Episode #50 - CATL Gets into Battery Swapping

Tu and Lei discuss the significance of CATL's launch of it EVOGO battery swap solution, the first major blockbuster news in China's EV, AV and mobility space in the new year. In particular, what it means to NIO and other OEMs as well as  the challenges that CATL could confront as it expands from a B2B battery supplier to a B2C battery swap solutions provider.

They then talk about Jidu's new logo and concept teaser, and close out the pod discussing policy updates on EV subsidies and purchase tax exemption. 

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Transcript

Tu Le:
Hi, all and welcome to China EVs and 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. We will open the room up at around the 40-minute mark to anyone who's keen to ask us any questions. One rule. We appreciate vigorous debate, but let's all be considerate and respectful to each other. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. Even if it sounds like investment advice, it isn't. We encourage those who enjoy this room to please connect with us on LinkedIn, get the word out to your friends and tune in again next week.

My name is Tu Le and I’m the managing director at SinoAuto Insights, a Beijing-based consultancy that helps organizations bring innovative and tech-focused products and services to the transportation and mobility sectors. I write a free weekly newsletter that we pull many of our discussion topics from. You can sign up for it at sinoautoinsights.com, which I encourage you all to do. Lei, can you please introduce yourself?

Lei Xing:
Hi, my name is Lei Xing. I am the former chief editor of China Auto Review, which published newsletters and the only tabloid magazine in English focused exclusively on the Chinese auto market. Pre-pandemic I spent pretty much 20 years on the ground in China covering the industry. Since the pandemic I’ve been in the U.S. as an independent analyst/consultant looking afar and still trying to keep tabs on the rapidly evolving market. 

This is our big 50th episode.

Tu Le:
I feel so old.

Lei Xing:
Meaning that we've done this on either Clubhouse or Twitter Spaces for 50 weeks in a row. So that's going to be roughly 5,000 minutes of discussion on China EVs, AVs and mobility. So just reading off the headlines, obviously the topic today is CATL’s EVOGO battery swap solution. I think it's going to be our primary topic today, but just reading off some of the recent headlines.

For example, today the Cadillac LYRIQ first pre-production vehicle rolled off the assembly line at the Spring Hill facility in the U.S., that's the one where they had the

Tu Le:
The ex-Saturn factory. 

Lei Xing:
Yeah the $2 billion investment was announced in October 2020. Luminar following the Volvo tie-up is now working with Mercedes-Benz to develop automated driving technologies and deploy Luminar’s LiDAR on upcoming Mercedes vehicles.

Tu Le:
Quickly becoming mainstream, LiDAR on vehicles.

Lei Xing:
Yeah and Mercedes-Benz is using, I believe, Valeo’s SCALA LiDAR on the new S-Class, I believe, for the Level 3, if I’m not mistaken. Then, that new Ford Mondeo I tweeted actually got a lot of attention. It seems positively received, I guess a lot of the U.S. people here wish they had it. It seems Ford has been hitting the ball out of the park with some of the recent designs, heavily locally-led designs like the EVOS and the Lincoln Z, and now with the new Mondeo.

Tu Le:
Let me add a couple things to this.

So the Mondeo, the EVOS, and the Lincoln ZEPHYR Reflection are supposed to have been primarily designed in China. The Lincoln ZEPHYR is a China only model, and the Mondeo is rumored to be the replacement potentially for the Ford Fusion in the U.S., so Americans still might see it, but as the Fusion. But one head scratcher a little bit, and I’m getting really technical, but the designer that was quoted in an article that I was reading about the Mondeo actually lives in Australia.

So I don't know what parts of the vehicle were primarily designed in China. Maybe the UX, maybe the interior, but I need to talk to my Ford folks to really get a better understanding of what was designed in China for China, because technically Australia is still Asia, but I wouldn't call that designed in China

Lei Xing:
Well heavily influenced with China.

Tu Le:
Yes, so technically.

Lei Xing:
Pony.ai just unveiled their 6th generation Robotaxi using the Toyota Sienna, utilizing a new design, also announcing their own computing unit, again, with NVIDIA’s Orin SoC. That was something that just came out today. Interestingly the HiPhi brand, they produced their 5,000th  HiPhi X and they also put this injunction on one of Renault’s subsidiaries in Germany, I checked and Renault’s Mobilize mobility brand did have a logo that is, let's just say a bit too close for comfort.

Tu Le:
I think it was turned like 30 degrees, basically the same logo just turned 30 degrees. 

Lei Xing:
Hats off to HiPhi and for spotting this and doing something.

Tu Le:
It's like your logo being a plus and the me turning it, so now it's an X.

Lei Xing:
Yeah.

Tu Le:
Just lazy, just seems kind of lazy.

Lei Xing:
Also this past week, Toyota had their 1.5 millionth hybrid sale in China. This is after 15 years on the market when in 2005 the Prius was introduced. So that was an interesting statistic. Stellantis Group just celebrated 1 year after being formed.

Tu Le:
The one thing I will also tell you is that HiPhi is rumored to be getting ready to IPO later this year in Hong Kong targeting to raise about half a billion dollars. What we're seeing is this entire move, transition, evolution from wanting to go public in the U.S. to transitioning over to Shanghai Star or Hong Kong. So I think that's kind of an important distinction because currently, and you know this too Lei, HiPhi is like blue ocean. They're the only domestic premium electric vehicle brand that's rooted in China. Now they have global ambitions and they're going to be launching a more sporty or coupe later this year. I think it's called the Z. It's more cutting edge, more digital than the HiPhi X. For those that have not seen it, just google HiPhi Z. There are aspects and elements that I like about it. But it seems a bit too cutting edge for me, but wanted to also note that HiPhi is looking to go public this year too.

Lei Xing:
Yeah they are definitely in a league of its own. I call them the GM Gang, because a lot of their executives were previously working at Shanghai GM, Ding Lei, he was the Shanghai GM president for many years, and Phil Murtaugh

Tu Le:
He (Ding) was an adviser for Faraday. You had mentioned that in the previous pod.

Lei Xing:
Phil Murtaugh the former GM China President. He's very low key. I'm not sure if he's still there, but he was involved at the very beginning. And I actually met him when they launched the brand in the summer of 2019, July 31, if I remember correctly, 2019. And when they launched the concept. I guess we can talk about CATL. It's probably the biggest news of the week and of the year so far.

Tu Le:
Let me throw some numbers out there, real quick, before we start talking swapping. CATL is also trying to raise more money. They believe currently that they have a shortfall by 2025 of 430 GWh of delta between supply and demand. So they're trying to raise more money to increase capacity. Last year from January to September, they had built 160 GWh worth of battery cells. That's massive. A Tesla Gigafactory in Nevada that puts out 40 to 50 GWh per year. 

So just to give you some sense of scale. By the end of this year, they should be at 240 GWh of capacity around the world. And there's a McKinsey report that said, and it's recent, I think it was launched in November of 2021. I was going to send it to you Lei and I will do that after this pod. It's an interesting report. There's going to be 3,900 GWh of demand globally for batteries by 2030, and 2,400 of that GWh is going to come from electric vehicles. So even if they get to that 600+ GWh of capacity by 2025, they're aiming to have almost 25% of the market by 2030. So a lot of capacities being added in Europe, the U.S. has made recent announcements, at least GM Ford has made recent announcements about really stepping up and accelerating additional capacity investment in Tennessee, in Kentucky, in particular.

So what we're seeing is a quick move into a lot of investment over the next 5, 6, 7 years. McKinsey also said 300 billion Euros would need to be invested by 2030 in order to support all the demand globally. CATL’s in the driver's seat right now. And I wanted to give more context. I never understand anything very well until I can relate it to either numbers or something I’m familiar with. So I wanted to give a little bit of background on that.

Lei Xing:
I wonder, the 430 GWh. I think I saw that note on the investor message board or something.

Tu Le:
They had to justify to the Shenzhen Stock Exchange why they wanted to raise additional capital. 

Lei Xing:
There's two numbers. There's a 430 GWh, and then I think there was another number that was actually 295 and taking away the 135 that they expect to have. So they said the short fall was 295. There's another number. But you wonder, have they considered the demand from these battery swap stations? Do you count those into that demand? Because I just quickly did a math, the so-called Choco-SEB, the chocolate bar-like swappable electric blocks, the Choco-SEB, each of them is a 26.5 kWh, and they have 48 maximum per station. If you do the simple multiplification, it comes out to be close to 1.3 GWh. If I did my math correctly, basically 48 × 26.5. So you wonder whether those shortfall numbers, whatever the 295 or the 430 would include those or no, because that's just adding on top of the supply and demand.

So I think that's one of the concerns that in the last episode we talked about was also concern from Dr. Wollenstein of Volkswagen Group China. Now for them, it didn't make sense to invest and put those extra capacity into the world. So that was one of the concerns, but now, when you have the world's biggest battery cell supplier, go from a B2B business model, going into a B2C business model of actually facing the end consumers, own brand, own stations, own app. Then that's really saying something about battery swapping.

When you have the battery sell suppliers play into it, right? B2B to B2C and trying to, actually, I guess the strategy is this closed loop, all the way from upstream development, raw materials, to the technology, C2P, whatever, to recycling to the energy, to the grid, and most important thing is they’are one to X, not one to one. They are an Ample, right, one to many. So they said first ten cities and many OEMs. The first one being the FAW Bestune NAT model. But initially, it looks like it'll be for ride-hailing purposes and then expand into the private vehicles. 

Tu Le:
Let's say that they get really good. They're really good at building capacity out on battery cells. They're entering into a B2C which is customer facing now so it's a new skill set that they likely don't have an abundance from their management team or anyone significant at the company. So that's a huge thing that they need to invest in, because everything that you had mentioned earlier is all supply chain stuff, all manufacturing, all engineering. But now that you are B2C, you got to have branding, you got to have customers understand. It needs to be affordable so that people buy into it, the app needs to be user friendly, and then everything needs to work together on the front end.

I think those are the kind of things that I want to see a little bit more about, because they were pretty light on details. The second thing I’ll say is that they can't be objective, because before they have many customers on the OEM side, but now that they're doing this swapping, they'll tell you that they're being objective, but they can't. If I have Lei Motor Company who buys my batteries, who's also using my platform for battery swapping in Tu Motor Company who's buying my batteries, but not using my swapping. Who do you think they're going to be a bit more service friendly towards? They can't be objective on this. It just doesn't make sense because why would Lei Motor Company stay with CATL unless there was a preference, right? So this is the thing that they have to balance, and they're already the 800-pound gorilla. It's intimidating for a lot of OEMs, foreign OEMs and domestic OEMs to sign up with them anyways. So this complicates things.

Lei Xing:
And that's maybe part of the reason why that the capital market wasn’t all that positive in terms of response. The day when they announced this, their stock price actually went down a little bit. I think this is the anticipation of similarly frictions and kind of conflict of interest. I think one thing to point out that’s important is, CATL has this CAES, the Contemporary Amperex Energy Technology Ltd. subsidiary that will run this whole operation. And they are doing something called a battery bank in which the CAES will be a participant. So almost like that battery asset company with NIO. Somebody has to so deal with the asset.

Tu Le:
It's like a shell company. So the battery, the assets don't sit on CATL’s balance sheet, right? So they keep it clean。

Lei Xing:
From what I know that they didn't announce for example, battery leasing, how much you will pay for the battery swap. But basically they will charge at a competitive rate, depending on the timing and location of where the stations are. And I also heard that they will initially use NMC chemistry because if you look at those…

Tu Le:
So those are expensive batteries. 

Lei Xing:
Yeah Wh numbers: 160 Wh/kg on a weight basis and 325 Wh/L on a volume basis. The other interesting thing it seems to be me is the standardized Choco-SEBs that it'll be three per vehicle. So they have this tiers, so one is 200 km, two is 400 km and three is 600 km, and you can swap either one, two or three. That's the difference compared to NIO where NIO is just whole, whatever, 74 kWh or 100 kWh. And they're trying to make it more flexible, right? This something that was different. 

Tu Le:
That could mean that, I see that as making a ton of sense: standardizing the battery pack and then being able to use it on a lot of different form factors, let's say a commercial vehicle needs four battery packs, but a hatchback needs one. So that makes a ton of sense to me. But on a pricing standpoint, it can't be more than RMB1,000 a month, right? For subscription, because NIO’s cost RBM1,000 a month. So it can't be more than that, right?

Lei Xing:
The other question was, this kind of compatibility, what the OEMs have to do to make it compatible. And they said that the OEMs only have to develop a Choco-SEB compatible battery swapping kind of a frame or bracket without tweaking the vehicle chassis. I think CATL is trying to make it as…

Tu Le:
Plug and play.

Lei Xing:
As much easy as on the OEM side.

Tu Le:
Sure. They have to. It has to be frictionless, right? It needs to be completely frictionless.

Lei Xing:
So the first one is fAW Besttune. And if you look at, I don't think many people know about Bestune in the audience. 

Tu Le:
It's not super popular.

Lei Xing:
I think it's a sign that we can say that the initial OEM customers are going to be those that are a bit less prominent on EVs maybe, they would be dependent on CATL and these others to help drive sales.

Tu Le:
They either don't have the money or they don't have the technology themselves in house, or the time to develop it. So they're using the CATL technology to piggyback to get them into the game.

Lei Xing:
I heard a very interesting comment from a friend of mine in the industry. And he said, instead of CATL supplying the batteries and trying to help the OEMs sell the EVs, he thinks is the other way around. He thinks it's the OEMs trying to help CATL sell batteries. That was his comment, which I thought was kind of interesting.

Tu Le:
We have to remember in the grand scheme of things, right? Let's say, for instance, CATL builds this 430 GWh of capacity, or additional 430 GWh of capacity. Remember, I am always cognizant of overcapacity in China. It's happened in a few different and important sectors: steel and solar panels to major industries. And with all this investment, especially if CATL has a ton of capacity, if you have 20% or 30% of global capacity, you control pricing, or you can at least dictate pricing or influence pricing substantially.

So if they wanted to add market share, they undercut everybody. And so the concern is that or the caution is that if there's a disruptive technology that all of a sudden makes, let's say it's the 8020 roll. So these factories, 600 GWh factory global capacity primarily makes LFP batteries. If there's a disruptive technology that makes LFP batteries less efficient or more inefficient or obsolete, what's going to happen with that capacity? They're going to dump it, and they're going to reduce cost substantially to make people want to keep using LFP batteries because that new technology is going to be pretty expensive.

I think I have a concern that we go short term from not enough battery supply to long term, 15 years out where it's like, man, there's so many battery factories. Because you and I know in China, there are a lot of manufacturing capacity for ICEs that are either off book or the only reason the plant and factories open is to employ that 800 or 1,200 people that are building this car that only the provincial or the Province buys. These are just things food for thought for everyone to think about. Right now, we're not that concerned about supply and demand meeting that supply, or supply meeting the demand. Long term, these are the things we have to think about.

Lei Xing:
And for the EVOGO solution, two things: one it’s chemistry agnostic, it will be NMC in the beginning, but they will also use LFP, and two, its brand agnostic, meaning serving multiple OEMs and brands. And speaking of the OEMs, I think it's worth mentioning that NIO, when you watch the press conference, it was only 10 minutes. When you watch what they said and how they presented it. I felt it was a bit déjà vu, because I felt like it was NIO who was doing the presentation, because this is been already existing. And that's why the president of the NIO battery swap asset company, he posted a WeChat comment, and he said, basically, we've done this for six years and rechargeable, upgradable, swappable. Whatever CATL said, only cements our strategy in that it worked. He said it nicely, he said this is good for battery swapping, we welcome it, we're happy. But I think CATL being a shareholder in NIO’s battery asset management company, I'm sure one, they have learned a thing or two about battery swapping; and two, there must be an understanding between CATL and NIO for this, that CATL is goingon a tangent.

Tu Le:
This is where if I’m wearing my NIO hat, that one advantage that I had, that was really, really customer friendly because I reduced the price of all my vehicles by RMB70,000, because I do battery swapping. Let's say, CATL, there's a mass market swapping station, and then there's a premium swapping station, so they can up-brand, or co-brand, sub-brand, whatever.

Now, my premium partners can also undercut or reduce pricing. So the competitive advantage that I had for battery swapping, if I’m NIO, that might have gone away, because a Cadillac and I’m making all this stuff up. But conceivably, there could be another premium automaker that is competing directly with NIO, saying what I'm going to offer a swap and a battery lease using CATL’s platform and infrastructure and reduce the price of my vehicle by RMB70,000. What do you think about that, NIO? So that can't make them feel good.

Lei Xing:
Right? So the thing basically is, it's a lot easier for CATL to serve multiple customers than NIO,  who though they've said that their battery swapping could be open to other OEMs, but it's probably not as easy as CATL maybe. And also, but on the flip side, if we look at there, this is part of the details that were not announced too much. So they have these OEMs they're planning to work with, ten cities. What is going to be the cadence? Is it we're going to open up one station every month? You see what i'm saying? Whereas, NIO, they already have what, 800 stations. If you talk about it competitively, then NIO is still far ahead and how fast these other OEMs catch on. I think I’m sure there's already been agreements signed. 

Tu Le:
Without question.

Lei Xing:
It’s just that the Bestune was the first to be announced, but you wonder, right? Last episode, we talked about nearly 1,300 total battery swap stations. NIO has the bulk of them. You wonder the cadence of the rollout? I don't know. It might not be significant this year. But at least I think I wrote in my article, basically, my conclusion was that swapping is not going to work for everyone, but CATL’s move is going to speed up the swapping revolution. There's no doubt about it.

Tu Le:
At least in China. The other thing to that is a wild card is they could be sitting down with Sinopec or one of the domestic oil companies or even Shell or Royal Dutch.

Lei Xing:
NIO is already working with them.

Tu Le:
 But if I’m Shell, hopefully I didn't sign an exclusive. Where I can only work with NIO, because why wouldn't I have this conversation? Because there's not going to be as many NIO cars as probably this CATL EVOGO swapping partner, number of vehicles, right? So it wouldn't make sense for Shell to only use NIO as a battery swapping partner. So one of the things that you and I we should figure out more about and maybe update everyone next week is how the actual battery swapping stations work.

The other thing that I think is important to note is that I believe CATL squeezed in that there's a requirement to use their BMS as well, their battery management system. And I would argue that one of Tesla's, big advantages being vertically integrated and creating most of the software they developed and launched in house, is their battery management system is much better than any traditional legacy OEM and they keep that data in house as well. If I need to use CATL’s BMS they're going to have so much information about many different OEMs’ electric vehicles. I think that's worth noting, because there's always that data play now. We always got to think about that data play, and it creates even in even more of an advantage, because now the software can be developed for the 8020 rule: 90% of the cars are optimized using our software or whatever number of OEMs they can initially sign up. So I think these are the kind of the implications that I’ve kind of thought through a little bit. 

And really quickly, you had mentioned Ample. Ample, their stations are actually really cool because they have intelligence software that actually, and their packs are standardized as well. They only have six or seven swapping stations in the U.S., but the batteries are charged in the swapping stations. And the software understands and can controlled the speed of the recharging so that they're sure to use power from the grid that when it's not expensive. I don't think NIO or CATL has that level of intelligence in their swapping station jet.

You and I had traded WeChats earlier, because I thought that they need to deliver charged batteries into the swapping stations. They don't charge themselves in the stations. So that can happen in China because labor is cheaper, but in an expensive country, that's completely impractical, right?

Lei Xing:
If I remember correctly, Ample’s model is swapping all the battery modules rather than the whole battery pack. So that's another slightly different play. Anyhow, more questions than answers. 

Tu Le:
Agree

Lei Xing:
Tons of questions that we probably are not going to be able to answer and see how this plays out.

Tu Le:
I would argue CATL can't answer them until they get one or two anchor customers or clients, because they'll need to accommodate specific requirements.

Lei Xing:
The other thing is whether we'll see one of the forum brands do this? Is that a possibility? It could be possible.

Tu Le:
So you had mentioned earlier in the pod that NIO talked about the possibility of licensing their swapping technology. Before the CATL announcement, it was an offensive play. Now, after the CATL announcement, it's a defense play, at least in my eyes. I bet they've already had initial conversations with some of these other premium automakers, maybe HiPhi and said, let's do this. But they're in no hurry to sign anybody up. And I’m sure the premium EV makers are taking a step back, concentrating on ramp rather than battery swapping. That's to me, for a lot of those companies, it's still a nice to have as opposed to this is a necessary qualifier for selling product into the market.

So we are at 10:40 Lei. Let's keep on talking, but we will now open the room up to questions, comments, and insight, because you all probably know about as much as we do about this battery swapping stuff for CATL so if you have heard or read anything that can add to the story, we are open to listening.

Lei Xing:
And the other topic is the JIDU. They updated and they had launched a new logo and teaser for the upcoming a concept. The car robot, which had the pop up LiDARs, it seemed, on top of the head lights, it looked like. And the Pixel-J logo was a bit interesting. I kept looking at it. It's very unorthodox. You can't really, it's a J and a half D, the letter D but cut off. And then a J. Then I went to look at some of the other logos. Go compare JIDU’s new logo with Li Auto and NIO, you might find some similarities, if you stare at them long enough.

Tu Le:
Maybe the same design agency, maybe it's the same brand identity.

Lei Xing:
Yeah same thought behind this whatever you want to call it pixel.

Tu Le:
These are clear breadcrumbs for JIDU being very digital, very technological.

Lei Xing:
Different. And the way, if you look at their announcements, every time they make announcement at the top of the announcement, they say this is day number 324, this is day number 350. Nobody does that, right? Keep counting how many days it’s passed since they were found.

Tu Le:
No, but to me, that's compelling stuff. You know, you and I are just nerds so we get into that stuff, but I would love to see the 5 minute clips by department of what's going on there, right? The design decisions, the business decisions.

Lei Xing:
I think the other important things, when this concept is revealed in April, the production version, at least from what they say now, will be about 90% showing what the final production vehicle will be. 

Tu Le:
So another way of saying that is 90% design frozen.

Lei Xing:
Yeah, so this is really fast. March 2021, so a year later, they're going to reveal the concept. Let's say, another year, it’s going to be launched. So two years from the company forming to launching a product.

Tu Le:
That indicates to me that they may be doing a lot of partnerships, maybe a platform partner. 

Lei Xing: 
Well Geely’s SEA platform, it’s already there.

Tu Le:
Their logo, I have two young boys. Their logo reminds me of Grand Turismo logo, the video game. So look at it Lei, because you have a daughter, so maybe she doesn't get into the whole racing. 

Lei Xing:
She's more of a Minecraft type.

Tu Le:
No gender roles with Minecraft for sure, but take a look at GT because it's very blocky and it does represent letters, but it's a little blocky. So April can be such a big month or late March early April, because there's going to be a lot more revealed. One thing we did hear about Lei is from a friend of ours, he was at a secret, I don't know if it's secret, let's just call it a secret Lotus SUV unveiling in Shanghai this week.

Lei Xing:
Yeah, nobody, I didn't see anything on the Chinese media or international media.

Tu Le:
They're moving forward.

Lei Xing:
It must have been the Type 132, so their first locally produced SUV which the official reveal is supposed to be in the springtime. So I’m not sure what this event was. Maybe there was a pre-preview or internal preview for VIPs or something.

Tu Le:
So our friend is one is a special guy, our friend is a special guy. I asked him to leak us some photos, but let's see what he comes back with. And a couple things about the Lotus SUV first of all, it's going to be built in Wuhan. So I think it's going to be the first Lotus vehicle built outside of the UK and it's an SUV following in the footsteps of Lamborghini, Aston Martin, Rolls Royce and Bentley. Those are the high runners. Porche did it and doubled, tripled sales until they launched the Cayenne and the Macan. You got to be there. Unfortunately, there are some traditionalists in the UK that are probably turning in their graves when they heard about Lotus building an SUV, but Lotus has never been very well managed, so they've always had cash problems. So I think Geely allowing them this platform investment and then being able to utilize some of their technology is going to help Lotus at least in China, they still have operations in the UK where their super cars, and sports cars are going to be designed and belt, but the mass market stuff is going to be dedicated to China initially. What else happened this week?

Lei Xing:
No, I guess on the policy side, just at a few, is the reiteration from the Minister of Industry and Information and Technology, he basically said the purchase tax for NEVs which is currently exempt, the exemption was supposed to end at end of this year, but it looks like he's hinting that it will continue next year. And the NDRC just came out with a document, Promotion Plan for Green Development, which had a lot of fluffy stuff on NEV support, basically the same things that have been talked about.

Tu Le:
So for our listeners, there are currently two types of incentives, one for the automaker and one for the buyer. The automaker has historically received a subsidy for the sale of an electric vehicle. So companies like BYD, NIO, they get a check written to them by the government for every EV they sell. And there was that announcement earlier or late last year that said, they're going to eliminate that subsidy completely by the end of this year, but that the buyer took advantage of that, because the overall MSRP got reduced by that subsidy. But it was actually given to the OEM there are a couple years, I think BYD made a billion dollars because of how many cars they sold and the subsidies that they received for the cars that they sold.

And then on the customer side, if you purchased an EV that 10% VAT would be waved and Lei, you tell me if I’m wrong, but those are the two enablers over the last several years to encourage EV adoption here in China. The European countries have combinations of both. There's no one size fits all answer at the country level in Europe. So there's a combination of subsidy and then elimination or the waving of the VAT for EV adoption in Europe. Then the U.S., which is a little weird because of the union stuff, you get more money, I believe, $7,500 versus $12,000 or $12,000 versus $7,500. If your vehicle that is purchased is manufactured by a union factory, so which G and Ford are smiling because it makes their Silverado, their most expensive products, generally speaking, much more attractive, because it's an extra $5,000 versus a Tesla which would get the $7,500 credit unless the 200,000 unit cap is carried over. I actually don't know if that starts from zero again, or I need to find that out.

Lei Xing:
But basically the subsidies are ending seriously this year. But the purchase tax exemption could continue in 2023. So that's the policy side for this year's market.

Tu Le:
And we'll see there was already happening, price adjustments because the subsidies are gone.

Lei Xing:
Sure but I think regardless we said the tipping point has gone past. I think short-term there'll be some, probably a jump this year, the last hurrah, right? But going forward in the long term, I think the market has been educated enough and people are not going to not by NEVs because the subsidies are gone, or because the purchase tax are gone.

Tu Le:
It sounds like they're still being a bit conservative if they're going to keep that that waiver in place. So maybe they still see a few cracks. They're trying to make sure that the momentum stays positive. 

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 at @sinoautoinsight. That's sinoautoinsight. You can find Lei on twitter at @leixing77. That's leixing77. If you wouldn't mind rating and reviewing us on Apple podcast, Spotify, or wherever you grab your podcasts from, we'd appreciate that as well, even better if you enjoy the show, please tell your friends about it. Please join us again next week as we track down all the latest news on China EVs & More. Bye bye.