Episode #111 - Tu & Lei Going Back to China, Reflections on the NY Auto Show, GM Kicks Apple Out

Lei kicks off the pod with his feelings on heading back to China after more than 3 years away. Tu then talks a bit about how much China has changed in that short amount of time. 

Lei moves the discussion over to his trip to the New York auto show and highlights the RAM EV truck that was unveiled. Tu comments on the massive size of the battery pack for the RAM. 

This gets them into a discussion about what the OEMs and the US need to do in order to create a real EV revolution in the US starting with producing affordable EVs, particularly below the $50K price point. 

They then begin to talk about why range is such an important consideration for Americans because of the desire to haul or tow things behind their vehicles and the challenges it poses to automakers who are challenged with providing sufficient range for vehicles when towing. 

Tu and Lei then briefly chat about the challenges being faced by the foreign legacies in China and Tu points to the hey days of them being market leaders is over.

Tu and Lei end the pod with a discussion about Tu’s newsletter post unpacking GM’s announcement that it’s not going to support Apple Car Play anymore. 

Transcript

CEM #111 Transcript
Recorded 4/6/23

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 & mobility sectors. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. If you enjoy this room, please help us get the word out 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.
 
Hello, Lei, Niu Yue Zen Me Yang (how was New York City?)

Lei Xing:
Good afternoon. Good afternoon. This is your co-host Lei Xing, former chief editor of China Auto Review, and this is episode lucky #111. I was at the New York Auto Show yesterday. So why don't we begin by talking about, one of the biggest chatters that came out of the New York Auto Show, and in relation to your newsletter, which had a long lead on America's infatuation with big trucks and SUVs.

Tu Le:
Thank you for being one of the two people that read it.

Lei Xing:
When I receive, I read it, man.

Tu Le:
I had. So I had two long rants. One was the GM.

Lei Xing: 
That we will talk as well.

Tu Le:
The divorce from Apple and Android. Let's talk about that. But why don't you start with this big infatuation, so.

Lei Xing:
Two, housekeeping. One: we just pushed out our latest MAX episode with Luminar CFO Tom Fennimore. Make sure to listen to that because they will be at the Shanghai Auto Show, in what,  10 days, 11 days.

Tu Le:
Everybody is going to be at the Shanghai Auto Show.

Lei Xing:
And two, is related to the Shanghai Auto Show. This is our last episode with us both being in the U.S. continent because next week we will be on the other side of the world. I'm actually a little bit, I don't know what's the word to describe, nervous, anxious, everything.

Tu Le:
Do you remember being on a plane for more than 8 hours?

Lei Xing:
Because the last couple of days I've been nothing but taking care of logistics issues, basically, I just made a reservation or appointment for the PCR testing on Sunday afternoon. But most likely we will be doing our next episode, next Friday, live episode at least, next Friday China time in the morning. So very exciting coming up.

Tu Le:
For those that can remember, the last auto show was in Shanghai two years ago, and this was when that woman had danced on the Tesla Model 3 roof, and last year's was supposed to be in Beijing, but it was cancelled because of COVID. So this is the first year that foreigners will be able to travel in to China. But only if you had a visa beforehand, probably.

Lei Xing:
Right. Right.

Tu Le:
Journalists are still having problems getting visas to enter, because let me explain for those that aren't familiar with that process. For China, there are tourist visas, there are business visas, and then there are journalist visas. Journalist visas, depending on what country you're from, and depending on what media outlet, it might be a bit more difficult. And so for the last several years, I would say, Lei, you tell me if I'm wrong, it's been pretty challenging, generally speaking for, number one, for American journalists to get visas. There are a number of journalists from well-known media outlets like Wall Street Journal, Financial Times that live in Hong Kong, that live in Taipei, that live in Seoul, covering the China automotive sector, covering the China mobility sector, covering the AI and ship sector, because they've not been able to get journalist visas. And so if they went into China on a visa that is not a journalist visa and they're doing journalism, they would be in big trouble. Hence, it's very important for them to have the official approval to get into China. And so I think what's going to happen is you and I Lei are probably going to get pinged a lot to be eyes and ears for a lot of those people. And we're friends with a lot of them. We know a lot of them. They're very diligent, very hardworking, very curious, but anyone that has lived, covered China from a business standpoint, politics standpoint, from a media standpoint, know that it is so dynamic and it's just really tough to keep up with. So kudos to all those journalists. We will help you if we can or and you know, you have a couple cities, couple three cities that you will be visiting and I’ll be doing the same. So.

Lei Xing:
Yeah, and even for me, who's been in China that many number of years, I need to go there to see with my own eyes what has changed. That's why I’m looking forward to, the most.

Tu Le:
What I believe Lei, is that you're going to go to Beijing and you'll be like, I didn't remember this here. I didn't remember this here. This restaurant has closed, this street has completely changed.

Lei Xing:
Liangmaqiao is one example where I used to live. I mean work.

Tu Le:
If I’m being 100% frank and honest, I’m a bit anxious to go to Shanghai. Because as most of you who have listened on this podcast, it's one of my favorite cities in the world. I was heartbroken along with a lot of other Shanghai ren (people) when it was on lockdown, but I've been told that although there is some PTSD with the residents of Shanghai, everything is kind of moved towards normal. If you can call a price war and an economic slowdown in China normal. But for those that are going to the auto show, let us know, DM me or dm Lei, we'd love to meet you in person, talk with you, take you out for a beer. We're actually thinking about spending a bit of money to have a happy hour, or host a happy hour. And I think that's a terrific way for you and I to reconnect with a lot of people that we haven't spoken with or seen in 6, 8, 10 months, a year, 18 months. So.

Lei Xing:
Yeah, and very much looking forward to it. And I guess that the lesson is really China sometimes can change in an instant. The lockdown being the perfect example, right? But it's already been a year since the lockdown. So time flies, anyways, we got to get back to our topic on the RAM 229-kWh battery and the 500 (mile range).

Tu Le:
The 3,000 pound, 1.5-ton battery.

Lei Xing:
Everything is big in America, and the RAM 1,500 REV is the latest example of that.

Tu Le:
And so it is, these are the halo vehicles, but the bread and butter is going to be sub-$45,000, sub-$50,000 EVs. That's where that tipping point is going to be reached when every single one of the major automakers in the U.S. has a viable product sub-$50,000, 5-seat, 6-seat crossover SUV, most likely sedans will work, but not so much.

Lei Xing:
America needs a small EV revolution. Because you pointed it out in the newsletter about your trip to Washington DC and I think there was, you mentioned about parking space and how much parking is there in America, right? I think there was a recent article about that being whether it's good or bad, right? So I mean to a point in the newsletter, I think we sometimes, can America embrace the small EVs? Right now the answer is probably no.

Tu Le:
I do much more preaching in my newsletter than I do on this podcast. But I believe there's an opportunity. I won't preach about it. But if we think about usage, parking lots and parking structures in the U.S. in busy cities, normally are used about 1/3 of the day, let's say, 8-5, 9-6, 9-7, then they sit there doing nothing. So if we are able to adopt either smaller cars, more efficient cars or shared services, and restrict some private passenger vehicles into the U.S., and you're talking to somebody who lives just outside of Detroit right now. So it's still pretty anti-thema to the folks in the Motor City. But as Ford and GM have their own city solutions teams, and they're starting to look at more about mobility services. You will also start to see their product portfolio evolve over time as well I think. Because they might not be able to make those $90,000 RAM, 250-kWh trucks, because what if they are restricted from buying rare earth metals from you know who. So a lot of things at play that just seemed to just dial up the intrigue factor for everything that's going on in the EV and AV and chip and mobility sectors globally, too. So because Europe is playing a role, Macron and I forget her name (von der Leyen). She's there, both are in China right now. They're talking about rare earth metals, they're talking about imports from China for EVs. They're talking about all that stuff. So anyways, it looks like there's a few new listeners. If you don't think China is involved in every single aspect of the mobility sector, you'd be wrong. This is where you'll start to see the rubber meet the road. When and if Jim and Ford, because GM specifically they have a $40,000 Blazer EV, and a $30,000 Equinox EV that are supposed to be launching later this year. One of them is supposed to be launching later this year, one in 2024. They're not going to be profitable without Chinese refining of the rare earth metals and purchasing from Chinese owned mines. Now, I’m not saying Chinese mines because China owns mines in Brazil, they own mines in South America and Chile. So that's why I said Chinese-owned mines, okay? Our good friend Steve LeVine today had an interview with Lithium America's CEO, I forget his name.

Lei Xing:
John Evans.

Tu Le:
But if you really want to peel those layers of the onion back, you got to know about battery chemistries, battery cells and where those raw materials come from.

Lei Xing:
Yeah, then we've only recently seen Ford and GM announce which vehicles actually get how much of the updated tax credits, right? Some full, some not, because of the IRA that the new language that goes into effect on April 18.

Tu Le:
We also know that senator Manchin is not very happy with Ford, and then he's not very happy with Tesla. Because the essence in the spirit of that IRA is not what the deals they have with CATL are meant to be.

Lei Xing:
If the aim of the IRA is to get this so-called “entity of concern,” which equals China basically, out of the equation.

Tu Le:
And Russia.

Lei Xing:
It's impossible, at least not in the near term, foreseeable future. So.

Tu Le:
I’d say at least through 2030, right?

Lei Xing:
And I think Simon Mores, he tweeted that a Gigafactory takes two years, mining takes 10 years, right? These are long lead times for you to materialize on what you're trying to achieve. Anyway, so this RAM won't come until end of next year. But I mean that's the production It’s huge. I mean every time I look at it, F150-Lighting is huge, I mean look at the Silverado, man, that's big. And I look at the RAM 1500, it’s the biggest of the big.

Tu Le:
These things are tanks. They're actually much more dangerous on the roads than ICE counterparts.

Lei Xing:
And the RAM 1500 has a huge frunk. I think it was like 15 cubic feet. I don't know if that's a right metric, but it's huge. 

Tu Le:
My son can basically swim in there, like a hot tub.

Lei Xing;
I can fit in there. And then they also have side frunks. Can you believe it? Side trunks, side runks?

Tu Le: 
I love the ingenuity and use of the space. I believe that's great. I think being able to efficiently use that space is great. But remember, I had written this in the newsletter. I've been told by many people, the U.S is a towing, a hauling country, people that tow things and all things, especially in Michigan. When they go up north, they haul their boats, they haul their camper, any significant extra weight….

Lei Xing:
That’s the cultural fabric.

Tu Le:
Any significant additional weight on that RAM, we're looking at range cut in half effectively. So that's the thing, right? In my newsletter, I talked about that. They sell a lot of those RAMs at that 250 + kWh pack? Yes. But we also have to remember that anything over $80,000 for trucks or SUVs will not receive those subsidies. So you're paying full freight on that vehicle. If you use it for work, to haul things, to tow things, and even if it's a third less range and we're talking 500 miles, maybe, I forget what RAM said the range was.

Lei Xing:
500 miles.

Tu Le:
But let's say you lose a third of that. The battery is so massive.

Lei Xing:
That's why you need that, what, the kind of overcapacity to account for that, right? 

Tu Le:
Yes. And God bless American ingenuity, because there are companies like Our Next Energy that are trying to come up with alternatives in order to reduce the size. But while still either maintaining range or increasing range. The longer those types of technologies take to commercialize, the longer we're going to be reliant on China mining Inc., China rare earth metal Inc., so.

Lei Xing:
So the New York Auto show a little bit, I tweeted yesterday that this has become since I went last year and this year. This has become the Stellantis Hyundai Kia auto show, because they are the ones that are really launching any new products or winning awards, right? IONIQ 5 last year, IONIQ 6 sweeps and the interesting China factor was, the ORA funky cat was one of the three finalists for the World Urban Car and Wang Chuanfu, right? Was one of the finalists for the person of year, which was won by the Sang-Yup Lee, the designer for Hyundai and Genesis. So I think right now Hyundai Kia in America is almost like BYD in China.

Tu Le:
I’m just going to tell you that, Lei, that's a bias because Wang Chuanfu is like should be not only automotive executive of the year, he should be businessperson of the year for the entire world.

Lei Xing:
So they are at their pinnacle, which I think is, you know how can you sustain that? It's going to be hard. But again, right, I mean, Hyundai Kia just, they've been killing it, right, with their products and designs, Genesis, right? The Genesis, the GV80 Coupe Concept they showed. And I actually, I got to talk, another China factor, I got to talk to the Jeep CEO, Christian Meunier, and this is, this is exclusive. I asked him, do you plan to launch some of, let's say, the Wagoneer EV and the Recon EV in China? He said they are considering, that they're also considering the next steps in terms of being an import brand, but everything is under discussion.

Tu Le:
So can you give our audience a quick summary for those that don't know the details of what happened with Jeep over the last 12 or 14 months?

Lei Xing:
Jeep is the OG in China, because Beijing Jeep is the first, even before SAIC Volkswagen, Beijing Jeep is the first foreign joint venture, car joint venture, and then it became what, Chrysler, DaimlerChrysler and now is Mercedes-Benz, right, it’s called BBAC, purely Mercedes. And Jeep backed out of the Chinese market, no longer producing.

Tu Le:
And the only clean energy vehicle they have on sale is the Jeep Wrangler 4xe.

Lei Xing:
In the U.S. they also have some of the other models that are being launched.

Tu Le:
They have the Grand Cherokee 4xe.

Lei Xing:
Right. And I asked him, do you plan to go to Shanghai Auto Show? And he said, I can't. So.

Tu Le:
Did Tavares not let him, or? 

Lei Xing:
I don’t know. Maybe it's a visa issue. I think he hinted it was a visa issue, but I didn't catch Carlos, but I would have asked him the same question, but I don't know.

Tu Le:
I wonder how much GAC had to deal with that visa issue.

Lei Xing:
We haven't heard, right? Like Mary Barra and Jim Farley. Are they going? We haven't heard any.

Tu Le:
I don't think they're going, although Buick is launching an EV SUV. 

Lei Xing:
I don’t know.

Tu Le:
I should double down on that. Mary had a China day last year, right? Middle of the year last year, late last year, where she announced by 2025, GM would have 10 EVs built off the Ultium platform in the China market. So for those that are wondering, GM is completely all in on China.

Lei Xing:
But the Cadillac, locally-produced Cadillac LYRIQ has been dead silent. I have not heard a single word talked about.

Tu Le: 
I got invited to one of those Cadillac Houses in Shanghai. So I’m just going to go visit one of those. It's like a NIO House, but for Cadillac.

Lei Xing:
That's the first globally, I think, like it's a huge.

Tu Le:
Yeah. And for those that are interested in GM, they also launched an import service called Durant Guild. What they're trying to do is build excitement for GM products that aren't normally sold in China. So they'll help you import a Corvette, to help you import a Tahoe, to help you import I think a Silverado or an Escalade. But be careful because Silverados can't drive on many, quite a few of the Shanghai city streets.

Lei Xing:
And the interesting thing and the weird thing is Ford announced their plans for Shanghai Auto Show. They're announcing the new Edge L SUV, the big SUV, they are introducing a pickup truck, could be localized. There's another model, there's no EVs. There's no nothing, so.

Tu Le:
Is it the Ford Maverick? 

Lei Xing:
I don't know. It's a smaller..

Tu Le:
A version of it, maybe?

Lei Xing:
Yeah, but no new EVs, anything. So I mean it's the biggest stage in the biggest EV market in the world, and it shows right?

Tu Le:
Well, to your point about the LYRIQ which has been fairly silent. So has news about the Mustang Mach-E in China. We should remind the audience that they're actually both built locally in China. They're not imported. So there is no price disadvantage on the purchase of those vehicles. As a matter of fact, Ford put $10,000, they discounted the Mach-E by almost RMB60,000 or close to $8,000 or $9,000.

Lei Xing:
Yeah those are the older inventory.

Tu Le:
Yeah, so you can, I think, accurately state that generally, foreign automakers, regardless of whatever the powertrain is, could be EV, could be ICE, they are having a tough tough time selling in China right now.

Lei Xing:
Anyways, if you look at the regional, these regionally different automakers, Kia already announced their China NEV strategy a few weeks ago, right? So they are there, and then the Germans obviously it's going to be a huge event for them, whether it's Volkswagen or the other premium brands. Ford, I don't know, GM just announced the Buick, nothing else so far, and then maybe Honda has two new EVs revealing. I mean that's about it.

Tu Le:
And then there's just going to be a plethora of Chinese companies. And so all that sizzle, there's going to be a void in a vacuum. It's all going to go to the Chinese EV companies.

Lei Xing:
And this thing is already starting tomorrow, Friday, China time. Chery is doing an NEV night and launching a new brand called iCAR. Hello, Apple! They're launching a new high-end series for the EXEED brand. They're launching their new hybrid platform. So this kind of the atmosphere is starting to buzz.

Tu Le:
Buzz starting, that's why. So I bought a 30-hour ticket. It's going to take me 30 hours to get to China. That's why I’m going to arrive on the 12th Lei, so I can spend one or two days, not working so hard and just kind of…

Lei Xing:
Get familiar with the new environment.

Tu Le:
And then starting on the weekend, I’ll probably hit it hard, catch up with friends, catch up with some of the new vehicles, just walk around Shanghai, be curious, take a bunch of pictures, so I would invite everyone that's listening to the podcast or on this live show to follow Lei and I because we'll probably tweet quite a bit. And we'll definitely have a lot of updates, likely like every day and…

Lei Xing:
And hour.

Tu Le:
And you know that Lei and I are very good about the rumor mill too, because I think you and I are pretty much the only guys that really hear the real deal of what's going on the ground in China with regards to brands, products, executives. That's part of what we love. We'll try to bring you accurate information up by the minute.

Lei Xing:
Yeah. So going to the next topic, March sales. I did a few calculations picking out several case studies. So for NIO, they would have to do over 70,000 a quarter in the next three quarters to meet their target of 250 (thousand). So that's one example. Second, Li Auto will have to do close to a 100,000 a quarter to meet their target. I think it was either 300,000 or 350,000, but anyways, it's a huge number. And BYD, one million a quarter in the next three quarters. And ZEEKR, over 40,000 a quarter, if they want to double to 140,000 units.

Tu Le:
For those wondering, ZEEKR has two vehicles: one is a what would you call it, a grand tour? 

Lei Xing:
Well three soon. 

Tu Le:
Yeah three soon. One is a grand tour, so not meant to be a high runner. One is an MPV, another not really meant to be a high runner.

Lei Xing:
The 001 and the 009, then the third model is the X.

Tu Le:
Which HiPhi also makes an X.

Lei Xing:
Yeah.

Tu Le:
And Tesla also makes an X.

Lei Xing:
So by the way, Li Auto just announced they will announce their BEV solution. I don't think they're going to reveal any, their next BEV car, but maybe a precursor of what's to come at the Shanghai Auto Show, much awaited. And then just, I think, in general, I think March was on up. I think CPCA said it was 550,000, still below the peaks that we had the end of last year. But…

Tu Le:
But I read that despite the price war, sales were actually a bit disappointing. So that indicates to me that it's even likelier that there's going to be some sort of stimulus from the Chinese government to goose sales even a bit more. So.

Lei Xing:
I think it's a matter of time and timing of when it is announced and in what format.

Tu Le:
And you and I should start a countdown. When is Tesla going to cut price again?

Lei Xing:
Let's just say something probably around the auto show time. Why not, right?

Tu Le:
Yeah, so they, March was 89,000?

Lei Xing:
Yeah, 88,000, 89,000. 

Tu Le: 
They haven't broken out how many were exported, but production wise solid month. Because remember that they probably have a 1.2 million-unit annual run rate. So that would be about 100,000 units. They're running at 100% capacity per month. And we also know that Q1 of every year for the China market is notoriously slow.

Lei Xing:
Yeah so I look at that leader board. If you look at all the names on the leader board, besides Tesla, besides, let's say, SAIC-GM-Wuling, which is a GM joint venture, you don't find a foreign brand until you get well down to the list, right? So that's how the current sort of the dynamic of just, Chinese just owns the market.

Tu Le:
And I got to point out there's a couple of tweets. There's a Bloomberg article about how China is squeezing out the foreign competition. And there was tweet about the Chinese government put their thumb on the scale. And I want to be fair here. The Chinese did have some protectionist measures, but the foreign automakers played a major role in their own demise over the last several years. So I’m just trying to call a spade a spade, because they were too focused on profitability of their ICE vehicles, they were slow to react to the market. And when they did react to the market, they brought analog devices to a digital party and they're still paying for it. So we know with the speed of the China market, if you're slow to react and you're slow to respond, you can get behind very, very quickly. It's very unforgiving.

Lei Xing:
In fact I was speaking to some of the industry folks at the New York Auto Show, and I just told them that some of these foreign legacies, they still don't realize the severity, the situation they're in, so.

Tu Le:
I've talked about this. I think that the executive teams, the management suite have a pretty good idea, but I think vice president and below, director and below, they might still think that they have this available time to, ample time, let's say, ample time to make that pivot. And there's no airspace. There is no airspace for mistakes if you are a foreign automaker in China.

Lei Xing:
I think in the case of Jeep, Stellantis, I think quite a few of their counterparts are really going to have to think about and make a decision, whether it is even in the better interest to not be in China. This is something that's seriously starting to, it's just different, we are in a different era.

Tu Le:
But this is the crazy thing and hear me out here. If they're not in China, then the Chinese battery companies have less incentive to support them outside of the China market. We know that for a while demand for battery cells, especially the LFP, more affordable, from a Envision AESC, from a CATL, from a BYD, from an Ocean, they're going to be in higher demand. So if I sell to you in two regions. I'm much more likely to provide you with additional supply. If you're not in the China market, maybe you lower down on the total pole, because your entire supply volume is lower, kay? I understand what you're saying because you're just going to be a zombie, dead man walking, if you continue to struggle in the China market and don't have significant products in the pipeline with and it has to be within the next 20, 24 months. Anything farther out? You're done. I don't think we're going to see the market share from Volkswagen that they had 5 years ago ever again. Volkswagen is never going to get that back.

Lei Xing:
No. What I was trying to get across is maybe the question is, sometimes, let's say in the case of Stellantis again, do you really have to be in China to be a successful company? And what I mean by successful is making profit and you're selling as well as everywhere else. But you are willing to sacrifice the Chinese market for that. What I was trying to say is this is something that these foreign automakers are going to have to consider。

Tu Le:
In regards to Stellantis, they have to reconcile the fact that the lion's share of their profit comes from an American company.

Lei Xing:
Right, and I think what the European Commissioner von der Leyen, what she said, if you listen to her speech or one of the press conferences that these European companies are not being treated on a playing field, right? I mean that's what they want. And so Carlos, he's smart, maybe in a way.

Tu Le:
Bu Carlos also has shareholders. Because again, when they were selling and very popular, they didn't have any complaint in the world. They kept their mouth shut. Now that he's left the market, he's complaining, left and right. So it's fine. There was some unfairness, but despite that, you guys made tons of profits from the market.

Lei Xing:
Speaking of complaining, we move over to the, I know we're past the 40 minute, but there’s more on the China EV100 Form. Speaking of complaining, we had Richard Yu of Huawei kind of complaining about what's been happening to their luck.

Tu Le:
Talk about shareholder value, right?

Lei Xing:
Yeah and the biggest comment that came out was how he said Huawei, the NIOs, Li Autos, Xpengs don't want us, they have their own route. The foreign companies, they don't want to use us because we're sanctioned. The Chinese companies, some of them, they don't want to use us because they're afraid to lose their soul. And then he was kind of complaining without openly, complaining about the decision not to use the Huawei brand on the AITO.

Tu Le:
But he was 100% accurate, right? I don't think anything that you’ve just said that he said, I read some of the stuff that he had said. I don't believe anything he said is actually incorrect.

Lei Xing:
That's the thing that I said, it tears you up a little bit.

Tu Le:
Yes. What foreign brand would, a desperate foreign brand, so maybe in 3 years, in order to gain favor to the Chinese government in the local market in China, maybe one of the lesser foreign brands concedes and says what we're just going to use Huawei for a hardware/software stack.

Lei Xing:
But the really interesting thing is their HI model, the Huawei Inside model, one with ARCFOX, one with the AVATR 11, these are completely different performing on the market. I mean ARCFOX right, it's basically failed. Whereas AVATR seems to be getting it right for some reason.

Tu Le:
Yeah.

Lei Xing:
I mean AVATR is a younger brand than ARCFOX. So what went right and what went wrong?

Tu Le:
Yeah and that was the thing. I saw a ton of ARCFOX because it's Beijing, right? So I saw a ton of ARCFOX. 

Lei Xing:
Yeah, I don't know.

Tu Le:
But the only real customer they have is an SOE. 

Lei Xing
Yeah they're working with JAC, Chery, the SERES model, which is the Huawei Select model, so we’ll see about that.

Tu Le:
He and his team need to just be head down, grind it out, and build a superior product.

Lei Xing:
Well he probably going to be no longer at Huawei, the rumors, right? But Xiaomi has denied that he is joining Xiaomi, but and then I think the other comment came out of LeapMotor’s chairman. He was saying the smart EV is going to get down to RMB50,000 in how many years?

Tu Le:
RMB50,000. So that's effectively an $8,000 car.

Lei Xing:
It just scares these foreign companies more.

Tu Le:
But it is still the wild west in the EV space in China. And the crazy thing is that the Chinese companies are beating each other up. Because most of the foreign brands have gotten a standing eight count. And maybe I’m a little bit harsh, but ABB, Audi, Beamer and Benz, they've kind of had a reprieve because not a lot of premium Chinese EV companies and startups have been launched or established yet. That is changing with BYD, with HiPhi, with our friend Weiming's company. So in the next 3 or 4 years...

Lei Xing:
Are they doing anything in Shanghai?

Tu Le:
No, I don't think so.

Lei Xing:
I haven't heard.

Tu Le:
He'll be there. I'll try to grab a drink with him, but because I definitely want to catch up and talk BeyonCa, but he wouldn't miss it. That's not his style, right?

Lei Xing:
Then so the other thing that came out of China EV100 Form, I think, will be very important going forward is both Wang Chuanfu and the CEO of Volkswagen Brand China, they called for the continuation or the extension of the purchase tax exemption. It’s one of the things that that is likely going to happen I think, if they are willingly to openly say that. And in fact, I think these, MIIT and other organs have kind of hinted at these stimulus or incentives coming out. So we'll see about that. And then the former minister of MIIT gave out a prediction that by 2030, there will be 100 million NEVs on the road in China out of a total of 450 million vehicles. So roughly less than 20%, one fifth.

Tu Le:
For those that are wondering, China buys about 22 million cars a year, that should grow by 2030, probably get closer to 26, 27. But 100 million EVs is a massive number.

Lei Xing:
And remember, Wang Chuanfu talked about penetration this year could even reach 50% in certain months.

Tu Le:
That's because he has in his spreadsheet, 4 million earmarked for BYD.

Lei Xing:
3.6, right? 3.6 is the publicly announced target.

Tu Le:
It's not going to be a production problem or a challenge.

Lei Xing:
And 3.6. So put that into perspective: 2021, total, China total, NEVs was just over 3.5 million and BYD’s doing that many this year.

Tu Le:
Didn’t BYD do 800,000 in the quarter? No? was it 800,000?

Lei Xing:
Q1 was, you were talking last year, no. Q1 was 550,000.

Tu  Le:
I've, I read something I forget now.

Lei Xing:
800,000 is their export target.

Tu Le:
Yes, export goal. Let's open the room up for any questions, any comments. Please raise your hand if you wanted to speak. And the last thing that I wanted to ask you about was your thoughts on GM getting a divorce with Apple and Android.

Lei Xing:
Yeah, my thought is that this is a calculated risk that GM is willing to take, because they think their system is good enough that they will please their customers, but I don't know. I was talking to some people, they would miss it, at the auto show. I think they said it's a bad decision, but you got to do what you got to do.

Tu Le:
Did you agree with every single point I made with my rant? I can only call it a rant.

Lei Xing:
I don't know if I’m in 100% agreement with you.

Tu Le:
No, but that's good. What did you not completely agree with? 

Lei Xing:
No I mean, it's like I said, I mean for me that has a car that has Apple CarPlay, I can't live without it. So.

Tu Le:
You have to admit that even using Apple CarPlay, it's not optimized. It's still clunky.

Lei Xing:
Yeah.

Tu Le:
So there are opportunities to improve the user experience. And so that's all I meant with that. And until they have a track record of building amazing and engaging user experiences, GM is going to have100% skeptics. I emphasize that Android and or Alphabet or Google and Apple are not resting on their laurels. They're improving, and they're looking to take more real estate, digital real estate in the interior of that vehicle. They're looking to create a gauge, cluster and the entertainment system. So what's left? If you are GM or Volkswagen, there's absolutely nothing left because you're sharing that data now. And that interface is made by Apple or made by Google. So that logo, when you turn on that car, you might see the Volkswagen logo, but you're also probably going to see that Apple logo.

Lei Xing:
Or at least a familiar interface.

Tu Le:
Yeah. I think all of the automakers have to make this decision. But I don't think they will.

Lei Xing:
The thing is from a perspective of giving your customers a choice, flexibility, then it's, then you're not doing that by what GM as announced, right? So that's why I said it's a calculated risk that they're willing to do this.

Tu Le:
The only company I know that has been successful at not giving people a choice? Apple. 

Lei Xing:
Or Tesla.

Tu Le:
Yeah. Tesla for sure. And I think back to that statement by Henry Ford, you can have any color you want…

Lei Xing:
As long as it's black.

Tu Le:
Of your Model T as long as it's black. Again. I respect the bold move from GM. Do they have the bench strength to back that up, and execute? Because the business decision to me was prudent and I would rather do it sooner rather than later. Because get that backlash out of the way and focus on. First of all, and I had actually written almost a page and a half, and I cut it all out because I couldn't stop thinking about all these different scenarios. And my thought is make it initially super simple, but make it freaking bulletproof. So people, cause if you don't like it, because it's not designed well or it could be designed better. That's one thing if it's buggy. And if it’s low latency and it doesn't match what the iPhone does. The other part of my rant Lei, was talking about those journalists who are bashing it. When they're probably typing on their MacBook Pro using their iPhone, listening to Apple Music and then Apple News. So they're using and they've been convinced by Apple, this closed ecosystem creates the best user experience yet they're turning around and ripping GM, it was just short sighted to me that most of these bad takes were out there. Is it almost an impossible task to build something let's say, within the next 48 months that do you want to try to compete with an Apple or Google from a technology standpoint? Yeah it's freaking daunting. But if they do, they win. The other example really quickly that I gave in the newsletter was and I’ve oversimplified this, but if you're Mary Barra, if I’m Mary Barra and you've created the latest version, latest TikTok app that is starting to go viral, I would call you and if my operating system and my app store and my entertainment system was awesome, I’d be like Lei, I know you charge $5 for this app on the Apple store or it's free. And Apple gets 30%. I'm going to give you access to the 10 million cars I sold this year or the 5 million cars I sold this year. I’m going to flash my software, and your apps can be on it Lei. And for the first 6 months, I’m not going to take any of that margin. But if you get a high engagement rate on this app using our platform, then let's agree, on an x-margin where we get a piece of it. On top of that, because we own the operating system, we designed it and is native to our system. We can help you design the app so that it feels like it's native to our Ultifi hardware/software stack. And so again, I’m over simplifying this, but if they get it right, this is the opportunity they have and guess what, because Apple is not part of the ecosystem. The Apple app store is not there, you can't get it anywhere else. It'll be on the Apple, it'll be on the iPhone, but it can't be on your GM Ultifi platform unless…You know, so prudent or shroud move by Mary. Now they just need to execute. So anyways.

Lei Xing
Yeah very different thinking.

Tu Le:
Let me ask you this. If I gave you $5, and you had to bet between GM’s Ultifi and Volkswagen’s CARIAD, in 5 years, who do you think is going to come out on Top?

Lei Xing:
If I'm here in the U.S. I would root for the U.S. company.

Tu Le:
Because Volkswagen, that's what they're thinking, too, you know that right? So. Hey, thanks for joining everyone. And good morning, good afternoon, good evening. We will talk with you in China next time.

Lei Xing:
Yeah, I'll be in Hong Kong, but at least in the same side of the world. So. Okay, all right. Talk to you later.

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.