Lei headed over to Germany for Porsche's Annual Press Conference so much of the podcast was dedicated to what Lei learned about during his visit and led to a broader discussion about Volkswagen Group and what Tu thought about VW Group's annual press conference and how important Porsche is to Volkswagen Group's global goals.
After a detailed discussion on Germany's largest automaker and one of its most important brands, the discussion moved over to NIO and their reaching 40M swaps. Tu and Lei also talked a bit about NIO's mass market brand Onvo and how it'll be positioned alongside the NIO premium brand and the yet to be launched Firefly brand.
The podcast ends with a discussion on not counting VW Group out just yet, although the mountain they need to climb to get back into the driver's seat in China seems insurmountable at this time.
Tu also briefly discusses some of the initial quality challenges some BYD vehicles are having in the export markets, but doesn't see anything out of the ordinary or that shoud be cause for alarm just yet. BYD is new to those markets and their products will react to each of the climates differently but it's a learning process that should help them strenghthen the future quality and reliability of their global portfolio.
Lei headed over to Germany for Porsche's Annual Press Conference so much of the podcast was dedicated to what Lei learned about during his visit and led to a broader discussion about Volkswagen Group and what Tu thought about VW Group's annual press conference and how important Porsche is to Volkswagen Group's global goals.
After a detailed discussion on Germany's largest automaker and one of its most important brands, the discussion moved over to NIO and their reaching 40M swaps. Tu and Lei also talked a bit about NIO's mass market brand Onvo and how it'll be positioned alongside the NIO premium brand and the yet to be launched Firefly brand.
The podcast ends with a discussion on not counting VW Group out just yet, although the mountain they need to climb to get back into the driver's seat in China seems insurmountable at this time.
Tu also briefly discusses some of the initial quality challenges some BYD vehicles are having in the export markets, but doesn't see anything out of the ordinary or that shoud be cause for alarm just yet. BYD is new to those markets and their products will react to each of the climates differently but it's a learning process that should help them strenghthen the future quality and reliability of their global portfolio.
CEM #157 Transcript
Recorded 3/14/24
Tu Le:
Hi everyone and welcome to a twilight edition of 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 global EV, AV and mobility sectors. We will open the room up at around the 40-minute mark to anyone who's keen to ask us any questions. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. For those that are new to the show, welcome. And to our loyal listeners, welcome back. We ask that you help us please get the word out to other enthusiasts about this podcast and tune in again next week.
My name is Tu Le, I'm the managing director at Sino Auto Insights, a global management consultancy that helps bring innovative and tech-focused products and services to the mobility sector. 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. Guten Tag, Lei. Can you please introduce yourself?
Lei Xing:
Guten Tag, Guten Abend. Guten Morgen Von meine seite.
Tu Le:
Gute Nacht. I think that's how you say good night.
Lei Xing:
Good morning. This is your co-host Lei Xing, former chief editor of China Auto Review, and coming to you live from Stuttgart, Germany, the is episode #157. Thank you for accommodating. I know this time throws us both off a little bit, but I’m traveling all day tomorrow, so I figured it'd be best to do it this way. Wow.
Tu Le:
All the things that you've seen and experienced are also fresh in your mind.
Lei Xing:
I'm just trying to remember, you know, everything from, because this week I'm in Germany, starting off with Leipzig, ending with Stuttgart, because I got invited to the Porsche Annual Press Conference. And this is, I was here 5 years ago attending the same conference. So this is from, I'm putting my Chinese media hat on because I still have this relationship with the PR people from China and from all the years of previously at China Auto Review. So, it's always like, they always have this program right off from when you arrive to when you leave like this whole program, the Annual Press conference, the global debut of the Taycan Turbo GT, press conference itself, dinner, visiting the Porsche Museum, visiting the Leipzig factory, the Porsche Experience Center. I did a taxi ride, what they would call a taxi ride, whith the Taycan Turbo GT and I ended up throwing up. It's like one of those once in a time, once in a lifetime experiences.
Tu Le:
Basically a roller coaster ride.
Lei Xing:
Yeah, so, like, one whole day, two days ago, it was nothing but riding in a bus from Stuttgart, all these programs.
Tu Le:
How long did that take?
Lei Xing:
Pretty much all day. Stopped at Nuremburg, which is right in the middle between Leipzig and Stuttgart. So Leipzig will be considered eastern Germany and Stuttgart would be kind of like almost the Bavaria, right? And then today was the Porsche Museum and Zuffenhausen factory, and specifically the Taycan factory. So this is the whole program they organized. And the China media entourage is always, they always get the special treatment because China is such an important market. I like, I would need your help to talk about like what stuff on China because it's so difficult to keep up.
Tu Le:
Yeah no worries. I think the most important thing that happened this week Lei is outside of the Porsche launch is the Volkswagen media day or media week. So.
Lei Xing:
I read your newsletter and I think this would be a good perspective because the CEO of Porsche and CEO of Volkswagen Group is the same man, Oliver Blume. And one of the most interesting things out of Porsche Annual Press Conference was like there was 40, 50 media from the world. And some, I don't know, have a dozen questions asked.
Tu Le:
So they let you watch the Volkswagen media day press conference?
Lei Xing:
Yeah, so on the 12th was the Porsche Annual Press Conference and on the 13th, which I was on the road, I kind of streamed it.
Tu Le:
And let me stop you there. So they had Blume. They had…
Lei Xing:
Meschke for Porsche, and then Arno Antiliz for the, CFO of Volkswagen Group.
Tu Le:
The CFO. They were in Berlin at the design museum?
Lei Xing:
The Drive? I think it's called The Drive. It's one of the.
Tu Le:
And this is their annual media day or week for Volkswagen Group. So.
Lei Xing:
And usually the way it goes is usually Volkswagen Group would have the Group media conference. The next day will be the Volkswagen brand, next day will be Audi, next day will be Porsche, Skoda. It goes on in the same week, right? But this year it went a little bit different like Porsche came out first and then the Group, and then Volkswagen, I think Skoda, maybe Audi is tomorrow and Audi is launching the global debuting the Audi Q6 e-tron, which is the sister model to the electric Macan based on the PPE platform, next Monday.
Tu Le:
We should remind the folks that the Macan was launched a couple of weeks ago, I think.
Lei Xing:
January 25, I believe, in Singapore. Yeah.
Tu Le:
So the Macan EV will start shipping later this year.
Lei Xing:
Yeah in the summer.
Tu Le:
So part of what VW Group and Blume said was this is their most ambitious year for product launches with over 30 globally with the Taycan Turbo GT and Macan being two of them. And then you said the Skoda, the Audi Q6, what did you say?
Lei Xing:
Q6 e-tron, yep.
Tu Le:
Q6 e-tron, several Volkswagens, including the recently approved by the Beijing Government, ID.QUNIX?
Lei Xing:
UNYX.
Tu Le:
UNYX, which is a Cupra Tavascan clone.
Lei Xing:
Tavascan clone, or sister model. Whatever you want to call it.
Tu Le:
So, it's, so and I was told, we were told that you tell me if I’m wrong, Lei, the Turbo is now going to be used similar to how BMW uses M and Mercedes uses AMG as a performance surname for Porsche vehicles on the EV side.
Lei Xing:
Yeah basically Turbo equals performance. That's all it is.
Tu Le:
Because when Taycan launched originally, they had a Turbo version, but there was no difference. Really, there was no turbo in it. And so they got kind of roasted for that a bit. Now I think they're differentiating by saying Turbo is now our M or our AMG or our V series for Cadillac. So tell me, man, what did you think of the Taycan?
Lei Xing:
Yeah, so let me continue with what I was saying about, the first of all, the Porsche press conference. 40, 50, probably around 50 global media about two dozen questions asked, and half of them touched upon China. And I’ve attended quite a few of these before when I was at China Auto Review, never have I seen this much attention. I mean usually it would be the Chinese media would ask about the China questions. But this year I mean, wow those China, like it felt like every other question had a China component. There's two reasons for that. One, the big 15% drop in sales last year, the first double digit drop since they entered the market in 2001. That's number one. And then number two is because of the recent China EV threat, China EV offensive, China EV export, the price war, the bloodbath in China, the world waking up, right?
Tu Le:
Let me stop you right there, Lei. Because last year, Porsche sold around 362,000 units. I don't think they lost that much.
Lei Xing:
320,000.
Tu Le:
320, sorry. And from a volume standpoint year over year, they didn't lose that many.
Lei Xing:
They grew.
Tu Le:
Because I think the United States and Europe made up for the losses in China. But if we take a step back and look at Volkswagen Group and the importance of Porsche to Volkswagen Group. We know that the lion's share of Volkswagen Group's profits come from Porsche, come from Audi. And the lion's share of Porsche’s profit comes from China. So indirectly, if Porsche sneezes, Volkswagen comes up with a cold.
Lei Xing:
Well that's the thing. And right, 18% return on sales. I mean that's pretty good, right? But the guidance that they gave was 15 to 17% for 2024. But I think that day it was interesting at the end of the day, I think their stock went up 11%. There are still the number three in terms of valuation behind Tesla and Toyota.
Tu Le:
You're referring to Porsche though, right, not Volkswagen Group.
Lei Xing:
Porsche. Porsche. Yes. Porsche.
Tu Le:
So because we should also note Lei, that Porsche is publicly traded, but is 75% owned by Volkswagen Group. And Volkswagen Group is publicly traded. The whole Porsche, cause Porsche valuation is higher than Volkswagen Group’s.
Lei Xing:
There's a Porsche Holding, which holds shares in both, right? But I was going to say that the questions on China, I mean, I thought Oliver, actually, they were actually pretty prepared, and they answered all the questions pretty candidly. I think there's three senses that I got, was the expectations. One is the expectation that they're probably going to lose again this year. That's in your newsletter you pointed out at the very beginning this value over volume thing, right? How do we interpret it? I think he mentioned that. And second he mentioned something about the real estate market, kind of these people that have real estate lost value and they lost these disposable income.
Tu Le:
And you're referring to the Chinese consumer.
Lei Xing:
Yeah. So I think they are well, they understand what's going on. They're going to have, the expectation is not going to be, this is the same for Porsche as it is for Volkswagen Group, the group in China. Because I and I, I told Oliver the good times are over, and that is your, right? You're resetting. And hence, I get the sense that 2024 for both Porsche and Group in China is a transitional year, and I get the sense that these launches, whether it's Porsche or the whole Group in China, I think in China, the Group is launching 40 NEVs over the next 3 years, half of, I mean, 40 models in China over the next 3 years, half of them NEVs. The expectation is that, first of all, 2025, the economy will recover, and then 2026 is really the offensive, even though they said this year is the product offensive, but 2026 will be the offensive in terms of kind of like the Group making a comeback. That's what I am sensing. So 2024, I don't think they expect major turnaround in 2024. That's why they keep mentioning value over volume, right? It's a different way of admitting, right?
Tu Le:
They see the turn happening in 2025 and then gaining stride in 2026.
Lei Xing:
So we look at it a little bit longer out into the future, but having said that 2024 is such a huge year for the Group because they're celebrating 40 years in China. 1984 is when Shanghai Volkswagen, right, started. So it's a big year, they're doing a big event at the Beijing Auto Show. And trust me, I think this year the way they want to do this is while the volume may be falling or staggering a little bit, they want to continue to invest in other areas. So expect announcements in terms of like partnerships, local partnerships that may not help volume wise, but…
Tu Le:
It's resetting the foundation.
Lei Xing:
Yeah resetting the foundation.
Tu Le:
For an EV future in China, leading to the rest of the world.
Lei Xing:
And so I think it's, I mean it's quite frank. I think the Oliver he answered, even at the Volkswagen Group, I think there were two questions at the Group media conference, one was on Xinjiang, and the other one was on the EU Commission’s tariff registration, which we should talk about, because Ola came out saying, we welcome these cheaper EVs. Oliver said we don't, protection is not what we want. In the back of that, part of the reason is because they have so much interests in China.
Tu le:
But we should also mention that Carlos (Tavares) couple of weeks ago also said that they want a free market and competition for the European market.
Lei Xing:
Yeah and hence right, I tweeted: losers want protection and winners seek competition. Maybe they hurd me. I don't know. But it's very diplomatic, but I think it's also true.
Tu Le:
But it creates a clear odd man out, because Reault, they're the OG because of the Dacia Spring, but they don't have a partnership. And they don't feel that, they're not going to feel the hammer if the Chinese push back on any tariffs in China because Renault doesn't have significant sales.
Lei Xing:
It's as much good to talk to these big shots as it was to talk some of the media there. So I talked to this reporter from Le Monde, which is the newspaper in France, right? And I was asking him about like, what is the average French consumer think about China EVs and he says they love these cheap, you know the Dacia Spring, right, is made in China. They love them, they love, they want cheap EVs. And he said it's all politicians that's from the ground and talking to these other Chinese media. They all think this bloodbath is actually, it's going to drive same as what we going to say that it's really not good for the industry. The MEGA saga being one example of how companies compete and right, the coffin, we talked about, this…
Tu Le:
It seems like some PR agencies are playing pretty dirty or marketing agencies, social media agencies that support these EV brands in China are starting to play a little dirty.
Lei Xing:
Yeah and you know that Xiaomi is announcing, they are launching the SU7 on March 28. The perspective I got from the Chinese media who saw the vehicle, not good in terms of really the car itself. I think about it like, Xiaomi announced when we started this show, right, pretty much, they announced their entry into the EV in 2021?
Tu Le:
March 28, 2024 will almost be 3 years after their initial announcement.
Lei Xing:
Yeah I’m like, to these foreign traditional, established more than 100-year-old automakers is unthinkable, unheard of. And now Volkswagen Group is trying to launch the Xiaopeng collaboration model in 36 months. So I got the sense that the China speed sometimes we were talking about this current market environment, the competition, the bloodbath. It's kind of now has gotten into kind of a negative connotation, I feel. And HiPhi is only one example. There's a bunch of others that are going to be in trouble. And so the speed.
Tu Le:
Let me stop you there, Lei because I want to say that the ICE side where the legacies are still really fat in China is really where they're going to be bleeding, because they've launched a lot of EV products, but the sales has never been there. Whereas on the ICE vehicles and I'll point to Honda, was it Nissan or one of the other Asian companies was talking about shutting down certain amount of capacity in China, because on the ICE side, they're just getting crushed. Now that the BYDs and some of these other EV brands are pricing below ICE it's only going to get worse.
Lei Xing:
We'll talk about BYD a little bit, but actually, I think the latest weekly sales, March 4-10, I don't know if you saw any of these numbers. BYD was number one. Total. I think this was like weekly sales. I saw the chart that said they beat Volkswagen brand for the first time. I'm not sure if that's true, but they're number one. And then Li Auto was number one ahead of AITO, ahead of ABB for that week, March 4-10, I think it was close to 10,000 units. So you kind of see that seasonality return, which we expect anyways in March that the leap forward, right? But, yeah, I think the reality is the Volkswagen Group, they understand the reality. But the other part of the reality is the Chinese themselves in this bloodbath that increasingly we're going to see casualties. I sometimes like when you step like you and me living in the western part of the world for what, close to, me 4 years and you close to 2 years now, right? Things are a little bit more laid back. They're slower, whereas China is just like, come on, come on, come on. That would have both positive and negative consequences. And I think we're seeing some of the negative consequences of that China speed. And this is probably what also, I think these foreign automakers, they are kind of betting that they will move in at the right time when the bloodbath is over. That's the sense I'm getting after this trip, right?
Tu Le:
So one of the things that I had written in this week's newsletter was being a survivor. I had written about U.S. EV brands in particular, but we can use that term for the China market as well, because this is probably where Volkswagen believes it can get back some of that share that it's lost. Now, let me give you my take on Volkswagen Group’s earnings in that hour long preso because last night I was on CNBC talking with Sri and Martin about it for a little bit. So I studied up watched a bit of the hour long presentation
Lei Xing:
And did you see how long Oliver spent on China? There's a few slides, I think spent like 3-4 minutes, right? Talking about China.
Tu Le:
The things that stuck out to me was that they were much more humble than I'm normally used to seeing them be. But Arno did say that we are willing to concede that whole volume over, or value over volume. And but my first thought was, it wasn't your choice, Arno, that share got taken from you.
Lei Xing:
Yeah of course.
Tu Le:
The three things that I thought were really important. I outlined them in the newsletter is how they said they were going to capture, recapture that share. They had three pillars. They saw deficiencies in their products versus the Chinese competitors in advanced driving assist systems in car infoainment or entertainment and the manufacturing costs. So he outlined we're working with Horizon Robotics on improving ADAS features. We're working with ThunderSoft to improve the in car infotainment or entertainment. And then finally, our partner Gotion is going to help us reduce BOM costs in order to be able to compete with the Chinese EV brands that we're losing out to currently. So he didn't mention anything about CARIAD which was a little bit surprising to me. But that’s, so Arno is a Volkswagen Group guy. So I think he's talking in general for all brands, but not all brands are created equal. We know that Skoda is close to leaving the market. Volkswagen brand. Audi has become a bit of a worry brand for them. And Porsche is still kind of in an unknown area. But one thing that I do know about Porsche because Polestar reduced the price of their 4 in the United States by $10,000. So you better believe that they're going to be really aggressive in the China market. And that Polestar 4 is a Macan and likely, to a lesser extent, a Cayenne competitor. So that the bloodbath, I won't call it a bloodbath that the price war is likely going to creep up into the premium segment. We know, right now, they don't want to play that price war game. Let's see. In July, August, September, how much sales they've lost and let's circle back and talk about that.
Lei Xing:
And this is where we probably can talk about NIO a little bit, because first of all, congrats on the 40 million swaps. And second, William Li registering his own account on Chinese version of TikTok, Douyin, and he did a live stream, like earlier, I don't know or yesterday China time I mean you, desperate measures because NIO is I think they've been a funk in the sense that right, the goal now is to get to that 20,000 per month when it should already been to get 30,000 per month. And he said this pretty bluntly that the Alps or now the NOVO brand is going to play into that price war thing, although NIO just dropped the BaaS pricing as an alternative to driving prices, right? So these are all things are going on that how they're pressured.
Tu Le:
And Qin Lihong, he needed to explain how the positioning of the brands were, trying to differentiate NIO clearly being their premium brand, and ONYO?
Lei Xing:
ONVO.
Tu Le:
ONVO being their, like so, the equivalent would be Cadillac, Buick and likely Chevrolet, right? ONVO is their Buick, and then Alps is their Chevrolet.
Lei Xing:
Well Alps is the ONVO.
Tu Le:
Sorry. Not Alps. Firefly?
Lei Xing:
Firefly will be the Chevrolet, right?
Tu Le:
Chevy. I really, if he needs to explain that, then they haven't, then they need to be more clear about, I mean I think they should have a presentation about it because it's going to confuse people.
Lei Xing:
So if you think about I mean Shanghai Auto Show last year was the shock, right? But Beijing Auto Show this year, there's how many brands new brands are launching? I look at my hand there is at least five fingers, there's at least five of them…
Tu Le:
And Lei I hear that some of the foreign brands are going to be launching new products too. So last year they were largely absent from the Shanghai Auto Show. And this year they plan to have at least one or two the U.S. brands. Let me just hint at that. And so what's going to be? What to watch about the Beijing Auto Show is because we just had the Two Sessions and the economy is not doing great. So we're not likely going to see a ton of glitz, I don't think. We'll see, it'll be measured. It won't be like over the top, I think.
Lei Xing:
So the big message the Chinese government has put out over recent days. Is that huge Yi Jiu Huan Xin program we talked about. So trade ins to spur consumption and specifically in the kind of auto, EV, there should be some more concrete measures coming. We'll see what's happening there. But I mean the general environment, I talked to the Chinese media who often go to these events product launches almost every other day. And they're even saying it's way too toxic, that the way companies and even CEOs compete and shout over the air, it's distorted. I think the competition is distorted, and the foreign legacies are not very used to that type of environment.
Tu Le:
There's a couple things that I want to point to really quickly Lei. There was an article from the FT, I had spoken with Ed White, about Geely, and how each of their SPAC brands, including ECARX, has not done well. So I think there is a lot of pressure on Geely as well. If you take a look at FT, it's a recent article 2 or 3 days old about Geely. It's a great pick up from the FT because yeah, they looked at all the SPACs, the Polestar SPAC, the ECARX SPAC, the Volvo SPAC, and oh man, every single chart was a steep decline from the IPO price. I wouldn't, if I were them, I would not do it in this market. But yeah.
Lei Xing:
I mean the fact of the matter is, right? How do we look at these? We look at the competition, cutthroat bloodbath, but we look at the profitability, who are profitable, who has a future from that perspective. BYD, Tesla, and for now, Li Auto.
Tu Le:
This is where we should give some credit, Lei, to, because there's also a New York Times article this week about BMW and how they've grown their EV sales to 307,000 units. And they're doing it the BYD way, where they're still using pseudo-ICE platform in building hybrids and BEVs off of that platform. So the article did not mention that BMW needed to press reset on pricing for those EVs in the China market. So I think I thought it was a great article, because yeah if we're looking at sales volume, they're doing better than just about everybody else. The other thing that I wanted to note about your whole point about mass market and talking to the Le Monde reporter, I did back of the envelope research: for 2023, for the European market, the best-selling plug-ins, they call them plug-ins. So that includes PHEVs, nine of 10 cost under 50,000 Euros. So Europeans need and love lower price vehicles. The one vehicle that was above was just above at 53,000-Euro and that was the Audi Q4 e-tron. That's going to be the trend. And the thing about the China market Lei is that the used car market is so robust right now. And with the price cuts on some of these EVs, the residuals are so low. The owners are getting upset, but if you're If you're trying to buy a used a lightly used EV you probably find great deals. So that's going to also play into new car sales in 2024.
Lei Xing:
I forget which brand it was, but I think there was some lawsuits going on because, I forgot which brand, but they had promised that they would not reduce prices. There was some dealer.
Tu Le:
That's probably those lawsuits are probably happening all over the world.
Lei Xing:
No I'm talking about China. I'm talking about China.
Tu Le:
Yeah, no, I'm saying, no, I know what you're saying, but.
Lei Xing:
I forget which brand, but it's like. And right, Li Auto launched just last few days, launched cheaper versions, right?
Tu Le:
Which need to emphasize right now is that they forecasted 5, 6, 7 years, most of these EV brands at a minimum, 4 years ago, committed to X number of units capacity per year. Thinking that there's going to be linear growth and that's not happening and they probably didn't forecast as many brands and as many products in being this competitive either.
Lei Xing:
It was also interesting that the Porsche few questions on their 80% BEV share by 2030. So they basically said, Oliver said, also in the press release that they're sticking to that target, but they added a qualifier kind of like Mercedes saying wherever market conditions allow, before they didn't have that qualifier. So that was interesting.
Tu Le:
Every major CEO of an automaker has had to eat his or her words.
Lei Xing:
There was one chart on the Porsche press conference that their average product age is going from 3 years to 1.5 this year because of the new e-Macan, the new a 911 with the hybrid coming later, the last year and the last year, the new Cayenne, the third generation of the Panamera, and by 2028, that number is going to get down to 1.3. So I was looking at that and I was like, oh man, this is like a Li Auto speak. Like ONE is done after 1.5 years. Ah, man.
Tu Le:
I’m going to give credit, a lot of credit to Volkswagen Group. I'm going to give a lot of credits to NIO, I’m going to give a lot of credit to BYD, some of the other brands as well that are continuing to try to introduce new features, new ideas, new products. They're not sitting there, just waiting for the end of the world to happen. And so whether they can execute on all of these things, that's a different topic and a different discussion to have. But I applaud that they aren't sitting down saying, okay, the China market is too far gone. Let's concentrate and focus on something else, they doubled down because they know how important the China market is.
Lei Xing:
So I guess my summary would be not everything is rosy for all these China smart EV, China EV Inc., and don't yet count out the Volkswagens because but they're not dead, they are behind, but they're still trying to, you know, trying to fight. So I think the jury is still out the winners and the losers.
Tu Le:
And at the end of the day, when the Chinese brands say no mas to cutting price further, then the Chinese consumer are going to push, lean back into who, what brand do I trust. That's probably where a lot of the foreign brands can pick up some sales. I'm not saying this year, but likely in 25, 26, because they for sure are going to be still around. Now, can a Volkswagen brand, can a Buick? Cause Buick is getting really aggressive. Cadillac is getting really aggressive in the next couple of years with product launches as well. So do I ever see them getting back to these ridiculous sales numbers? I don't. But I see them settling in at a pretty significant sales volume in China. Still, I don't think they go to zero. Let's just say that. The last thing I wanted to talk about because you had brought it up earlier was BYD, there was an article about some of the quality issues that they're starting to see around the world. I don't know if you saw that article.
Lei Xing:
No. I haven’t. I did see some BYDs at a showroom in Stuttgart and they look pretty good.
Tu Le:
Let me say this. I spoke to someone in Australia just before I got on tonight's episode. He said that he has a BYD himself in Australia. But he said some of the people that are on the coast that have a year old or close to a year old BYD they're starting to see a bit of rust. So first of all, this makes sense, right? Because Australia is a big island. So the wind blows in the salt. Now, have I heard of any? And I’m asking you as well, Lei. I've not heard of any quality spills. The reason I bring this up is because this is part of growing pains for any company. The challenges and issues, the quality problems. These are new because they're selling them in new markets. So there's different weather, different environments, different use cases. And so, until I hear man, the ignition switch or something like that, then to me, this is part and parcel of growing pains and becoming a global company. But what was your thought? What were your thoughts on the Suttgart BYD, was it pretty high end? Or.
Lei Xing:
It was in a prime location. They're spending a lot of money on it. I'm sure. They're working with the Hedin Group, which is their partner in Germany. They have four cars on display, the cheapest being ATTO 3. And I was talking to the sales associate and he said about 15-20 sold a month. I don't know. It doesn't seem that big of a number, but what he was saying that they're giving people who trade in other brands about 4,000-5,000 euro incentive, so that car comes out to be around 35,000 Euros, the ATTO 3. And the Tang and Han is way too expensive, 70,000 euros. As I said, put up that little video. I don't think they're selling at that price point, someone said traffic, I said it was closing time, traffic was slow, but someone said replies that it's slow period, but I mean I think it's also a statement. It's the home of Porsche and Mercedes, they have a showroom in the most right in the city center, right? I think that in itself is pretty significant, right? Of this China EV threat, which is, I still think now in EU and U.S. is overblown a little bit, whether it's the competitive threat or whether it's the data threat. It's overblown a little bit. Because you know I specifically from Leipzig on the bus to Stuttgart, I was trying to look for China EVs on the roads. It's not representative on the autobahns, but I saw one BYD and one LYNK & CO. I didn't see that many China EVs on the roads at least not in the volumes that I thought I would expect, and especially after hearing they're coming, right? And we've been talking about they're coming, but it's going to take some time. And as you pointed out that growing pains, right?
Tu Le:
Well, and the challenging economy and the price war might whittle down the number of entrants anyways from China, just because of the fact that they ran out of capital to build, that's a real reality. I mean look at AIWAYS, they didn't sell anything in China, so they're looking at being an export only vehicle. That's basically what the MG brand is. The other thing about the German market, I think they, most of the executives get a company car, so it's like a lease. The company gives to them. So it's a little weird. I won't say weird. It's just different than what I'm used to. But Lei, it is 9:50. Let's keep on talking, because I’m about good.
Lei Xing:
Yeah I’m about good as well.
Tu Le:
Let’s open the room up. There is one comment, and I will open the room up for questions. If you have any questions, raise your hand, and we'll try to answer it. Pull you up or put a comment in the comment section. Peter has written having been in China a few times last year, and notice that consumers behaviors changed quite significantly more value oriented rather than luxury brand conscious. Did you guys get a similar feel? What impact could be to luxury auto brand sales in China this year?
Lei Xing:
I think he answered his own question, right there, right? Because China is not a market, well you have some brand loyalty, but I think the new generation consumers, you know Xiaomi is, I think a lot of people, is a brand that some, a lot of people very much looking forward to. I don't know if they get the price, if the price is right, they'll sell, but that's the difficult thing.
Tu Le:
Honestly, Lei. I don't even know if it's going to be that because look at the MEGA. I think there could be a like espionage that says some social media posts like just dumps on it, and then it just goes viral.
Lei Xing:
What I’m saying is that this lack of brand loyalty, meaning any brand could work, there's also appetite, but look at the Polestones, right? There's also some recent news that they did not sell a single car. I said it's a Li Auto wannabe. These type of things like, I don't wish bad things on, and these compete, but at the end of the day it’s, they're going to be existing the market.
Tu Le:
Survival of fittest, buddy. It’s the survival of fittest. You got to keep your head down, you got to keep grinding. I just don't know how long this pace can keep up. I think by the end of this year, everyone will be pretty exhausted. The one company we haven't talked about a lot, at least in this episode is Tesla, and I just tweeted, I predicted that I said that 24 is worse than 23 for sure. I said that we're not even into April.
Lei Xing:
Yeah. That, what, they're about to fall below $500 billion in market cap or something, like they dropped a lot today. So because of a few, I think analyst.
Tu Le:
Yeah they're getting dumped on, they're getting ganged up on a little bit, but a Model 2 comes out 12, 14 months from now. All will be forgiven, I’m sure.
Lei Xing:
Let's hope.
Tu Le:
Well Elon was in Berlin. He said that they would be building the 2 in Berlin. But he also said they would be building it in Austin. So maybe this is their first global car that's going to be built in multiple regions. There are three regions. No, because, I take that back because the 3 and Y are built in three regions too. So I should take that back.
Lei Xing:
That would be four, because in the earnings call, he said Texas, Mexico, a third location to be decided, maybe it is Berlin, maybe it's Shanghai. I don't know.
Tu Le:
This is pure speculation, but I was reading something about them pulling out of Mexico, or at least delaying it, just like Rivian has with Georgia, because of the interest rates and for Rivian, I think that's a great move because they haven't filled capacity on Illinois.
Lei Xing:
I think as a U.S. EV startup, I think it was just feel good to see that, right? That there's a lot of future and a lot of things to look forward to. But other than that is, right? It's not the China market dynamic. Far from it, it's night and day, right? There's hundreds of Rivians in China, basically.
Tu Le:
And you're talking about companies, not individual vehicles. Hey, I’m going to let you get to bed, dude.
Lei Xing:
I don't know if I will, like, I got to head to the airport in 3 hours, I'll probably going to stay up.
Tu Le:
Hai You Pi Jiu Ma (any more beer left?)
Lei Xing:
No, this bottle I finished while I was doing this episode. I was sipping, I was literally sipping this bottle of pisner, Gutgartter hef brau.
Tu Le:
We're going to get back to it. So actually, next week, my sons are on spring break, so we'll have to figure out what we're going to do next week.
Lei Xing:
All right. My daughter is returning to school next week from her spring break.
Tu Le:
Nice. So I'm going to be on a cruise ship in Florida.
Lei Xing:
Oh man. We’ll figure it out.
Tu Le:
But then you'll have to keep, you have to catch up on China and then keep me figure out what's going on. Now I think this was a good episode focused on Volkswagen, Porsche and everything. So everyone appreciate you, spending your morning, afternoon, evening with us. We will figure out next week.
Lei Xing:
Thank you for the timing. I thought this was the only thing that worked because during the day, my time it wouldn't work.
Tu Le:
This actually is fine to me, I think it's not. I think our European listeners might prefer 9 am so anyways, everyone, good morning, good afternoon, good evening. We will talk with you all next week.
Lei Xing:
Alright man, bye bye. Talk to you next week.
Tu Le:
Hey, safe travels, dude.
Lei Xing:
Thanks, man. 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.