Episode #110 - AutoShanghai Buildup, BYD Earnings, Faraday Job #1

The pod begins with Tu recalling the ordering process for OEMs to suppliers and Lei and Tu discussing the impact of the emissions standard update in July on the pricing and sales of ICE vehicles, specifically those that do not meet the new emissions requirements. 

Tu and Lei then move the conversation over to BYD and their export ambitions, recent earnings and overall outlook as they expand further into international markets. 

Lei then moves the conversation over to Huawei and they both discuss Huawei’s ambitions, their partners and what they think will Huawei’s ultimate path to success.

The podcast closes out with a discussion on Faraday’s strange Job #1 announcement and their continued struggles. 

Transcript

CEM #110 Transcript
Recorded 3/31/23

Highlights:
Lei: Whether they (ICE vehicles) meet the 6A or 6B or not, they are losing competitive advantage to the NEVs. That is the reality. Because China's car market is no longer a first-time buyer market, it's about customer retention and their next vehicle purchases are more than likely to be NEVs.

Tu: CATL all they had to do was sit back, because Ford basically lobbied on their behalf, and then Tesla just came right behind and said, hey, we want the same thing. I'll have what he's having.

Tu: BYD is the machine that continues to run. They have small hiccups, but they just seem to run them over. It just seems like BYD is the new Toyota, they just get things done.

Lei: It would be good for these global CEOs really to be the Martin Winterkorns that look at these, all of these Chinese EVs, personally walk the show and see what they're stacked up against. That will shock them to say the least.

Tu: 2023 is going to be a telling year, because weaker players will shake out, which will likely strengthen BYD and Tesla. It's still unknown if they get that Model 3 refresh out in the China market. Let's see how their numbers shake out later this year. It's clearly globally going to be a two-man race.

Lei: FF has just redefined what SOP is. YT, he said it was 9 years of suffocation. I don't know whether that will get better.

Tu: At the end of the day, these companies like a WM and a Faraday, writing a half a billion dollar check to them, is throwing good money after bad. Because they've proved, they've not shown that they can design engineer, build products that people want. 

Tu Le:
Hi everyone and welcome to China EVs & More where my co-host Lei Xing and I will go over the week's most important and interesting news coming out of the China EV, AV and mobility sectors. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. 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. 

Good morning, Lei. Can you please introduce yourself?

Lei Xing:
Good morning to a clogged-up Tu this time.

Tu Le:
Yeah, you hear me, huh?

Lei Xing:
Yes. Hope you're okay. This is your co-host Lei Xing, former chief editor of China Auto Review. And this is episode #110.

Tu Le:
Racking them up, we are racking them up.

Lei Xing:
It's the last day of March and last day of the quarter. I can feel the buzz and the Chinese word is “juan” or involution.

Tu Le:
That's an appropriate word, “juan,” right? 

Lei Xing:
Leading up to the Shanghai Auto Show, because it seems that every day there's been something going on. I don't know if you feel that way, but that's how I feel.

Tu Le:
I don't know about you Lei, but I've gotten pinged by my journo contacts. Hey, do you know any agencies that can fast track visas? I'm having problems. So the foreign journalists that have not been to China, it sounds like a disproportionate number of them are still going to have problems getting in and won't be making, the ones I know, aren't going to be making the show unfortunately. So.

Lei Xing:
I’ve been getting requests like, do you know, good comms agencies for this company that are trying to expand into China and stuff like that, so.

Tu Le:
Yeah. So business is good, although on the surface, it would seem that China is still trying to combat this price war, but the IRA is supposed to be finalizing its language on who and what and when will receive those subsidies, right on the heels of CATL and Tesla being rumored to open a factory in Texas using Ford's play book with CATL.

Lei Xing:
Blueprint, blueprint. And yeah, and this is supposed to be also the last day that the rear wheel drive of the Model 3 that gets the complete $7,500, supposedly, because that new language is coming out today, right? So I listed in the topics, the China Development Forum that was a bit a few days back. There's been the Bo’ao Forum. This weekend is the all-important China EV100 Forum. So there's been a lot going on. We had Faraday Future finally, SOPing with an asterisk.

Tu Le:
I don't know what that was. I have no idea what that was.

Lei Xing:
It was pushed off by the employees. So anyways, we heard earnings from BYD, GAC Group, Great Wall Motor. We just heard about Huawei this morning. I tweeted some stuff on that. Maybe we can discuss a little bit of that. And then there's been talks of pushing back the China 6B emissions standards to allow kind of a grace period, so that these OEMs can get rid of the inventory.

Tu Le:
They're going to end up giving them away for free or dumping them on the foreign market.

Lei Xing:
Well in the GAC Group earnings conference.

Tu Le:
Can you describe a little bit to the audience? What exactly this is?

Lei Xing:
Which one, the China 6?

Tu Le:
The emissions, the restriction.

Lei Xing:
So there's these two sets of emissions standards of China 6A and 6B. 6A went into effect July 1, 2020 and 6B kicks in three, in four months: July 1 of this year, which basically have more stringent requirements on emissions of nitrogen oxide, particular matter.

Tu Le:
I think generally we can say that requirements for running clean are tighter, which makes the current set of ICE engines, not eligible. Or what's the right way to say this? Not in compliance.

Lei Xing:
Not in compliance. Right. That's why you've seen in the price war a lot of steep discounts on ICEs, is the attempt to get rid of the inventory. And in the words of Zeng Qinghong, the chairman of GAC Group on their earnings call, he said, it's basically, if you don't reduce prices, if they don't sell, then they become scrap metal.

Tu Le:
Yeah, they instantly become excess and obsolescence.

Lei Xing:
So I think over the last few days, CADA, the China Automobile Dealers Association, similar to the NADA here in the U.S., has been meeting and lobbying, has been meeting with some of the representatives of OEMs and lobbying for the delay of that China 6B emission standards. And the request is to delay for a year. And in one of their meetings, the OEMs shared that they expect they have 2 million vehicles sitting in inventory, of these ICE vehicles that are, I believe, 6A, so they can still be sold, but they're facing issues of clearing them out.

Tu Le:
So let me add some color to that from an operation standpoint. In general, when I worked at GM there was an 830 schedule. That was the 12-week planning schedule. And then they had the eight, I want to say, and I’m old, so I forget the exact number, but I want to say the 811 schedule and that was the monthly shipping schedule. The planning schedule gave the suppliers, ok, buy material for the next 12 weeks at this volume. And it's going to come in, week one was always the current week, and then 12 weeks out. And so what they would do is in order to the planning schedule, would basically allow the supplier, authorize the supplier to purchase the raw materials and guarantee somewhat that they would be whole in case, any orders were changed. And then the 811 schedule, and I’m not sure that 811 is right, but that's not the important name anyways, The 811 schedule would say we told you on the planning schedule that we needed in week five, a hundred of these parts part number X. Now, the weekly shipping schedule says we need 25 on Tuesday, we need 50 on Wednesday, and we need 25 on Thursday. That's how that works. And on the supply agreements, they normally have anything outside of 30 days, anything outside of 90 days. We as the customer, the OEM, we don't have any liability on. So we give you this planning schedule for planning purposes. We're only going to pay for what is on our shipping schedule or whatever, right? Depending on because suppliers sometimes they have those 30 day. This is where ok we have these parts in what exacerbated it was the price war and the current economic downturn, because they had these productions scheduled. They thought they could sell them and then demand fell off a cliff. And so that's kind of sort of what we're seeing here, right? A glut of product that was already in the pipeline that ended up being final goods. So nothing they can do about putting that genie back in the bottle, because they're already built, right?

Lei Xing:
I think the reality is whether they meet the 6A or 6B or not. They are losing competitive advantage to the NEVs. That is the reality. Forget about these new emissions policies, whether they're there or not, right? If you look at what Wang Chuanfu mentioned in the earnings is that he expects the penetration of NEVs of this year to be around 40 to 45%, and at a certain month, it could be as high as 50%, so half the vehicle sold are NEVs. And if we look at the volumes, the expected volume increase in NEVs last year was 6.8 million. This year, let's say 9 million, let’s be conservative. That's over 2 million units. And where do you get those 2 million units? It's from the loss of the 2 million units of ICEs I think that's about the math that you can do, because China's car market is no longer a first-time buyer market. It's the people trading up. It's the existing, it's about customer retention and their next vehicle purchases are more than likely to be NEVs.

Tu Le:
And Lei we should dedicate at least one episode to the used car market and the volatility of pricing on that at some point in time, too.

Lei Xing:
Yeah. And I saw a clip of Wang Chuanfu dunking on some of the legacy premium brands. And he's saying in that clip, these premium brands are selling a few hundred units of their EVs a month at 20-30% off, not officially, but at the dealer, and he's like why bother selling them anyways? So, yeah.

Tu Le:
He's looking at it like he can't wait till consolidation occurs, because he's not really, they're not really fighting anybody. I think they're kind of above the fray. And so he's just waiting for the weaker players to get got and ENOVATE is one of them. So we got official word that they are closing their doors. So.

Lei Xing:
I mean, maybe WM Motor, we mentioned a lot on the show, but over the last 2.5 years or 2+ years that we’ve talked. How many times did we mention ENOVATE? Probably you can count by your fingers, handful of times, that shows, right? 

Tu Le:
Lei, remember when we first started talking and doing this podcast, I’d sent you a pitch deck from ENOVATE. And, so for since we've been doing this podcast, they've been trying to raise capital.

Lei Xing:
The funny thing is, like WM Motor, ENOVATE is, there’s founder, not founders, but their management are from, I will call them the SAIC VW gang. And these are traditional automotive people, and it hasn't worked out similar to WM Motor. Freeman, I mean he's from the traditional.

Tu Le:
What we're going to find is that Freeman had an issue with Geely, which really complicated his ability to maneuver. And I know the background story on that, but once that comes out, it'll come out. But so WM is definitely on a death watch, but…

Lei Xing:
They're done. 

Tu Le:
Well, our friend Daniel asked me if WM had gotten an injection of funding, I didn't hear that, but it, I don't think it's helpful.

Lei Xing:
That is supposed to be from the Apollo FMG, that's still hashing out the details, but I don't know where that's going if anywhere at all.

Tu Le:
It's the same pair of pants, just different pockets. It's not new capital.

Lei Xing:
And going be back to BYD a little bit, BYD, Wang Chuanfu, he said the target is to double sales at 3.6 million. And that includes 800,000 export. It's a huge number, I think…

Tu Le:
China exported around 2 million units last year, I want to say.

Lei Xing:
Well, total autos was close to 3 million.

Tu Le:
Yeah, ok.

Lei Xing:
So I think 700,000 roughly were NEVs, and BYD wants to do 800,000 this year.

Tu Le:
The best part about BYD is that they are shipping currently to over 35 countries.

Lei Xing:
Mexico.

Tu Le:
Yeah and they are leading, within 6-8 months of entering a market, they're leading like Israel, they're leading in certain segments.

Lei Xing:
And he did say that the U.S. is currently not, not, they're not looking to enter the U.S. market for now.

Tu Le:
That means before 2025, basically. The other thing too Lei, is what do you think he's thinking about CATL getting that double whammy?

Lei Xing:
I don't know, I think he’s…

Tu Le:
I think he's a little upset. I think missed opportunity. I think, you know cuz CATL all they had to do was sit back, because Ford basically lobbied on their behalf, and then Tesla just came right behind and said, hey, we want the same thing. I'll have what he's having.

Lei Xing:
Just to give an idea of the scale that BYD the 3.6 million total, including exports. So domestically, there will be 2.8 million, 2.8 million would rank them into the top ten globally. And he did say number one in China, meaning FAW-Volkswagen is the number one stand alone, manufacturer. I think they sold more than 2 million last year in China. So that's what we're looking at.

Tu Le:
And if you combine SAIC and FAW they are well over 3 million for Volkswagen is.

Lei Xing:
Sure but that includes the joint ventures. So big ambitions.

Tu Le:
But they're the only one currently, that is the machine that continues to run. They have small hiccups, but they just seem to run them over. Whereas even Tesla has major challenges, and they make aggressive moves to try to remedy those. And it just seems like BYD is the new Toyota. They just get things done.

Lei Xing:
It just seems, I was talking about this buzz. So every day or probably every other day, you will see multiple models being revealed or launched. Let's say, the N, the Denza N8 right? I tweeted that the N7 was just revealed. And now they come out with N8. And then the Fashion brand, what was that a code on that fashion brand? 2316?

Tu Le:
Yeah.

Lei Xing:
Yeah whatever that is, the Yang Wang, right? And then you look at the legacies. They're just quiet. So.

Tu Le:
Well, you know, I expect, I expect at least two or three of them to try to make big announcements in about 15 days, whether their products will really resonate is going to be a question. And you can expect that there's going to be product launches from the folks that we talk about on a regular basis in some of the newbees.

Lei Xing:
I think it would be good. It would be good for these global CEOs really to be the Martin Winterkorns that look at these, all of these Chinese EVs, personally walk the show and see what they're stacked up against, right? I think that will shock them to say the least.

Tu Le:
Yeah.

Lei Xing:
I know that Oliver Zipse and Ola (Källenius), they were here for the CDF but that was more governmental PR relations type of trip. So they'll come spend some time and checking out the China vibes, right? Which I’m looking forward to as well, because you as well. Probably me more than you because I haven't been back for 39 months.

Tu Le:
That's a lifetime, buddy. Your mouth is going to water because of the food and you're going to be like, yeah, it's going to be different for you, but it's going to be heartwarming, but also like a little abrupt. I think.

Lei Xing:
Everything everywhere all at once, right?

Tu Le:
Yeah exactly. And I need to balance out the FOMO a little bit because as you know, we've been invited to places to go visit people and things and companies and need to balance that with just meeting people that we haven't talked to or seen in a while, friends. And so for you and me, it's as much personal as it is professional. So I'm excited.

Lei Xing:
It's almost like a homecoming in a way, right? Because I've been looking at the market from the sidelines basically with this much time. It's important to be inside it, to feel it, to understand it.

Tu Le:
I'm going to be a hater for a second because there have been a lot of new China so called experts that have popped out of the woodwork. And it's not that they want to inform, it's that they come off so confident, but they don't know, they have no idea a lot of it is parody. Likely a lot of it is parodying you and I, and so it is what it is because I mean we just do, right? Because we're nerds anyways, we want to see the things, we want to drive the things, we want to talk to those people. And so it is what it is.

Lei Xing:
To be frank, we don't know. We try to infer, we try to speculate. We try to understand all this time as well. 

Tu Le:
Yeah. And one of those things happened, yesterday's Xpeng’s NGP event in Shanghai.

Lei Xing:
They're finally rolling out the city-NGP for the Shanghai market.

Tu Le:
Let me ask you lay, would you characterize this NGP launch as equivalent to Tesla’s FSD which is not available in China?

Lei Xing:
I would say that the XNGP that they just announced, including parts of it saying that they don't need the HD map. So we talked about that last episode. These type of things, yeah that's basically the FSD, the XNGP, but it's the same functions. It's trying to do point to point assisted driving. 

Tu Le:
But in China, there is not going to be a lot of wiggle room for interpretation on where, when, how the ADAS systems can be utilized. There's not going to be a lot of social media posts that try to glamorize. I don't think the OEMs want that, the OEMs don't want that. I don't think there is an opinion about that. The OEMs don't want that. You also don't see that from many Tesla owners or Tesla itself in China.

Lei Xing:
It's more of these official media test drives, these videos that are put out there rather than the kind of the videos we see here on social media, so.

Tu Le:
They're very very curated, so. 

Lei Xing:
Anyway, just want to point out a caveat on the BYD earnings, RMB16 billion, right? 500% growth, but they got over RMB10 billion in NEV subsidies in 2022. So for 2023 and beyond, we have to look at that part of the finances and see how they do though revenues are going to go up anyways, because they're selling more vehicles, right?

Tu Le:
And it should, their operating cost should, per vehicle should be reduced because they're selling more vehicles. Unless we look at their CAPEX and see that they are still investing in cell manufacturing, R&D, etc.

Lei Xing:
So RMB16 billion, I think Great Wall Motor and GAC Group, their net profit was about RMB8 billion, so half as much.

Tu Le:
We should note and I'm jumping around a little bit. The BYD revenue numbers were just out of this world. The net income numbers were ridiculous.

Lei Xing:
Yeah, I mean, 2022. I mean it's a special year, it’s a special year.

Tu Le:
And it just points back to, if, if there are any countries, any OEMs, any EV startups that are still taking for granted or under, what's the right word? So I have, my head is cloudy today, underestimating BYD’s capabilities, they better just do their homework or just listen to us, do not do that. Now, I will say that BYD has challenges ahead of itself, because it's launching two new brands. It's entering 35 markets, as I said. So there will be challenges. I'm not saying that they're going to hit home runs at every single market. I'm not saying that every single product is going to be successful, but despite those challenges, again, they just seem to shake it off and keep moving forward. And so these amazing targets, they just keep achieving them. So 2023 is going to be a telling year, because weaker players will shake out, which will likely strengthen BYD and Tesla. It's still unknown if they get that Model 3 refresh out in the China market. Let's see how their numbers shake out later this year. But and there's a couple other EV manufacturers that I think towards the end this year should see some upside as well. But again, it's clearly globally going to be a two-man race.

Lei Xing:
As I say, when you are at the top, it's hard to go higher. Another, to put this into perspective, the 3.6 million is roughly the entire NEV sold in China in 2021. So that's also mind boggling, just 2 years ago.

Tu Le:
And one thing I saw on Twitter today is Lotus started shipping its, or delivering its ELETRE, right?

Lei Xing:
That huge event that they organized with Clive Chapman attending and Jensen Button, right? All in the crowd.

Tu Le:
And there's been some effusive praise for the Polestar 3 from western media. So we could see Geely indirectly competing head to head with two great products, potentially. I don't know. Let me think about this for 5 seconds. I think I would get the ELETRE, not the Polestar 3.

Lei Xing:
But the Polestar 3 is made in America. 

Tu Le:
It will be in China.

Lei Xing:
Yeah I think ELETRE is obviously addressing the Chinese market first, because it's, first of all, it's produced in Wuhan, right?

Tu Le:
Wuhan, and we said that it's separate factories. Polestar 3 is a separate factory, but in Wuhan and then the ELETRE is in Wuhan, but at a different factory.

Lei Xing:
ELETRE is in Wuhan, yeah.

Tu Le:
I'm wondering, I think we talked about this couple episodes ago. I'm wondering if the ROBO-01 is going to be built off the same line as the Lotus.

Lei Xing:
We don't know. I mean, it’s…

Tu Le:
JIDU has actually been pretty quiet. We should ping our friend, so.

Tu Le:
Yeah we should. So Huawei, right? Huawei, I tweeted about their intelligent vehicle business was about RMB2.1 billion last year. A very infinitesimal amount compared to their RMB600 some billion in their entire business. And then, I think their chairman, the founder Ren Zhengfei sent an internal letter basically saying, again, Huawei does not intent to manufacture cars or produce cars, but rather being a value-added supplier. And he wants to, these brands to stop abusing using the Huawei brand. One example will be the AITO changing their name to Huawei, their promotional marketing materials changed from AITO to Huawei. So I think that probably will be stopped.

Tu Le:
AITO, I don’t know if AITO sells the car any other way.

Lei Xing:
And interestingly enough, that Meng Wanzhou, she's going to become the new rotating chairwoman tomorrow from her current position. So it’s…

Tu Le:
You know, they're not the same at all, but I equate Foxconn and Huawei in similar situations, because they rely on this, this customer to generate sales in order for their product.

Lei Xing:
Yeah, part of what happened last year, maybe for a few years now is they had increased a lot of R&D on the products for sanctioned, you know what I'm saying, that kind of affected their profitability. And then I think in the automotive business, I think it's worth to point out that they have three business models, one as the just simply a tier-one supplier, two as the Huawei inside. So with that “HI” sign, that's with ARCFOX and AVATR. And then the third business model is the Huawei Select, which is SERES, the AITOs, which means that they are deep into this development and process. And they are also working with Chery, JAC on upcoming Huawei select models. So it's as close to manufacturing cars to actually without manufacturing cars. So that's the way to put it.

Tu Le:
The question becomes, whose arm are they going to twist from the foreign automakers into China market to utilize Huawei select? That's the only way it really, truly gets legitimized. Otherwise, it's China for China.

Lei Xing:
It's also interesting whether Harmony.OS whether they will go into any foreign brands. I don't know if they already are or they plan to, but..

Tu Le:
Well you know that there's discussions behind the scenes. And the OEMs, all of the OEMs are like kicking the tires. It's great. Yeah, yeah, it’s great, we'll wait and see. But will there be a foreign OEM that's desperate enough because they're losing sales, or they're not able to build out their in-house version of the operating system in order to swap something in really quickly, desperate times, right?

Lei Xing:
And now with that Meizu and LYNK & CO collab with the Flyme Auto, I'm hearing a lot of the chatter is that this is appearing to be one of the best systems out there now. It's how interesting that Geely has integrated this Meizu acquisition into the automotive. And it was rare, again, I twitted that was rare for Chairman Eric Li to talk about this at the beginning of a launch event. So that shows how important this strategic route is for Geely, this smart, how to integrate smartphones with the car business, right? NIO is launching theirs supposedly in Q3.

Tu Le:
NIO also launched version three of their swap station, goes from 5 to 4, or 6 minutes to 5 minutes or something like that, holds many more batteries. So there are a lot of westerners who still think that swapping stations are a complete waste of money. They are burning money, effectively, I think that misses the point though, because the China market is unique. If you're only looking at the European market as an entry point, then you're not looking at this the right way.

Lei Xing:
So I think NIO is really preparing and anticipating once they launched their other brands that what is it, Firefly, right? Or Alps that they expect these new power swap stations to come into play. And the only thing I can think of is what Tesla went through with the superchargers, whether you have the chickens first or the eggs first, right? This is the thing that's going on. And I think NIO is making a huge bet.

Tu Le:
And we have to remember that just this week, was it Feifan? They launched the F7, with an optional swappable battery.

Lei Xing:
Right. Leasing, battery leasing. Right. 

Tu Le:
So China is all in on swapping. So maybe it doesn't work in the rest of the world, but that doesn't mean it won't work in China.

Lei Xing:
Geely has the Livan brand with the battery swappable.

Tu Le:
Have you heard anything about like, how many stations and stuff? I've not been able to learn anymore about that stuff.

Lei Xing:
There were some numbers thrown out last year, I believe. But I don't remember the exact numbers, in the thousands, not that (many), I’m sure.

Tu Le:
I'm sure if you haven't seen it, Lei, to the swapping station will get a chance. I'm certain in Shanghai, to try it out. It’s pretty cool.

Lei Xing:
You know, where I used to work near Sanlitun. There is one swap station being built. I watched it being built every day to and from work. I don't know what happened to that one. I have to go and check it out whether it was still there.

Tu Le:
Zainaer? Where in Sanlitun?

Lei Xing:
It's near the capital club. At the corner of that T-intersection going down to Sanlitun, so.

Tu Le:
You probably, I'm sure it was being built, but the Intercon where Gongti Beilu and that side street where the Intercon is and the Bookworm used to be, they were building a subway stop there. And so you're going to be amazed at the difference in the 3 years since you've been gone, you're going to be like what is going on. So I'm anxious to see, I might be doing something with the British chamber or we might be doing something with the British chamber of commerce in Beijing with an event. So for the folks that are listening in China, in Beijing or Shanghai, Lei and I are going to be hosting a happy hour sometime. We need to figure out that date in Shanghai before media days, I think. And then I'll be in Beijing. The week after the auto show for some meetings with clients, do some visits, but also hopefully have one or two events as well, hosting one, maybe, and then being a part of one or two, as well. So, yeah. I'm excited.

Lei Xing:
I'm very anxious.

Tu Le:
If I can be very honest with you Lei, you know whenever I go to the United States, and then fly back to China and never got super excited. But I’m pretty excited this time around. So maybe it's because I know I can get back on a plane to the United States, but yeah, cuz for the longest time, couldn't think of it like that. But anything else?

Lei Xing:
No, I mean, just, FF 91 is, I don't know, I mean YT, he said it was 9 years of suffocation. I don't know whether that will get better.

Tu Le:
For those that are wondering, SOP means start of production. That is typically when job #1 rolls off the line, meaning that the first production vehicle that can be sold and used and driven by customer. Before that, they do have vehicles that come off the line, but those are pilots. Those are alpha and betas. And they're not saleable, because they have parts that are from prototype parts that are hand built. So when you have job one, everything comes off production tooling and the software and the hardware is all golden mastered and completed. And so you heard my idea of job one or star production was a lot different than that picture showed.

Lei Xing:
Yeah, I said, FF has just redefined what SOP is. And I'll be honest with you. I have a few friends there working there. I know understanding where YT came from, from the LeTV days. This is not what I expected. And to be honest with you, I’m very disappointed.

Tu Le:
This is not what he expected, either.

Lei Xing:
I mean this is what they showed with SOP when you understand what SOP means in the industry as you described. So I am not very happy to be honest that they presented this SOP the way they did, what the heck.

Tu Le:
Yeah, this was, this is.

Lei Xing:
Which does not add any credibility at all. I don't know why this hasn't been more reported that what is this?

Tu Le:
I think there's just very little expectation for Faraday. And so this just, this is consistent with what we've been seeing from them for the last few years. Because at the end of the day, these companies like a WM and a Faraday, writing a half a billion dollar check to them, is throwing good money after bad. Because they've proved, they've not shown that they can design engineer, build products that people want. And so I don't know.

Lei Xing:
I think really YT, his dream is being a Chinese in the U.S. and trying to prove he can make this very pinnacle position, top of the industry, a model, and this business thrive. I think that's what he wants to prove.

Tu Le:
Right. I still have a couple and you do too, people that work there, but they kind of ignore me because they know I’m going to ask tough questions, but I don't have anything else. Actually, let me look at my newsletter. I think that it's notable that Tesla again slash prices, but this time in the UK by ￡4,200. So they're still playing with that lever. I think who's the, my goodness, not Li Bin, but who’s the COO of NIO, Lihong?

Lei Xing:
Lihong, he’s in Frankfurt.

Tu Le:
They feel confident that they're going to hit 250,000 units this year. That's more than double of the 122 that they did last year. I think that's reassuring here.

Lei Xing:
I think it would be very tough. To be honest.

Tu Le:
You think so? The U.S. and Japan are working together to secure and make sure that Japan gets, Japanese OEMs get a piece of the IRA by working together on rare earth metals. And a little bit surprising to me, because it's less than a year in the market, the ET7’s going to get a refresh. So that was pretty surprising.

Lei Xing:
Like we said, how long did the Li ONE last on the market? Not very long. I think ET7 was even shorter.

Tu Le:
I have my theories, obviously, but let me ask you, is it a full-size sedan thing? Or is it a ET7 thing?

Lei Xing:
No, I think it's a ET7 thing. I think there's a lot of little issues problems that surfaced.

Tu Le:
We've heard about, our friend Will has one, but he seems to like it a bit, but it's not good that they would spend a ton of capital to build this platform. And then on top of that, the ET7. And then less than a year later, have to dedicate capital and resources to refreshing it, because even in China terms that's fast to get a new front end or a new rear end or revised interior, okay? And that's about it, man, I am actually in, so I was in New York last weekend, DC this week. I've for the last 3 days lay, I’ve walked 20,000 steps each day.

Lei Xing:
What did you do?

Tu Le:
DC, so yeah you know, my kids have never, they are on Spring Break, and so I’m sightseeing working and vacationing at the same time. It's impossible to do. 

Lei Xing:
Well tell me about it.

Tu Le:
Yeah, it's especially if you want to be present. You know what I mean? Because like I don't know, man, I’m just trying to when I’m not working focus on them, yeah. Because they deserve it and so they really enjoy it. It's been beautiful. The weather is a little cold but warmer than Michigan. And it was rainy in New York over the weekend. So that's why I kind of got something a little bit. But one of the things that what I thought was missing for the kids was understanding us history and American history. So for them to be able to see this, the Washington Monument, the Lincoln Memorial. And we walked everywhere.

Lei Xing:
That's good.

Tu Le:
So I think now they understand it at a whole different level. And I have to say one thing. There was a gentleman. And this is the craziest story Lei. I was at the Washington Monument and I was like wrestling with my son. One of my wallet fell out, and I’m walking towards the Lincoln Memorial. I get a phone call, that's a 415 number and I’m like, it could be a business call because I don't know who this person is, and I answer it. And they're like, are you Tu Le? And I generally don't like when people are like, are you Tu Le? Dude? You called me, right? So I’m like, who's this? He's like, I found Tu Le’s wallet at the Washington Monument. You're not at Washington DC, are you? I was like, whoa, and I checked my pocket, and I was like, he's right. He's I lost it. And then he's like Googled your name. I got your number. And so within 15 minutes, we meet, and he gives me back the wallet. He's with his son. And I was like, hey, good Samaritan of the year award. So there's still a lot of good people in this world in the United States. So thank you, Ryan for doing that. But man. 

Lei Xing:
It's a good story. 

Tu Le:
And I had the other meeting that I told you about that. I thought that was pretty useful, pretty fruitful.

Lei Xing:
That means you are very famous. They can find your name and number.

Tu Le:
Yes, right?! So. I'm good for today.

Lei Xing:
So this weekend, so I’ll be looking forward to the signals that will come out of the China EV100 Forum, because there will be a lot of government people speaking there and see what kind of direction that, basically Q1 is done, right? And whether we will see. So that delay in the China 6B is one thing, but any other stimulus incentives that are expected to come out, maybe we'll know by the end of this weekend. And then the sales come out tomorrow. So we'll talk about those next week.

Tu Le:
Should be a fun episode next week.

Lei Xing:
And I don't have anything else. 

Tu Le:
Me neither. Hey, thanks for joining everyone. Good morning, good afternoon, and good evening.

Lei Xing:
Likewise and happy April Fool’s!

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.