Tu and Lei start out the podcast with a quick review of the November sales and a broader discussion about the difficulty of and pressure on the EV makers to grow sales in an ultra competitive environment.
They both then spend a few minutes unpacking the announcement & implications of VW developing an EV platform called the China Main Platform (CMP) based on the MEB platform for the China market ONLY and how that's likely to do.
Lei gets Tu's thoughts on Elon mentioning that in the future the Top 10 EV makers will be Tesla with the other 9 all being Chinese.
The podcast shifts over to discussing all the latest moves by Huawei, who both agree have been very aggressively moving into the connected, EV space over the last couple years with a goal to grow revenues from this new division significantly over the next several years.
The podcast ends with both discussing NIO's expanding swap partnerships in China, now including Geely.
Tu and Lei start out the podcast with a quick review of the November sales and a broader discussion about the difficulty of and pressure on the EV makers to grow sales in an ultra competitive environment.
They both then spend a few minutes unpacking the announcement & implications of VW developing an EV platform called the China Main Platform (CMP) based on the MEB platform for the China market ONLY and how that's likely to do.
Lei gets Tu's thoughts on Elon mentioning that in the future the Top 10 EV makers will be Tesla with the other 9 all being Chinese.
The podcast shifts over to discussing all the latest moves by Huawei, who both agree have been very aggressively moving into the connected, EV space over the last couple years with a goal to grow revenues from this new division significantly over the next several years.
The podcast ends with both discussing NIO's expanding swap partnerships in China, now including Geely.
CEM #143 Transcript
Recorded 12/1/23
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 shall 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, as you had mentioned, right before we started recording, we are heading towards the home stretch of 2023. There's been a lot that's been happening. There are a lot of those newsletters that will talk about what's happened. We will also be doing that. And we will look forward to 2024, you and I are going to have some predictions. Maybe we can look at what we said last year and see how close we were. Can you please introduce yourself?
Lei Xing:
Yes sir, good morning. This is Lei Xing, former chief editor of China Auto Review, and this is episode #143. We are at the top of the month, of the final month of 2023. And I think, yes, home stretch and this China EVs movie that we are seeing playing out just got a lot more spicy, I think, over the last few days.
Tu Le:
It's already “hen la” (spicy), right? So.
Lei Xing:
Yeah. And I tweeted that the year is ending on a bang, but we still have a month to go. That's how it feels like, right? Too many headlines.
Tu Le:
I just saw that BYD crushed it again in November.
Lei Xing:
Yeah, let's quickly just get over the sales from November, right? The first of every month is a mad scramble for people that are putting all those bar charts.
Tu Le:
Whoever, at least at the brand level, those that want to show off the numbers and some that don't. So.
Lei Xing:
So I think, I had a quick glance this morning and it's, for quite a few of these, it’s pretty flat if we do a month on month comparison, everybody is right where they are. I think the three brands that stood out for me were definitely AITO because of the M7, right? So they had a huge jump. I think VOYAH had a huge jump. IM had a huge jump with the LS6, which I think was part of the reason why JIYUE announced that price cut, and Wuling because the new Bingo and, all of these ones that grew, the common thread is new models. But…
Tu Le:
Let's call this the new model bump.
Lei Xing:
Yeah. But let's talk about JIYUE for a minute. I'm a little bit concerned to be honest. I don't know if you feel the same way for a brand that launches in the first month and then did a price cut? I think somewhere it went wrong. I hate to say it, but this is not what I expected.
Tu Le:
So this is a pretty significant price cut, too. So it wasn't a couple hundred bucks.
Lei Xing:
I don’t know. I mean, Are we seeing perhaps a repeat of the Xpeng G9 mistake? I'm thinking along those lines because you have to pay, I think, for the ADAS, right? High levels of ADAS features. And I think that might be one of the tactics that could have gone wrong.
Tu Le:
And I remember last month Lei, you and I talked about, that's a fairly reasonably aggressive initial price. So I didn't think it was overpriced at all. So a month in, to be cutting the price, I echo your concerns.
Lei Xing:
Yeah. But at the same time, this reflects how fast decisions are made, right? I mean whether it's for good or for bad, but…
Tu Le:
And we might be seeing the pendulum swinging a bit Lei, where there might be too much technology now.
Lei Xing:
Yeah, I mean but the expectations of what you're getting, bang for the buck is a lot lower, and that creates the expectations and pressure that if you don't get it right, then what end ends up happening is what JIYUE did. So that's how tough it is.
Tu Le:
Remember that JIYUE is the joint venture between Baidu and Geely. So Geely is the contract manufacturer, and if JIYUE is not filling that factory with orders, there's going to be increased pressure for JIYUE to increase sales in a short period of time because we're talking about a major production line for Geely that's sitting idle effectively.
Lei Xing:
Likewise, for BYD I mean they're at the top, but they're under a lot of pressure as well, right? So the amount of promotional activities that had been launched, right? I mean we've seen the posts, RMB8,000 off here, RMB10,000 off there.
Tu Le:
And I want to make sure that we get back to your original point that sales seem to be flat, because it took a lot of effort to keep them flat from a price war standpoint, from a cost reduction, price reduction, not cost reduction, price reduction standpoint. So the companies, JIYUE is the prime example, they're still cutting price, and they're still creating incentives for the purchase of these vehicles. So it's taken a lot of effort to just keep sales flat.
Lei Xing:
That sounds deflating.
Tu Le:
It makes it concerning for at least Q1, Q2 of 2024, because there's probably a lot of sales that have been pulled into 2023. And this increases the pressure of the continuous price cuts into 2024. You and I had agreed that the price war is going to last at least through the summer of 2024. So.
Lei Xing:
Back to your point about predictions, my prediction was, at the beginning of the year, it was over 9 million and more or less it'll get there. But if we look at, a huge part of that was export, right? So Shenlan (Deepal) just launched in Thailand. NETA, I think, launched in somewhere. So we're seeing these export numbers account for a big portion of the sales.
Tu Le:
Yes. You know that there's globally now a ton of scrutiny on that export number. So it's important to kind of keep an eye on it, and not only the big export number, but the mix between ICEs and EVs.
Lei Xing:
Yeah, so speaking of, so Li Auto just, is planning to launch in the Middle East. I think that's specifically to your point about this global scrutiny that they want to launch in a region where there's no scrutiny. So not Europe, definitely not the U.S., right?
Tu Le:
Friendly. So this is the crazy thing, though, Lei. Let's point back to Stellantis investing in LeapMotor. Tavares was, really one of the headline points that he made was we're going to be shipping EREVs into Europe. So Li Auto has to feel conflicted a little bit, because they're like, we're the king of EREVs. But I agree, and I can't help, but to point back to some of the Faraday Future posts on Twitter about selling into the Middle East and having those big road shows. So another pseudo Chinese EV company that's high profile, but struggling, has looked to the Middle East to really try to shore up some of their sales for 2024.
Lei Xing:
And then speaking of the foreign automakers, so a week ago, Volkswagen announced that China Main Platform (CMP) based on the MEB exclusively for China. And they're saying it's going to take 36 months for to develop four vehicles that will be priced in the 18,000-22,000 Euro range.
Tu Le:
Those vehicles will not make money.
Lei Xing:
Not only without, will not make money, but will they be competitive in three years?
Tu Le:
Yeah. Maybe that's a more appropriate question.
Lei Xing:
But to Volkswagen, three years is China speed!
Tu Le:
Yeah. That's the irony of it because that is probably them with their most optimistic speed to market forecast. Three years.
Lei Xing:
I'll say Volkswagen is the most aggressive in terms of localizing with respect to working with partners like Horizon, ThunderSoft, Xpeng, right?
Tu Le:
But I’ll counterpoint to your point Lei. They were also one of the last to the party.
Lei Xing:
So it's a mad dash for them, basically.
Tu Le:
Yeah. I actually think that they looked and assessed that they're really behind, because I'll give you a high profile. GM went in early and were like you know what, we're going to invest in Momenta. That's just a simple example. But just localizing example, Porsche, Tesla, they all announced R&D centers, and then it wasn't until, shoot, what's the CEO’s name? Volkswagen Group’s CEO name?
Lei Xing:
Blume.
Tu Le:
Until he came on board, yeah, until he came on board, and was able to, cause, again, I don't necessarily believe that his strategy is so much different than Diess’s, but he's just polishing it and the messaging a bit more so that it's palatable for the folks in Ingolstadt, in Stuttgart, in Wolfsburg. And let's not forget that there was an announcement from Schaefer that Volkswagen brand is going to be losing a lot of employees, reducing 10 billion Euros worth of expenses. That's the plan. And to your point about Volkswagen speed, they have like the United States of the U.S. 3, they have a strong union that they need to work with in order to transition roles. In the announcement, it said that they won't be laying people off until 2029. What they're trying to do is reduce, get early buyouts and then reduce the attrition. So not hire people back for roles when people retire or take early buyouts. That's not going to work. We've seen that with the U.S. 3. And nobody takes the buyouts, number one. And it's a slow process.
Lei Xing:
Let me ask you an interesting question, what Elon mentioned that of the top 10 EV makers in the world, Tesla will be one of them and the other nine will be Chinese. What do you think about that?
Tu Le:
At this point in time, I'm 100% in agreement with him.
Lei Xing:
Maybe it already is.
Tu Le:
Yeah because this is the thing, the European market and the United States market is still waking up to the EV phenomenon. They're still in a little bit of denial.
Lei Xing:
It’s going back to sleep.
Tu Le:
Yeah, they're just in denial, because and it goes back to, I'm just become much more sensitive to all the back and forth in the U.S. with regards to the dealers pushing back, to Mary and Jim saying the market is not moving away, but slowing down for EVs. There's inventory building up. And at a practical level, that's all true. But the EV market is not shrinking. We're going to go from around 800,000 units last year to 1.1-1.2 (million). So that's a healthy growth rate. That's despite a lack of products, because outside of Tesla, which probably has 40-50% of the sales for the U.S. market, there's Kia Hyundai. I don't even count Hummer. I don't count Rivian. I don't count Lucid because they are $90,000 cars. So until we see more Bolts, until we see, because Lei...
Lei Xing:
Let's get a JIYUE over here. I'll buy it with no hesitation.
Tu Le:
Right? That's what I'm saying, like a $35,000 BYD or a JIYUE, because even the ID.4s, they're, even Americans don't like ID.4 or ID. series vehicles. So that's a global issue for Volkswagen. It's not a China market thing anymore. It's a global issue. And at the end of the day, you had tweeted, Tesla is the only company that would get this level of attention for a truck that they announced three years ago.
Lei Xing:
Four years ago.
Tu Le:
In an unveil. It's a $61,000 starting price truck. And they'll probably sell as many as they can make, at least through the first 2 or 3 years, right? So don't tell me that people don't want EVs. They just don't want your EV. I think that's the important distinction, because I mean at the end of the day, it’s a 9,000-lb Hummer for $120,000. Are you serious? Now, charging infrastructure is a challenge. Cell manufacturing capacity is a challenge in the United States, but to say that there is no, I mean, it's a $61,000 truck, and there's a million reservations.
Lei Xing:
Well the $61,000 won't even come until 2025. That's the rear wheel drive version. So…
Tu Le:
It's the $70,000.
Lei Xing:
$79,000, let's just say $80,000, they’ll get the…
Tu Le:
And I tweeted: Now, for the utilitarian folks or the business folks that actually use trucks for work and for their livelihood, they're not going to buy the F150 Lightning because the range when there's a huge payload or when it needs to toll something is so so small. For casual buyers, how many are going to pick an F150 Lightning over a Tesla Cybertruck? I want to see what the statistics are after 6 months, after 12 months, because it's a casual buyer. Now. Maybe they just want a fun car or a car that kind of gets them a set of eyeballs. And Cybertruck obviously does that.
Lei Xing:
I think Cybertruck will sell. I think that it's a polarizing product. It's got a lot of attention. I'm not sure how many of those million orders…
Tu Le:
That's the thing Lei, because it's a million orders, but if you are 900,000 in line, you're not going to get that for 3 years, he said. So, and it's a $250 deposit. So let's say the take rate is 20%. That's still pretty significant. So there's a lot of misinformation when it comes to EV stuff. And god forbid the CEOs were wrong, right? Because I don't see any of the CEOs really taking any blame for wrongly forecasting their EV goals. So anyways.
Lei Xing:
Let's go back to China a bit. And I think one of the key word for the last week or so, I can think of is frenemy, coopetition. And I'm pointing to the case of Mercedes and BMW doing that JV for charging as well as the battery swap alliance.
Tu Le:
They don’t have a choice.
Lei Xing:
And the Huawei move right with the 60:40 entity that they're trying to set up.
Tu Le:
Huawei is going gangster, because they are either in talks or already partnered with 6, 7, 8 brands.
Lei Xing:
Just this morning, which is the evening time in China, JAC put out a statement formally announcing their strategic partnership with Huawei, which will lead to the third brand under the HIMA, the Harmony Intelligent Mobility Alliance. So the AITO (wenjie), LUXEED (zhijie), and the third “jie” will come out. I don't know what’s it going to be called, but from JAC. And the only one remaining is the one with BAIC.
Tu Le:
And Lei, we have to point back to MIH. And kind of Huawei is a hardware and a software, so they have a complete stack. But MIH from Foxconn, that's what, Huawei is what MIH wanted to be in effect. But I also feel that Huawei is bullying some of these companies into using its technology.
Lei Xing:
And it's just interesting that they announced that new entity with Chang’an first. And Chang’an is not in the HIMA alliance. Chang is in the, second business model, which is the HI Huawei Inside model. It looks like and then JAC and SERES put out statements saying that they're aware of this. They could become investors into this entity as well as the BAIC and Chery, right?
Tu Le:
For those that are wondering. SERES is the joint venture partner with Huawei that is building the AITO.
Lei Xing:
Yes. And Chery is the partner for LUXEED.
Tu Le:
And the critical thing is that I would argue the Huawei brand stands out more than the EV brand on a lot of these cooperation.
Lei Xing:
Yeah because all of these events announcing these products, it's Richard Yu out in front and center, right? And he's known for a big mouth, right? Talking BS and dunking on people.
Tu Le:
But remember also, you and I have heard that he's under tremendous pressure to generate revenues for that division, right? Tremendous.
Lei Xing:
Yeah, so basically the spinning off of the vehicle business unit into that entity, which Huawei will still have 60%. At least that's what's put out by the statement and getting outside investors. I think it's also a way to, I guess the sense is that Huawei doesn't want to, I don't know how to put this, like the automotive side of it, they want to kind of not be involved with Huawei in some way like, but they still have 60% ownership.
Tu Le:
It's one of those things where do as I say, but not as I do, because they keep on saying that we're not building cars and we're not going to get into the business of building cars, but that's to make sure that their cooperation partners don't get upset. Because effectively, what Huawei is doing is the puppet master, because all of their joint venture partners Lei, and correct me if I’m wrong, are very state owned. So there's going to be a set of state-owned EV brands that most of them are going to use the HIMA or the HI. And then there's these EV startups like a NIO, like Li Auto that are, and a JIYUE that are building their own capabilities. And then you have that third. And I'm not saying it's direct competition or it's direct comparison, but Geely has ECARX.
Lei Xing:
Which is, well, MEIZU is about to make a car: Dreamcar MX.
Tu Le:
So with a price war, with the number of brands, with the number of products, the reality for a lot of these new brands, even at the SOEs, the new brands within the SOEs, profitability is pushed out for years.
Lei Xing:
It almost feels like. So the four partners in the HIMA, SERES, Chery, JAC and BAIC, I think, with the exception of Chery, the other three in terms of their own indigenous brands have been weak. They're almost like trying to leverage Huawei in launching these high-end brands, right? LUXEED, AITO, next one from JAC, so maybe that's the strategic thinking.
Tu Le:
And I feel that number one, they're already SOEs or so for those that are listening that don't know what an SOE is, it’s state-owned enterprise. And in China, provincial governments normally are very, very active in automotive manufacturing. So there are a number of brands that are state-owned. And because they are already state-owned enterprises, and they're using Huawei, they've conceded the export market, because a lot of countries are going to be hesitant to use or allow vehicles to be imported that's using a Huawei hardware software stack. In my opinion, do you agree?
Lei Xing:
Well I mean, Chery, JAC, BAIC they all export, but mostly I think ICEs for now which doesn't involve Huawei. And the volumes are pretty big. So it would be interesting. I mean for now we can't see AITO and the LUXEED being exported, at least not yet or maybe never, I don't know.
Tu Le:
But we could see AVATR.
Lei Xing:
AVATR is launching what in, was it Thailand too? So regions, right? Regions where there's not these sensitivity or scrutiny.
Tu Le:
Well, let me put it another way Lei, regions where the trade deficit is important, where the smaller country needs Chinese imports. So China has, the Chinese brand might have a bit more leverage. But I guess I'm more referring to and you know this, but I'll spell it out. I'm more referring to like western Europe, obviously the United States, things like that, places like that.
Lei Xing:
Alright, Chang’an, Geely and NIO alliance. I think we…
Tu Le:
Have you heard anything, your moles tell you anything?
Lei Xing:
Let's do this. Who do you think is going to be the next one? I have a couple that I’m thinking.
Tu Le:
Well they said JAC.
Lei Xing:
I think GAC. You know what because Geely, the second one already operates the Yiyi Power swap stations, right? And quite significant at that, the network. GAC also has its own for the Hyper(brand) battery swap. So I'm thinking any, the potential, I think, even for CATL, even for Aulton, if China is behind this, why not just put it in an alliance and let's grow this together. So I agree also, JAC I mean it's a natural, right? JAC is the partner for NIO. GAC. Rumored FAW, I think that anybody is… the state-owned companies, I think they're all in play.
Tu Le:
And I think that it's important to note that this is wide ranging. It's not just passenger vehicles. It's going to be fleets, right? A lot of taxis. So on the commercial side as well as the passenger side.
Lei Xing:
Also going forward instead of NIO. So let's say NIO sets up these separate partnerships, let's say, with ten companies, ten OEMs, the possibility of a kind of the Huawei spinoff as to the NIO battery spinoff, swap spinoff. What do you think about that?
Tu Le:
I think it lightens the load and I think it's important to note because another thing I said the same thing about 30 seconds ago, but Geely and Chang’an last year combined for almost 4 million vehicle sales. And so that's how significant these announcements are.
Lei Xing:
And the myriad of brands under those two groups.
Tu Le:
Exactly. So it's instantly if there was any doubt about swapping, at least in China, this should relieve all of that. Because the potential for, I'm not saying it's 4 million units are going to be sold that can swap next year. It's going to take at least 2 years, probably to figure out the standardization, and then start manufacturing them. So it could be 5 years before we see a couple million. There are one, 1.5 million of these cars across different brands that have the same capability. But we're talking the economics really ramps because Geely and Chang’an are such huge players in the China market.
Lei Xing:
And then what also complicates things is NIO has to build out, expand its own network for, that’ll have special exclusivity, in terms of services, for the NIO users.
Tu Le:
It has to, yeah.
Lei Xing:
At the same time build all these shared kind of the network. But luckily they'll have help from investment.
Tu Le:
I'm going to give you an example Lei, because, you nod in agreement because I know you will. I'm from looking at some of the Geely brands like Geometry and some of these lesser brands. Could you imagine a Geometry? So for our foreign listeners who have never don't know what Geometry is, it's a mass market brand under the Geely umbrella of companies. And in tier-two, tier-three cities, you see a lot of them certain tier-two, tier-three cities. And a lot of them are used for DiDi. So they're effectively a fleet vehicle. If I’m a westerner, it's like a Chevrolet and a Cadillac bin. So, could you imagine a Geometry going into a NIO swap station and getting the same type of treatment? That's why it's important. What you just said that NIO needs to separate the NIO experience from these other companies.
Lei Xing:
And I think William stressed that himself.
Tu Le:
How they do that is going to be really interesting.
Lei Xing:
That's why I said it's, every, all of these deals now are for show rather than dough. We're still waiting for that dough, right? The concrete, which model is going to get this, will be battery swappable, and things like that, right?
Tu Le:
It opens these questions. Are there going to be two standards, a mass market standard, and then a premium standard? Does that mean there are two sets of batteries? Does that mean that? So is the differentiation going to be a user experience thing? Because physically, if it's one standard, the bottom of a NIO and the bottom of a Geometry are effectively going to be the same.
Lei Xing:
Well let's just say, Aulton, and what Geely has with the Yiyi Power is totally different than NIO. It's more mechanical, I think, rather than more intelligent.
Tu Le:
The one thing that we also have to know is that Lei, if I draw you a box to play in, some of your creativity as a brand might be constrained, because it needs to be X size, it needs to hold X weight. And it's this tall. So the floor of the vehicle might be constraining from a design standpoint. That's also going to be very interesting to see, because what's to say that a swap station can get a bit more complicated and carry two sets of batteries. And the, once you drive into one, it automatically knows that it's a NIO versus a mass market Geometry. And it replaces the battery with the correct replacement battery. So it is because, I feel that having one standard, it's an over simplification, because I don't think, if you talk to Chang’an, if you talk to Geely, the ZEEKR brand, the AVATR brand, the NIO brand, they're not the same as the mass market brands that they're all going to have. So they need to differentiate somehow some way.
Lei Xing:
And my understanding is, let's say, a future shared battery swapping station built by NIO and Geely. Now, that can perhaps accommodate, let's say, a Geometry, a Livan, a Maple, a ZEEKR, but can that accommodate a Deepal and an AVATR. But like these, we can imagine, right? Are they specific to the specific partnership or they across partnerships? So these are all possibilities that how can we make it more accessible and flexible?
Tu Le:
And I just gave you numbers: combined 4 million. So Chang’an was around 2.5 million, and Geely was about 1.5 million, a little bit less on both. But chabuduo (about the same), now NIO is the standard, pushing a certain standard. Lei, if you're the 2.4 million sales partner, and I'm the 1.4 million sales partner, am I going to have my say, of course I am and you are. So that's why it's complicated. That's why it's not as straightforward and that's why it's going to take time. And my guess is that the Chinese government is going to have to come in and really be referee, I believe.
Lei Xing:
And then, excuse me, given the current market environment, NIO launching the Alps next year, just became a lot more difficult when you have JIYUE right? They're launching the RMB200,000-300,000, I don't know, I mean…
Tu Le:
Profitability is going to be scarce on a lot of these companies. And I would say end of 2024 will probably see a number of them run out of capital, because as much as the state-owned enterprises can just pile money into losing businesses, at a certain point in time, especially if the Chinese economy in 2024 is still struggling to get back into growth mode. The SOEs are going to cut off the funding for sure, because my assumption Lei, is that all these Huawei partners, of all these Huawei partners, 2 or 3, 4 maybe, might survive through 2024.
Lei Xing:
Yeah, and then somebody like JIYUE, right? I mean, I hope they're okay, but they're not out of the woods.
Tu Le:
No stretch of the imagination because they're probably selling a couple thousand a month maybe?
Lei Xing:
They didn’t, we haven't heard I mean they launched at the end of October, so theoretically they should be announcing sales numbers.
Tu Le:
Yeah, but at least one month, one full month. And as we know from the Mach-E, from the G9, if you don't come roaring out of the gates when you launch, it is extremely hard to build momentum, sales momentum, extremely hard to build sales momentum. So anything else?
Lei Xing:
I think we covered pretty much all the big headlines.
Tu Le:
I like how we talked, I think it was important to kind of really talk in detail or discuss in detail this whole swapping thing and how it helps, but it doesn't, because for at least NIO, it doesn't really move the needle on sale strategy. So do you agree with that?
Lei Xing:
They don't have a new model, at least not an all-new model, unless there's been some rumors of some kind of a 9, halo model coming or announcing the Alps, right? NIO Day is coming up, but right? 2024, they will, work will be cut out for them, still.
Tu Le:
And maybe we should save this for our look ahead episode, but I just don't believe the China market is going to be able to grow like it has been even this year. I think 2024 might be difficult to get, to achieve the same amount of growth.
Lei Xing:
Once you get to 10 million, you can't expect, right? That's already a huge number. It will probably stay there. Let's say 10 million every year, nobody is going to catch up anytime soon, any market.
Tu Le:
But you and I know also that the pressure in 2024 to export specifically with the struggling EV makers is going to be tremendous.
Lei Xing:
We're supposed to be hearing some updates on the IRA rules today, I believe. Have you heard anything new yet or maybe it's being announced?
Tu Le:
I do know that Our Next Energy is reducing staff by 25%. So I had alluded to, we know that they have a lot of ex-U.S. government folks on their team. So maybe they heard something that isn't as favorable to them.
Lei Xing:
Depending on what happens there. So one thing we can look forward to is possibly indeed some announcement by some Chinese brand via some path of entering the North American market in 2024, not in 2024, but announcement in 2024, you think that's fair?
Tu Le:
Yeah it is. And I don't envy some of these people because it's just going to be really tough.
Lei Xing:
Despite all the head winds, right?
Tu Le:
So Lei, I'm kind of done with, we talked a lot about swapping, but I'm okay with that. Next week, we'll probably have a more complete discussion on sales.
Lei Xing:
I mean a million-unit month, either November or December, I think it has to be that way, that it always is. I mean when the December numbers are the high for the year.
Tu Le:
The one thing I did also want to mention Lei is that with this reconciliation, by at least Ford and GM and with GM now open to hybrid vehicles. And the lithium and nickel pricing at lows, at 2-year long lows. There is a lot of pressure on CATL, BYD battery side to get that capacity, because there is so much capacity built up on not only the battery cell manufacturing, but on the mining, refining, that there is probably going to be downward pricing pressure on battery cells for 2024. So it's not only the EV, the Chinese EV makers, but it's going to be the battery makers. The CATLs are probably going to be a lot of pressure. Margins are going to get squeezed. Because the hybrid thing is, in the United States market specifically, the hybrid thing is kind of the wild card right now, because what if GM says we're going to mimic BYD and for every EV we offer we are going to offer a PHEV? So we knew that their original forecast, Mary Barra’s 2024 we're going to have 400,000 units of sales for EVs. We knew that was never going to happen. But what if there were 400,000 BEVs and PHEVs combined? That effectively reduces the demand almost by half of GM right? I'm kind of just estimating, right? That's a significant reduction in demand. So keep an eye out on the export pressure, not only for Chinese EVs into Europe, Latin America, Southeast Asia, but battery cells as well, because there's been so much more capacity built specifically in China. And so that's going to be the big concern from the governments, the foreign governments. We have a comment from NIO Chicago. What do you guys think about Li Bin’s comments saying power exchange network is equivalent to the cloud service infrastructure of the energy internet? I'm just reading this. So I'm processing while I'm reading it.
Lei Xing:
Yeah I mean, I think the physical, if you been hearing what Shen Fei, the guy in charge of the NIO Power has been saying, right? It's not only the physical stations themselves, but the cloud infrastructure that's making this work. I'm not an expert on the technical details, but this is the whole experience of not only the battery swapping itself, whatever 3 minutes, 4 minutes, but before and after, right? In that Mercedes and BMW presser, they are saying that you could do plug in charge, you could do reservation for a charging spot. Things like that. I mean those are all right, cloud infrastructure.
Tu Le:
I look at it this way. I look at it like they went from single brand, small market to multi brand, large market. I think that's what he's referring to. He went from, he wants to sell the picks and the shovels to everybody. That's what opening the swapping will do for NIO. Now, again, it's going to be a separate business. And it doesn't really help them on the vehicle sale side. So they still have challenges in front of them. That's all I had man unless anyone has any other questions. I'm good. Happy December, everyone. I think it's December 1 today. And Lei and I will be in probably 2 or 3 weeks having our year end episode. And then the following may be in week one or week two of January 2024. We'll have our look ahead episode. So thanks for listening, everyone. Good morning, good afternoon and good evening.
Lei Xing:
Alrighty, we'll talk to you guys next week. Bye. Bye.
Tu Le:
That brings us to the end of this week show. Lei and I thank you for tuning in. My name is Tu Le and you can find me on twitter @sinoautoinsight. You can find Lei on twitter @leixing77. If you wouldn't mind rating and or reviewing us on Apple Podcast, Spotify or wherever you grab your podcast from, we'd appreciate that as well. Even better if you enjoy this show, please tell your friends about it. Please join this again next week as we track down all the latest news on China EVs & More.