Episode #170 - EU Tariff fallout, VW Group + Rivian Mashup, New Robotaxi Pilots in BJ

Tu and Lei unpack who they think could be the winners and losers from the recently announced EU tariffs on Chinese electric vehicles and how they may react to tariffs being considered in other markets. 

Tu and Lei then look a bit forward to what they expect to see later this year as we get past summer and move towards the always exciting year-end sales dash including the impact some of the new vehicles scheduled to begin delivery will have on the competitive landscape.

The discussion moves over to the VW Group investment and partnership announcement with Rivian as the two dissect how the partnership may work. Tu raises questions about both Cariad's and Scout's future place in the VW Group hierarchy now that they've effectively partnered with two strong EV startups in China and in the ROW - rest of the world. 

Lei spends a few minutes talking about his visit to NIO's Hefei factory and what he saw. 

The podcast ends with Lei giving his take on the new pilots being offered by WeRide and Baidu in Beijing from the Daxing airport to downtown.  

Transcript

CEM #170 Transcript
Recorded 7/5/24

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 global EV, AV and mobility sectors. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. For those that are new to the show, welcome. And to our loyal listeners, welcome back. We ask you to please help us get the word out about this podcast to other enthusiasts and of course 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.substack.com, which of course I encourage you all to do. A Beijing three weeks Lei, can you please introduce yourself?

Lei Xing:
Ten more days. And then I’ll be back in the stateside Lei and good morning to a very Swiss Tu, Swiss bound Tu. 

Tu Le:
Bonjour, Bonjour.

Lei Xing:
Bonjour. Wait. Do they speak French? 

Tu Le:
It's French. At least in Lausanne. 

Lei Xing:
Ok. And good afternoon from Beijing. This is your co-host Lei Xing, former chief editor of China Auto Review, and this is episode #170. Since you're in Europe, let's talk about the EU tariffs. And then we can kind of at the end update on what we've been up to, each of us.

Tu Le:
So I should apologize because last week was a bit hectic for me. We weren't able to host the show, but I hope, because I'll be back in the U.S. mid next week. I hope that we'll be able to get it back into a regular occurrence, a weekly occurrence. My apologies for that. But please.

Lei Xing:
No, I just, I mean I'll be back the following week anyway. So we're probably going to stick with the Friday U.S. morning, east coast morning time from there on. But I was just going to say there's really not much to say about this EU tariffs, because other than the small percentage tweak, it's happened. I don't see any major concessions going forward. There's still a 4-month grace period, but I mean it's happening, right? So.

Tu Le:
The only way I see them conceding any of this tariff over this next four months is if there are some sort of guarantees from Chinese companies that they're going to invest heavily in Europe. And but I don't see them moving away from the percentages right now.

Lei Xing:
So it's just a matter of, I think we've already saw, I think MG and NIO have hinted that they will raise prices. 

Tu Le:
For Tesla, too.

Lei Xing:
Yeah, European bound cars. Other than that for someone like a BYD, they'll probably eat it up. They may increase prices as well. But the one thing to note that everything has been on BEVs, battery electric vehicles. So I think there's an opportunity for the PHEVs, which are not included in the implementation document.

Tu Le:
What I’m not sure about Lei, is that if that's an oversight or if that's by design.

Lei Xing:
Probably both, probably by design. That's my take.

Tu Le:
Because I look at it like these announcements by NIO and MG as like a trial balloon, because they're trying to figure out what BYD is going to do. And I think they'll try to swallow as much as of that tariff as they can, but it still depends on who the leader is going to be doing. They have the most flexibility because they're looking at a 30% tariff versus a 50% tariff. And then Tesla, Volkswagen, they're also going to get hit by a 20% or 20+10. So a 30% tariff, even if you're a European brand, but you're shipping from China, it's going to be inclusive of that tariff now, so.

Lei Xing:
Yeah Tesla to be decided. Tesla is kind of the outlier, but for any, SAIC, I would imagine subsidiaries including the some of the Volkswagens, well, Volkswagen Anhui, which is exporting vehicles, they'll be affected, but right, there's no winners in all of this, the Chinese EV brands are going to lose somewhat, but the ones that are losing, the more losers out of these losers are the Germans, really, the Europeans.

Tu Le:
The bigger losers. I would disagree. I think Stellantis is going to come out looking pretty good, because we've already seen that they are shipping kits to Poland, and they're going to ramp that up for LeapMotor vehicles. And I think that, with their set of, the Avenger. I saw the Avenger in Paris, looks great. Now, small, or short range, but I think if they could bump up the range by 20% and keep the price flat, that would be a winner. In the United States, in Europe, I haven't seen that many of them here. But here in Switzerland, I see a bunch of Teslas. My friend is driving an X, an 8-year-old X that he thinks is still a great, great car. And so the one thing Lei that I think is kind of crazy is that Stifel is now covering Tesla and the pressure for them to keep utilization high in Shanghai. And now with this tariff going on, they're likely going to increase Berlin Giga production for local supply. And now they need to find a new place for the production coming out of Shanghai, or they're going to have to continue to cut price in Shanghai in order to try to keep utilization rates high at Shanghai Giga. So the fact that this analyst is like I’m long and then another analyst who's on CNBC recently, I’m super long. Aa it's going to be a game changer, blah, blah, blah, that they don't mention China, and they don't mention these EU tariffs and how that might affect, is unbelievable to me. And so they're not either talking about the full picture or they don't know what the full picture is.

Lei Xing:
I mean yeah you're right, maybe everybody except Stellantis. First of all, because of the LeapMotor play. And second, Tesla, they could get the BYD treatment or they could get the SAIC Motor treatment, right? That's a pretty big difference. Depending on that, then we'll see what happens from there on. But I mean they've tried very hard in China, not through direct price cuts, but the interest incentives, right, that are in place.

Tu Le:
Which are effectively price cuts.

Lei Xing:
Which to me, I think it's a better way to do it, I guess. I think they maintained ok volumes in China. I think it was like close to 60,000 units domestically in June. That's pretty good, right? Considering all the bloodbaths. But I think the good thing of this EU tariff is that we do have this four-month window, talks are ongoing, whereas in the U.S. it's just a pure wall set up. There's no dialogue, there's no nothing, right? At least that's the hope, whether it's from the MOFCOM, whether it's from the CCEU, whether from the automakers. But I think my expectations are,  probably yours as well, is that these rates are unlikely to change significantly if at all. And just a matter of process, right? Going through the 13-month process.

Tu Le:
If it isn't obvious already, the major difference between the U.S. versus the EU tariffs is number one, the size of the tariffs in the United States and the fact that the EU would be open to local production and foreign direct investment from these Chinese companies, whether they be EV companies or battery companies. 

Lei Xing:
Yeah. And that's just a natural way for any company to be, to go global anyways, right? That's been happening before the tariff announcement. Even before last October, right? Of these battery and EV local production announcements. Will this accelerate it? Probably, but it's been happening. It's been a strategy, and it's just a matter of going over that speed bump and tactically make some decisions on products, right, and pricing.

Tu Le:
And Lei, having spent the better part of almost three weeks here. Now. They're here. The Chinese EVs are here. I've been to London, I’ve been to Paris and now in Switzerland. And so I think it's important to note and for the Europeans that are listening, you all know this, but because if you're listening to this podcast, it means you're quite aware, but it's very subtle. There's no overt, like MG is Chinese, and so it, but do you also have this announcement in implementation of the tariffs, while Euro 2024 is going on and BYD, Hisense, Alibaba, they're all huge sponsors of the Euro 2024. So they're not leaving and they're not going to be dissuaded by these bumps in the road, some of the major, BYD, you and I agree, got off pretty cleanly non-win win for them. And the fact that what you alluded to in the beginning that there are no PHEV restrictions, that's a huge win for them as well. BYD is still kind of dictating the pace for the rest of the world, whether it's U.S. manufacturers in China, whether it's European manufacturers in China or European manufacturers and Chinese manufacturers in Europe, so. And they plan to do that in Latin America as well.

Lei Xing:
Yeah so regardless of the tariff, what's happening there, by the time BYD, I mean they rolled off the 8 millionth in Bangkok right yesterday or two days ago. Maybe their 12 millionth , maybe their16 millionth will be rolling off in Hungary, who knows, right?

Tu Le:
Or Brazil.

Lei Xing:
 Or Brazil. Or Mexico, who knows?

Tu Le:
Or India.

Lei Xing:
Right. So these are happening. And it's only natural that the U.S. automakers, the Europeans, the Japanese, Koreans, right? They're producing globally. Why can't the Chinese?

Tu Le:
But I love that. I think it's in Michigan, in the United States, I was feeling a bit of momentum from the U.S. IRA for the U.S. 3. But now that the EU tariffs are in place, Canada's threatening tariffs, I'm starting to feel a bit more urgency on the U.S. 3 side. You're starting hear, guys like Jim Farley talking about. He wrote that op ed. I think it's an important one. You hear about this team in southern California that they're building. I still don't understand why it needs to be in California, but that's a different topic to discuss. We'll look at Volkswagen with Rivian. Maybe. Do you have anything else to talk about with regards to the tariffs? Or should we kind of pivot over to the Rivian and Volkswagen topic?

Lei Xing:
Yeah we can pivot. The only other thing I'll just mention is that maybe a good quote to mention, at least from the Chinese perspective, is that they need to understand Rome is, what's the saying, Rome is not built in one day? Is that the saying? I think that's the mentality that they need to approach the European market, because it's still, to this day, it's still brand building. It's not volume, it's not flooding the market, at least not yet, right? I mean the VDA also, something I want to mention is, it looks like that VDA statement put out are pretty much written by the German automakers. I mean all the data they showed, right? How much hurt they're going to get? Because there's so much bilateral trade, actually on the one side how, for example, the components, supplier, value of the supply exported to China and also that comes with the high profitable vehicles, ICE vehicles that the German brands export to China. So there's so much involved that obviously too much at stake. That's why they're against it. Yeah, but I think you look at it from both sides, right? The Chinese side and the German side, the European side.

Tu Le:
And they know that they're very vulnerable. The Germans in particular.

Lei Xing:
Vulnerable in China.

Tu Le:
The track record is that they're losing share, even because there is an article that BMW is now like cutting prices on the i3 pretty substantially in China again in order to keep the sales going. So lots of challenges for the German automakers in the China market, if you didn't know that yet.

Lei Xing:
I just posted a chart that NIO put out. I mean it's only one indication that the ES6 and the EC6, I think over the last five weeks beat the Porsche Macan, the Audi Q5L Sportback, Mercedes GLC Coupe and Audi Q5L, right? And the BMW X3 combined over the last five weeks in China.

Tu Le:
And NIO doesn't get many of those wins. So they're definitely going to talk about it, right?

Lei Xing:
So they finally can start boasting, especially with, we haven't talked about the June sales. NIO, being one of the records, right? A monthly record. And then the last thing I'll say was this is a triple whammy. It's not only a double whammy, especially for the Germans, because one they're losing market share in China. Second, they are planning to export out of China. MINI, one case, one example and third, these potential 25% tariff on these 2.5L vehicles, imported which are significant volumes and profit driver. So triple whammy, obviously, they don't want see the tariffs.

Tu Le:
One thing that I’ll also mention really quickly is export only Chinese EV companies like an AIWAYS, what happens to them now? They struggled already. Now is this going to be the nail in the coffin, the last nail in the coffin for them?

Lei Xing:
I don't expect any positive turnaround for these type of brands.

Tu Le:
Because AIWAYS has effectively announced that they are an export only brand because they got zero sales in China, but there are other effective, there are other Chinese EV brands that are effectively export only so that could really close the door on any opportunity for them to gain sales curves. A 30% tariff on a vehicle that's likely not profitable already from a volume standpoint. I don't know how much longer they're going to be able to do that. So let's do this. Instead of talking Volkswagen Rivian, let's talk June sales because you mentioned it. So any surprises for you? Any?

Lei Xing:
NIO actually getting above 20,000 was a bit of a surprise because they had hinted based on the guidance. And Li Auto was strong, again, beating out AITO. I think LeapMotor had a strong month, and they just launched the C16, which is in the Chinese media, it's looked at as a “half Li Auto L7 or L8” because it's basically the same thing, but half cheap. And then some other brands, BYD again, also a record. Now I was thinking about whether they'll get to 10 millionth production within this year, given the current trajectory. 

Tu Le:
And the mad dash for the year.

Lei Xing:
Yeah mad dash. I think June is kind of like the mad dash of the first half year. And then December, you'll see the mad dash at the end of the year. So there's a lot of seasonality involved. Also because I tweeted that of the current Yi Jiu Huan Xin, which means two things, the cash for clunkers and also scrapping your old vehicles for new ones, plus all the kind of incentives, right? That are put out by Tesla being one example, others, trying to, the aim of which is not the car market, but really the economy.

Tu Le:
Yes, and so kind of, and we can talk about this later, but I didn't see any real surprises. I was pleasantly surprised outside of the NIO sales. Because they just keep grinding. The one thing that is a little bit of a head scratcher, is the ONVO going to use a separate swapping system.

Lei Xing:
It will be the same, but it'll be available on the new 4th-gen swapping stations and some of the third-gen. But mostly on the 4th-gen that are being accelerated as we speak in the second half of the year, because they have planned to build 1,000 extra swapping stations this year.

Tu Le:
I like the breadcrumbs for ONVO. They're building up the excitement. I think they're doing a better job, with their new brand than Xpeng is with the MONA brand. I think it's still a little bit confusing for a lot of people.

Lei Xing:
Speaking of, I think, Xpeng, my view is that they are still struggling a little bit. If you look at the sales rankings, right? 10,000 units, ok, it's not great given their positioning, the MONA, the design language, the styling, it's called the Xpeng MONA M03, rather than the Xpeng M03 or the MONA M03, right? I don't see the kind of the identity consistency compared to, let's say a Li Auto or a NIO. And they, I mean originally, MONA was a second brand, but I think it's one of those last-minute changes in strategy, tactic.

Tu Le:
So that's what I'm not sure of. Is it a sub-brand now or a trim? 

Lei Xing:
It's an Xpeng brand but a new series: Xi Lie, right, in Chinese called the Xi Lie, which is a little bit confusing if you're trying to explain to English.

Tu Le:
Well I was confused, but my Chinese is terrible. So that's why I was confused. 

Lei Xing:
Yeah. Because it's still got the Xpeng logo, right?

Tu Le:
Yes. And we know you got to be careful about that because there's going to be a lot of co-branding going on. And you saw Huawei kind of gave up the trademark rights for…

Lei Xing:
AITO. Yeah.

Tu Le:
Yeah, so, which means to me that they're trying to spread their risk a little bit among all these SOE startups that they are working with. We are, I wrote in the newsletter or on a tweet that this is 3D chess now, there’s geopolitics involved, there's technology involved or restrictions on technology, there's data involved, national security. And one of the things that, and Xander, I know you raised your hand, but can you do that again in about 20 minutes? We'll get to your question, but I also wanted you to maybe spend a few minutes talking about because you attended the London event, so, but we'll circle back on that, but Lei your thoughts on Rivian Volkswagen.

Lei Xing:
First of all, I love the official photo op that they put out. It's mostly Rivian, right? And then Volkswagen tweeted out a picture of Oliver and RJ kind of looking afar, standing next to each other. I'm like, this is the best romance in the industry so far. 

Tu Le:
Until it isn’t.

Lei Xing:
They are both pretty handsome CEOs. And Oliver Blume has now turned into a what would you call him? Beter, a smart EV startup stan now, right?

Tu Le:
And he kind of breaks the mold because you see him in the blazer with the dark shirt, dark t-shirt. And then all of his management team are wearing the German uniform, the suit with no tie. So he does stand out that way as well.

Lei Xing:
And it just to me that a Volkswagen Xpeng for China and the Volkswagen Rivian possibly not only for North America, and I think, as a matter of fact, it is for a global purpose.

Tu Le:
It is ROW, meaning for the rest of the world.

Lei Xing:
It’s not restricted to the. U.S. market right? It's, I guess it's part of that puzzle which we are still puzzled of Volkswagen Group’s kind of the software play, right? It just shows how much, that one, he's betting on these smart EV startups and second, how much lacking or miss fire they have on the software side.

Tu Le:
I don't know what CARIAD’s place is going to be number one. And you looked at it as the glass is half full because you said his belief in the startups this I look at as his mistrust of CARIAD and his internal team. He has every reason to be because he's been CEO now over a year, well over a year. And CARIAD has done nothing since 2020 when they were established, but fall down, they trip themselves up. I can't help but think the CTO of Volkswagen Group must be pulling his freaking hair out. Like now we have another partnership. But it's only going to be for certain countries, let's say, North America. And then we have another partnership with Xpeng. And do we have the same level of cooperation? Are we swapping for the China market? The parts that Xpeng are licensing to us, is that now also going to be the formula for North America and what Rivian is going to be are sharing with us. Because they've invested in two companies, they already have eight brands, nine brands that are selling globally, 10 brands that are selling globally. Is this 11 and 12 potentially? Because odd man out right now as Scout Motors in the United States.

Lei Xing:
I would imagine Scout will utilize whatever comes out of the joint venture, right?

Tu Le:
Which must not make some of the Scout team very happy.

Lei Xing:
It just adding, well, I mean if you look at what RJ explained in the call that they had and also the Investor Day, right? It was pretty clear why they talk about this zonal ECU architecture going away from the traditional domain ECU architecture, right? Part of the reason why these legacies are difficult change over, switch over, right? You want to simplify, but Volkswagen is adding complexity it seems, because they have multiple platforms. 

Tu Le:
Oh, without question.

Lei Xing:
One for China, CMP specifically, some other ones that are in place MEB and then the PPE that are starting production in China as well, right? And in the future SSP how all of these mesh and work together. I don't want to be in his position, right? It's difficult to manage.

Tu Le:
It's a necessary kind of strategy, because there's not going to be a lot of data transfer from China to the rest of the world and vice versa. So there needs to be that separation, bifurcation, however you want to call it. But again, I actually think it's a little bit of an indictment on the Germany software development community and sector a little bit, too, because they're not able to get it done. We need to hire a team in Silicon Valley, that team in Silicon Valley has poached a bunch of Rivian employees. So guess what, let's take it a step further. And then the individual brands, because you and I are hearing that these individual brands are having arguments as well because they want their own system. But at the end of the day, that's these brands not caring or not understanding that backend. It doesn't matter. Backend should be shared by all of the brands, at least outside of China, inside China the back end should be shared again. But companies like Porsche, Bentley and Audi, who are the premium brands for Volkswagen Group want to use different back ends. Then again, to your point Lei, we're looking at overly overly complicated. And at this point, in time, if you want to move fast, you've got to simplify. So it's a bit frustrating.

Lei Xing:
And then also, the precedent of these type of partnerships, which Volkswagen and Rivian were both involved in, one the Volkswagen Ford EV and AV partnership, that was a failure. The Ford's investment into Rivian, these happened in the same year, 2019. That was a failure. Can these two new ones Xpeng and Rivain be any different? It's a question mark, right? With that precedent.

Tu Le:
Blume was not at Volkswagen Group when that happened with Argo. So he might not have the lessons learned that Diess would. 

Lei Xing:
But still right, I mean you look at the history, then you wonder whether history will repeat.

Tu Le:
And this is obviously a huge win for Rivian. Huge.

Lei Xing:
Yeah, I mean the capital, right? The whatever much steeper investment than the $700 million, right, for Xpeng.

Tu Le:
But the joint venture being 50:50 with like two CEOs. 

Lei Xing:
It is 50:50.

Tu Le:
No, but two CEOs. It doesn't make any sense to me that way either from a leadership standpoint.

Lei Xing:
I don't know, they'll probably come out of the chief software officer positions from both companies or something. I don't know. And Volkswagen’s

Tu Le:
Oh my god, it sounds like a freaking train wreck.

Lei Xing:
Volkswagen’s current, the CARIAD’s current CTO is the former CSO of Rivian. And right, if you think about that, maybe this thing, talk has been going on for months.

Tu Le:
And this makes me think that he came over to Volkswagen, and he’s like holy shit, these guys are terrible.

Lei Xing:
Let’s bring Rivian on board.

Tu Le:
And I need to talk to Blume and have him write a big check. Again, this is a big win for Rivian for obvious reasons, because I, maybe they are going to get over the hump with R2, R3, which I think should be if they can launch them flawlessly, they should be home runs, in my opinion. But…

Lei Xing:
I have one on order. I believe you have one on order as well.

Tu Le:
Yeah. But one of the things that's important to note is that Ford I think felt threatened by Rivian. I think they thought that they could work together initially. That's why they did the transaction, but it ultimately, they looked at Rivian’s product and said wow, this could be a huge threat to us. And so we need to separate ourselves. And I think that's one of the underlying reasons Ford sold out of the Rivian investment. But let's do this Lei, since we haven't had this podcast in two weeks. Can you update us on what you've been up to in China?

Lei Xing:
I think first thing that comes to mind is this time coming back with the family is more visiting relatives and old friends, including my daughter's friends. And we're really feeling like a local. I don't see myself as oh someone who's never been to China. You see the recent news about the 144-hour visa free which have driven the uptick and the foreigners coming into China, but it's just the daily fabric of life how life is here. I don't see any, I don't feel surprised at anything, how things, life is here. People work really hard, right? You appreciate that. But there's a couple of events or things I did was, one last week I went to NIO again and they had this quality kind of like a quality day where Li Bin and the head of the there's a quality committee at NIO, Shen Feng, who was the (head of) R&D for Volvo China 7 years ago, but you joined NIO. They really talked in detail about how they approach quality as this thing called All Time Quality (ATQ) that Li Bin mentioned. And this entire system that they go through, not only on manufacturing, but on all facets of quality, right, service, software, OTA, battery, everything, logistics.

Tu Le:
Sounds a little bit like TQM total quality management at Toyota.

Lei Xing:
Yeah and they had this event, talk at a basketball court, an employee basketball court in the F2, in Hefei. Outside there is the soccer field. Then after that, they had a tour and I was really surprised. They let you take all kinds of photos and videos. So the tour included the general assembly, the body shop, the stamping, and also the e-motor, which is E1 next door. It was kind of interesting to see they had some show and tell of the level or the carefulness of how they deal with quality, including, for example, the badge, the Wei Lai NIO logo and the character badge, how the texture and the finish and the brightness, if they see something wrong with it, then right? It's no good. You have to kind of fix it. It is pretty excruciating how detailed they went on about the quality. And it was pretty cool to see rolling off at the end of the line where you were at the 500,000, half a millionth roll off, right, a couple of months ago. So yeah it was a much, I mean it's my third visit, but the most comprehensive and in depth peek inside the factory. So that was pretty cool.

Tu le:
I don't want to oversimplify this, but Toyota believed that you build the quality into the systems and the processes so that the output is high quality.

Lei Xing:
Exactly. And some things could be even that the leakage testing is how much water they go through for each vehicle. So stuff like that and being digital, right? A digital factory where they laid out like, I forgot a number, but all these lines on underground to make everything digital things like that. It was pretty good to see.

Tu Le:
And then they use that to re-calibrate their tools and everything. So I think what you just summarized is your appreciation for how detailed and complicated manufacturing or mass producing high quality vehicles, electric vehicles or ICE vehicles is and the amount of details that need to be managed and kept at a high level in order to build quality products that don't break down on the road, that don't have warranty issues after the first 30 days. So I think it's great, especially for people that have never been in a factory and don't appreciate, or are not able to appreciate how large they are, how complicated they are, how much work goes in every day from part shipping, from trucks being off loaded and then put into certain stations. And there's a part of NEO Park that the fact that the factory is very automated, and then final assembly is going to be a lot more manual labor. So there's a combination, but I think NEO Park does have quite a bit of robots.

Lei Xing:
Video of the body shop where the doors, the four doors are being put on by the robots, right? The Kuka robots and that process takes about, I don't know, 90 seconds roughly, right? And then I think Li Bin, I thought he said something was interesting was it's difficult to guarantee we’ll have 100%, everything is 100% once you get the car that you don't ever do a recall, right? It's, nobody can promise you that. But what he can promise is the kind of the process that they have in place for quality. And I think one of the things that's driven their sales in recent months is the last few weeks they've started talking more about this 15-year, not warranty, but kind of like a guarantee that the battery would not lose the capacity below 85%. I think the national standard is 80%. So they are 5% better. And they are really trying to send the message that the battery swapping not only of convenience, but also considering the residual value of your car. I think those are some of the messages being driven home by these executives that may have helped in some way, I think in their sales, aside from obviously the BaaS, right?

Tu Le:
Yeah, so anything else that you did? 

Lei Xing:
Yeah I just tried out the latest WeRide and Baidu robotaxi service from Daxing Airport to Yizhuang. And I took a…

Tu Le:
How long did that take?

Lei Xing:
I took a round trip the other day, just random round trip, going to the airport with a WeRide and coming back in a Luobo Kuaipao, the Baidu’s platform and my conclusion is that I was surprised how much WeRide was better, significantly better than Baidu. I was very surprised. I don't know, because…

Tu Le:
No major differences on the traffic or the difficulty.

Lei Xing:
No, no major differences, during a weekday. I think it was during, a Saturday morning, but I mean Yi Zhuang and.

Tu Le:
Did it take south 4th Ring or how did it get to Yizhuang.

Lei Xing:
Yizhuang and Daxing Airport is way out of Beijing, right? So there's an expressway, part of the expressway connecting the Daxing Airport. So the Baidu one felt, first of all, there was 3 to 4 takeovers. WeRide, there was not one takeover.

Tu Le:
Hold on, so let me be clear there were safety drivers, this was not driverless.

Lei Xing:
With, it's called the Zhu Jia You Ren, which means the safety driver on the driver's seat. The safety driver basically, not fully driver less, not like Waymo. Not yet at least. The trip basically 50 minutes, 45 km each way. So a not a short trip, pretty long trip. So local roads, expressways, a lot of on ramp off ramp. And most interesting thing was going through the ETC lane, because the current, the Xpeng we tested, the NOA or the XNGP they still have to figure that out. You have to take over, but this thing because it has ETC installed. There's four different. So two each for the two trips and each one performed differently, it was kind of hilarious. So that shows you there's still so much more to go of really.

Tu Le:
And variations in strategy.

Lei Xing:
Variations in strategy and actual what the car did once the Baidu totally stopped before the ETC lane, because it was, there was traffic behind that kind of went passed by it. Then the other case that WeRide kind of went through the ETC fine but at the end, when the bar raised it kind of hesitated a little bit, I was like, oh it's got to think a little bit and then it went on, but I mean it shows that these ODD are expanding, but still, I think it's still quite expensive. It was free for me. Since it was, they still had to tweak their payment in the backend. So both trips were free, but the actual cost will be close to RMB200, that shows you how long it is. I think currently I just checked that they're now giving, the WeRide platform at least, right now it's 50% off. So like RMB180 trip one way you will pay about RMB90. It's like 50% off.

Tu Le:
So RMB200 could be because.

Lei Xing:
Because it's a long trip, I think, more than anything else. Because they are basically using the same pricing structure comparable to the taxis.

Tu Le:
Yeah, but rather than pay the taxis, that's their gravy right there.

Lei Xing:
Yeah, so hopefully before I head back, I’ll try the Pony pilot which I've heard from other media that of the three, Pony has the best experience in terms of comfort and the jerkiness, right? Sitting in the back, so hopefully I’ll try it out. It's great to see I mean since you last year and since the pandemic, I mean you've been on several of these AVs on different occasions. I've been on several these occasions. You can see these development, right?

Tu Le:
And you can, you could definitely, and that's why it's important. 

Lei Xing:
And bugs, still bugs, tons of bugs. 

Tu Le:
But that's why if people are wondering, why do we keep on taking the Baidu and doing this, because these little tweaks make a lot of difference and the right quality and the responsiveness and the comfortability for the passenger. So that's why I'm anxious and wanting to try it every time I'm in China just to see what the next version of software does.

Lei Xing:
Yeah. And also, I mean since our trip at the end of April, Xpeng’s XNGP I think that Tianji 5.1 is now 5.2. That system has gotten significantly better just within a matter of weeks.

Tu Le:
This is on the heels of rumors that a limited FSD is going to launch in Shanghai soon.

Lei Xing:
Maybe it already is.

Tu Le:
Yeah, maybe, but so let's do this, Lei. It's 8:20 my time.

Lei Xing:
48 minutes.

Tu Le:
Yeah, so I'm going to open the room up for any questions. Xander, if you want to raise your hand again, we'll bring you up. I'm going to talk about my time after the MOVE conference in Paris and then the last couple of days here. Paris getting ready for the Olympics, super exciting. What's cool? I was in London, saw the England match in a pub. And then in Paris, I was with my sons, we were walking around, all the sports bars were reserved, didn't have any room. So we found this random pizza place, coffee shop, walked in, got a table, watched France play in the 90th  minute or 93rd minute or something like that. They scored a goal. Everybody started cheering. I think it was a good experience for my sons, because obviously, watching France play and France was a pretty cool experience. I think they'll look back on it.

Lei Xing:
Were you guys wearing those jerseys that you bought in Shenzhen?

Tu Le:
Yeah, so Nathan was wearing the France jersey. I was not wearing my Brazil jersey, but Hary, at the England match, he was wearing his England match and England jersey. So that's cool. And then I was supposed to get a Microlino in Switzerland, but it didn't work out. I wanted to drive that thing around. The one thing that I think it was cool was the event in London with Steven Lynch and Sam Hogg in Soho at this place called the China Exchange, right in Chinatown effectively. Soho, Chinatown. And I didn't know what to expect, 40, 50 people, maybe. There's 250 people. There's a ￡23 fee to get in. So these people paid money. And three panels. I was told that ours was the best, wink, wink, but got an opportunity to sit down with Simon Wright, from the Economist and Henry Sanderson from Benchmark Minerals, ex-FT mining journalist. And so the first question was, when they use these, what are they going to do with all of our data? And so I just looked at them and said, how many, how many of you have Android phones? How many of you have iPhones? They have your data because those are built in China. And so you're not that concerned about that, are you? And it's just kind of, yeah, I'm not advocating for one or the other. I'm just saying you can't ignore that and then complain about this. It was a good conversation, but that crowd was a bit more open minded about engagement with China. And then Paris walked a lot, probably averaging 16,000, 17,000 steps a day.

Lei Xing:
Same for me when I visited October 2022.

Tu Le:
And man, I’m in love with Europe because the weather has been so freaking amazing man.

Lei Xing:
The week we had in Munich. I mean how lovely that was, right? It's a different vibe. Different vibe.

Tu Le:
So took the train from Paris to Lausanne. Actually, I take that back. There's a little bit of rain when we arrived to Lausanne. Friend picked me up and staying with him. He lives in Lausanne, right on the water. In Switzerland, beautiful place.

Lei Xing:
Switzerland, of most, I think of all the countries in Europe. My daughter and I went on a train trip in Switzerland in summer 2018, and everything was done by train to all the different places to the Youngfrau, to the mountains. That's how convenient it is. I mean like, yeah. I'm thinking like how much better if we can go to Florida from Massachusetts just in the high, bullet train in 5 hours? 

Tu Le:
Well I used to be, before I lived in China, I used to be all about cars. But now and I can say, I’ve experienced transportation systems all over the world, because I'm not saying I stayed a day, I've stayed quite a while in a lot of these places. And so one of the things I don't know if I told you that, but on the, so I visited Bloomberg in London, amazing office. And then I took a London cab, an electric London cab. I specifically called…

Lei Xing:
The black taxi? The LEVC, right?

Tu Le:
Yeah and the cab driver's name was Rory, talked to him for about 25 minutes, effectively entire ride to the Bloomberg headquarters. And he said he was impressed with the London cab, but he had a hybrid and he said the hybrid only gives them like 40 miles. And then the gas engine kicks in and then he said the map on the infotainment, included in the infotainment system is terrible. So he uses his phone. And so I hope the United States really takes a step back, looks at the opportunity to kind of re prioritize what's important from a transportation standpoint, not only to make, because, man, like I don't really look at walking as exercise, but man, 16,000 steps is a lot of exercise.

Lei Xing:
That's a lot for you.

Tu Le:
Yes, but I needed it because I was with my friend.

Lei Xing:
And good for your kids as well.

Tu Le:
The Jing A founder, we drank a bunch of beer. So anyways, and then last night, my friend has a deck that overlooks Lake LeMond, and across from where we are is Evian, the city of Evian I guess or town whatever.

Lei Xing:.
Yeah Evian water, it’s cheap, cheaper than coke. 

Tu Le:
Yeah, so we sat outside, a friend of his, a neighbor of his came over, American wife, Italian husband, and celebrated America's birthday and made hamburgers, hot dogs. Kids loved it sitting outside, beautiful day.

Lei Xing:
We had KFC yesterday, if that's celebrating the U.S.

Tu Le:
Yes, no. And then tonight we will watch Spain and Germany.

Lei Xing:
I'm rooting for Germany, man, because of the EV connection. I'm rooting for the underdogs.

Tu Le:
Hold on who's, it's Portugal versus, oh forget.

Lei Xing:
Netherlands? 

Tu Le:
France. France. So both two amazing matches. Anyways we stopped talking and this is me and you talking as friends not as podcast hosts. So you can…

Lei Xing:
No I mean if we think about the mobility, I don't know if you get the same feeling as I do that whenever we're in China and Europe, our mobility radius suddenly expands significantly, whereas in the U.S. you are kind of stuck in your own neighborhood. Do you feel that? I mean that's the way I feel, because of the convenience of different mobility and transportation options that you have.

Tu Le:
I don't feel that I can walk out my door and walk for 40 miles or for a mile and be in different neighborhoods, well we live in the suburbs. So I think that's different, too. But the American way is not jumping on a bike. The American way is like getting in a car for everything.

Lei Xing:
I should mention also this time back again, I paid a little bit more attention on the waimai brother, these kind of people who are riding these electric scooters or bikes to deliver food, and there's been significantly more battery swapping boxes, set up outside of compounds that I've seen the last time I was here, maybe I didn't pay attention, but those are becoming very ubiquitous because of the intensity with which they use these bikes to deliver food. It's a quick solution rather than plug it in charge.

Tu Le:
So the battery swapping stations are right next to the package box.

Lei Xing:
Yeah outside of the gates of your compound. I've seen significantly more.

Tu Le:
And what's that supermarket that Alibaba has, anyways.

Lei Xing:
Yeah I know what you're talking about. Yeah.

Tu Le:
They have those blue scooters that have the battery swapping. So those guys run through batteries and because they are super, super efficient, super, super aggressive.

Lei Xing:
The autonomous delivery robots are just, I see them all the time, because I live in Shunyi. They're actually delivering these for the waimai brothers. It's almost like aa like constantly running around and I actually see a lot of them stopping by on the side of the road. And then waimai brothers would pick up these packages from the robots. So it's.

Tu Le:
The other thing, too, that is really important is the electric bicycles in Europe is also very ubiquitous. I see pedal bikes, but I've seen a lot of electric bicycles. So.

Lei Xing:
You know in Hefei, right, where NIO is based, production. In the city, you don't see, I didn't see that many, at least at the place where I stayed, I don't see that many Hello bikes or Meituan bikes, I see a lot of those shared yellow scooters with the basket which has the helmet. And you don't see that in Beijing. But you see it in other cities.

Tu Le:
And let me do this. Lei. Jeffrey had posted a couple of things: I don't think China has any native tumble weeds, but I do expect to start seeing them at the BBA sales departments after tariffs at the social media channels. Rumor is Firefly has separate stations, ONVO compatible with, yeah, sorry. You're right. Jeffrey Firefly has separate stations, not ONVO, gen-four and also gen-three. Yeah, after about 15 minutes of reconfiguration gen-four now down to 2 minutes 24 seconds, this is a funny one, the VW Rivian partnership, I'm renaming the company to Vivian. 

Lei Xing:
Vivian? No. I say this, Volkswarian, whereas the Xpeng is Volkswapeng.

Tu Le:
Dude I like Vivian better.

Lei Xing:
Vivian, like a girl's name, Vivian.

Tu Le:
There was another, so one of these, so Matt tweeted, one of the worst EU tariffs is against a European company attempting to make cars in China for import MINI, the tariffs are designed to share benefits and cultivate an industry at home, because the alternative is EV job losses for European’s radical right government. And then mega tariffs are worst turn against EVs entirely. So.

Lei Xing:
I think that's why I kind of take it as, rather than, the complaints are going to be out there. But I think for the Chinese automakers like again, really, there’s, it doesn't help to kind of complain just these things are going to happen as you go global, given the ever more complex regionalization, geopolitical, you take it with a long termism, right?

Tu Le:
I'm going to close on two things. One is that anyone that wanted to gain a leadership position in the European or U.S. markets, they need to build locally. No one's ever imported their way into a leadership role. Number two, for the past 40 years or so, the Chinese government and Chinese companies have never had to deal with exporting that much. I mean not exporting but exporting vehicles. They've had the ball in their court, so they had the leverage because everybody wanted to invest money in them. So now what we're seeing is the pendulum swing it back. And this is really the first time where Chinese companies are exporting amass into multiple regions, multiple countries, in BYD's case, 70 countries. Now for BYD.

Lei Xing:
88 countries, I think that is what they announced yesterday, or two days ago.

Tu Le:
Yeah that's unbelievable. So isn't Tesla like in 50 or 40 countries? But anyways, BYD has gotten mostly positive embrace, but the shoe’s on the other foot now. So these Chinese companies are going to have to play by other people's rules, not their own rules, not rules governed by their domestic government. So this is just to your point Lei the way to do business outside of China.

Lei Xing:
And then the third point probably is the product acceptance, the Chinese brand acceptance, the domestic stronghold of the brand loyalty in Europe and the U.S. market is not easy to break. It's going to take a long time, really. Right?

Tu Le:
But, so the main differences between Japan entering the United States and Europe, Koreans entering the United States and Europe, their products were not great when they entered those markets. These Chinese products.

Lei Xing:
They are great.

Tu Le:
They're good today, good today. And we know that any tweaks that need to be made can be done within 12, 18 months. And so this is not going to be a decade thing for these Chinese EV makers. It's going to be within 5, 6, 7 years, you're going to gain 20, 30, 40% share unless the domestic European automakers, domestic U.S. automakers can bring products to the game that are really competitive, and where the Chinese are the most competitive is on price. So you got to deal and they're talking about Europe is going to be 30% Chinese brands by 2030 or something like that. It's a very interesting time. I'm glad to be doing what I’m doing and I think you are too Lei.

Lei Xing:
Yeah and being able to have this lens while you go to different places in the world, right? It's great.

Tu Le:
And it's important to remember that we've been talking about this for a long time. So this is no, none of this is surprise to us. So anyways.

Lei Xing:
Alright man, have fun man in the rest of your European trip. You going to meet up with the Meng Shi or no?

Tu Le:
Oh man, but I’m actually kind of ready to go home, but everyone.

Lei Xing:
I’m not. 

Tu Le:
Thanks again for listening. Good morning, good afternoon and good evening. We will talk with you all next week. 

Lei Xing:
Yep. Talk to you next week. Bye bye.

Tu Le:
That brings us to the end of this week show. Lei and I thank you for tuning in. My name is Tu Le and you can find me on twitter @sinoautoinsight. You can find Lei on twitter @leixing77. If you wouldn't mind rating and or reviewing us on Apple Podcast, Spotify or wherever you grab your podcast from, we'd appreciate that as well. Even better if you enjoy this show, please tell your friends about it. Please join this again next week as we track down all the latest news on China EVs & More.