu Le:
Two years.
Lei Xing:
Yeah, and I think this when they launched this many years ago, this probably was the aim at the end of the day, that a performance EV brand competing let's say the Porsches, right? The timing, I don't know. I mean it's right before Xi Bi meeting. So hopefully that’ll…
Tu Le:
I look at this from a timing standpoint is there's no better time than the present, who knows? Because remember that 2024 we're in an election year. So the atmosphere for an IPO by a Chinese company could actually get worse.
Lei Xing:
If you look at the prospectus and the statement put out by Geely, the Hong Kong Geely Auto, there was that big disclaimer or kind of the forward looking statement at the very beginning, which mentions these factors, geopolitical factors.
Tu Le:
I actually think it's, I think the time now is better than potentially 6 months from now, specifically as we get closer to November, which is when the presidential election is going to be in the United States. Now, I think they are fairly conservative on what they want as a valuation, but we'll see, I think there's going to be enough western investors that have an interest in ZEEKR. I think they did a decent job or pretty good job of showing off their products on that short U.S. tour that they did last week that included Lei and I. So, man, people are capitalists in the west, so they…
Lei Xing:
May be the more broad question to ask is, the China U.S. relationship, has it hit rock bottom? And is it climbing out? Maybe that's the question, right?
Tu Le:
Yes.
Lei Xing:
And whether that'll help in some way.
Tu Le:
I am still in a number of groups on messaging with friends in China, Shanghai, Beijing, Shenzhen, and we were openly talking about this because we do know the Chinese economy is down. We know the U.S. economy with the exception of interest rates is up. So this creates a different dynamic for the U.S. China relationship. There's also a good article in the Wall Street Journal about that and how the U.S. is concerned about exports because of the cheap, the currency being so cheap. China is concerned about the high interest rates on the U.S. side, so there's ways to cooperate and you and I believe Lei, talking is better than not talking. So.
Lei Xing:
Right. I mean, that's engagement.
Tu Le:
Hold on a second. We got one more comment. Have any possibility about ZEEKR producing in South Korea? So that the Polestar South Korea thing Lei, is that a Geely thing? Or is that a Polestar thing?
Lei Xing:
That's a joint venture with Geely being one of the three, I think that's a joint venture between Geely, Samsung and Renault, I believe.
Tu Le:
So surely there is a distinct possibility that Polestars get built in Seoul, because or Korea, anyways, because we will know more in Q1 of 2024, whether or not those vehicles will get Inflation Reduction Act love.
Lei Xing:
Yeah, I think for the time being, ZEEKRs will be made in Ningbo, including the robotaxi, and shipped out.
Tu Le:
So the reason I say that is because in Ningbo, the JIYUE 01, the Polestar 4 and one other car, the Lotus Eletre are all built off the same line, because they're all using the same platform, the SEA platform. So it’s not, that's why I asked you Lei, is this a Geely joint venture? Is this a Polestar joint venture? Because a Polestar.
Lei Xing:
It’s a Geely joint venture.
Tu Le:
Yeah so this opens the door. And you better believe that Geely will move into more than one brand if that joint venture is able to get some Inflation Reduction Act love. So.
Lei Xing:
Yeah, so that’s there, that play’s there.
Tu Le:
And it's an open question, because all the people that I talk to have no clue. So that tells me that the U.S. government is still trying to analyze what makes the most sense. Lei, that's all I have, buddy. We will talk with everyone soon, good morning, good afternoon and good evening.
Lei Xing:
Thank you all for joining. Bye. Bye.
Tu Le:
That brings us to the end of this week show. Lei and I thank you for tuning in. My name is Tu Le and you can find me on twitter @sinoautoinsight. You can find Lei on twitter @leixing77. If you wouldn't mind rating and or reviewing us on Apple Podcast, Spotify or wherever you grab your podcast from, we'd appreciate that as well. Even better if you enjoy this show, please tell your friends about it. Please join this again next week as we track down all the latest news on China EVs & More.