Episode #175 - More than Not: China's Take Rate, Restrictions on Chinese Tech, Clearing up a Bad Take

Tu and Lei start the podcast out with a discussion on the China take rate on NEVs exceeding 50% in July for the first time. 

The discussion then shifts to reports that the Biden administration is looking at restricting Chinese connected, intelligent driving technology for use on US roads including the ability to collect data on Americans. They project how these restrictions may or may not be mimicked by the UK and EU, two places that also have voiced concerns re: national security, data security and privacy. 

They move onto Audi potentially not using their logo for their new Chinese EVs and evolves into a more detailed discussion about Audi's history in China. 

Tu ends the podcast clearing up a bad take from an American analyst who is trying to drum up clicks by writing about the Chinese govt wanting to kick all the foreign automakers out of China. 

Transcript

CEM #175 Transcript
Recorded 8/9/24

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 show, welcome! And to those loyal listeners of ours, welcome back. We ask that you please help us get the word out about this podcast 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.substack.com, which I encourage you all to do. Lei, good morning, in a cooler Massachusetts. Can you please introduce yourself?

Lei Xing:
Yeah, good morning. This is your co-host Lei Xing, former chief editor of China Auto Review, and this is episode #175. We start off with the big fat 50 and I'm talking about the share of retail sales of passenger vehicles in July that were NEVs. 51.1%, I think was the number, according to CPCA.

Tu Le:
50.78, I think.

Lei Xing:
Yeah, well it's over 50 %. So that's the milestone we're talking about. And it's fair to say that it's taken 15 years to get this point, methodically. But obviously, we've seen the take rate accelerate during the pandemic, but we’ve reached this point, a new tipping point.

Tu Le:
For those wanting to know in absolute terms, it’s around 900,000 units. 2024 is probably going to be around 26 million units, Lei, what do you think? 26, 27?

Lei Xing:
Roughly? I'd say roughly.

Tu Le:
So we haven't hit that take rate until July. And so we would expect the annual take rate to probably be in the 40s, probably.

Lei Xing:
Yeah so 40 is the ballpark number for the year. It's just point of no return, right?

Tu Le:
But it's not just that EV adoption and more EVs are being purchased. The denominator is getting smaller from the standpoint of ICE vehicles are less popular. So it's not just a growing popularity. It's also that ICE sales are shrinking. So.

Lei Xing:
Plus, very importantly, plus PHEVs are growing crazy, because China accounts PHEVs. 

Tu Le:
And everyone is joining the party. So BYD leads by a huge amount from a PHEV standpoint, I want to say around 40% of their sales is PHEV?

Lei Xing:
Or actually the other way, 60% PHEVs.

Tu Le:
Shit, sorry.

Lei Xing:
40% would be, I think it was notably higher in July as we talked last episode, I think in earlier months, it was roughly 50:50. But remember, BYD has launched a slew of these newer DM-i models. Qin L for example, as one of those, the DM-i, basically taken over share from, I use the term ICEVs, traditional internal combustion engine vehicles. So big help from PHEVs.

Tu Le:
Another really important item of note is that, and I've said this in past newsletters, is that the Chinese EV makers, they live in the mass market segment. So the brutal competition is happening below RMB300,000 or less than $45,000. It's being led by BYD because the Qin L, it can't be more than RMB250,000, so.

Lei Xing:
Well it starts off at under RMB100,000

Tu Le:
So, RMB100,000 is around $15,000 for the U.S. folks, it's a glaring comparing and contrast between the European and U.S. markets that don't have that many choices below 30,000 Euros or $35,000. Whereas in China, there are numerous choices on both the PHEV side, the EREV side, and the BEV side or the BEV side. Because we should remind listeners that LeapMotor, one of their big technology is EREV. And Li Auto is EREV. Li Auto is less of a mass market brand because of the price point. But EREV extended range electric vehicle. So from, I guess Lei, we could call it a hybrid, but a different type of hybrid.

Lei Xing:
The difference is the engines do not drive the wheels, only replenish the battery. So that's a major difference, whereas the regular PHEV is, both powertrains drive the wheels, right? So, yeah, I mean there's been a lot of debate on, I've seen recently on the use of NEVs. I mean we're just that's the China specific term, which includes the PHEVs and the fuel cell EVs. But PHEVs I think over recent times I think have really gotten a major boost. Two reasons, one, BYD as we’ve talked about. And then the other one, the EREVs and some of the BEV companies looking into EREVs, going into EREVs as well. Still.

Tu Le:
And BYD is now in over 80 countries, looking at entering Canada. And so.

Lei Xing:
Come on over.

Tu Le:
They are leading the conversation with regards to the umbrella term that I coined China EV Inc. that we use, you and I use quite often, right, Lei? So are there formidable adversary for Tesla and the legacy OEMs? I don't see, so one of the things that we're going to be talking about is the Chinese technology restrictions for the U.S. market that the Biden Administration is looking at proposing restrictions or bans on software and hardware that is supplied by, and this is where the fine print hasn't dried yet. So I'm not super clear.

Lei Xing:
So the way I understand it to mean is maybe the software part of it gets some kind of restriction first. And then the hardware comes later. That's my understanding of it. So which I think in your newsletter you talked about, right? We also chatted about the LiDAR companies. Actually Hesai getting those three foreign OEM customers in China, in China only. And what happens, by the way, a lot of, Hesai has, I think the number one share of LiDARs for autonomous vehicles, robotaxis. Even some of the ones used here in the U.S. I believe, let's say a NURO, let's say, any of these AV companies testing. That's a major red flag, right? And with Hesai being a listed company in the U.S., with them being on the, what is it, the black list?

Tu Le:
With an office in Michigan.

Lei Xing:
Yeah. So it's interesting as also these AVs we talked about what happens to the valuations, right? As they plan to IPO and with this news coming out.

Tu Le:
And Hesai also supplies commercial vehicles with LiDAR, semis, and things like that. So a brief history, because we've talked about this in the past, but for the new listeners that aren't as keyed in on the specific LiDAR industry companies, specifically Hesai, Innovusion. Can you think of any other companies Lei? They've really driven the price down on LiDAR. Now, you can put a couple of LiDARs on a passenger vehicle for probably less than $1,000.

Lei Xing:
Yeah. So the other one is RoboSense, which recently put the new Seal that was launched two days ago, I think, is the first, I think, BYD with LiDAR. Remember, BYD is an investor in RoboSense, and they're both based in Shenzhen.

Tu Le:
So one thing that I want to always clarify Lei, and I think we should start doing this from now on, because I think there are people out there that seem to be trying to take credit for things that we've talked about years ago, months ago, one of the things that I want to emphasize is that I had said last year that intelligent driving Level 2+ systems will be standard within the next few years on many mass market vehicles. You're starting to see that with the BYDs, I just want to make sure that 6, 8 months from now, someone doesn't come out and write it in their newsletter. And all of a sudden, people think that he's this brilliant person, right? It's a slippery slope in the United States government, European government, the UK government, they all need to evaluate the risks associated with intelligent driving connected vehicles. Now I don't want to stop at Chinese. Is it, do we automatically because it's from Tesla? Do we automatically accept it? And I'm talking about the U.S. government, I'm talking about the EU and I'm talking about the UK. I think they all should be evaluated. And if there are specific concerns about China, that needs to be clarified, communicated, and the policies and the restrictions need to be articulated, right? But it's not just because if they're hacked, it doesn't matter if it's a Chinese car. If a Tesla gets hacked, then there's risk. You and I have kind of talked about this offline. The EU and the United States need to get in front of this and just really, really communicate very, very detailed kind of thoughts on what they think about the entire space.

Lei Xing:
I mean China, I mean when we talk about China nowadays, it's the red flag, right? No pun intended, but anything, EVs, AVs, this connectivity, data. It's difficult to erase that in this environment, especially with now, what, less than 3 months ago for the election.

Tu Le:
My question Lei, is that if we're so concerned about this and I understand, let me emphasize this. I understand the difference. But if there's a risk about data collection, virtually every mobile phone in the world is manufactured in China. This is where and this is what's really important for me to understand, are we going to be restricting Chinese branded tier-one supplier hardware and software or anything that's manufactured in China. So there's a difference. I just want to understand that because again, it's a slippery slope because the internet of thing, those devices, all manufactured in China. And I'm talking about Alexa, those little speakers that everybody has now. Those are all manufactured. It collects data. That's what I mean by slippery slope. Where do we stop? I'm not a politician. I don't have the right answer. I think it's great that they want to evaluate, understand. They want to study and whatever is whatever, but the autonomous vehicle companies, the Chinese autonomous, they've been in existence in silicon valley since forever, since the sector started.

Lei Xing:
So that's the bifurcation that you've been talking about, right? It's increasing.

Tu Le:
Yeah. Exactly.

Lei Xing:
Back to the sales part of it, I mean we've been doing this pod for 3.5 years. And I think we've grown with the market and nothing really surprises. Whatever happens, I mean the 50%, the great fallout of the foreign automakers in China. I mean, it's as probably most of what you have predicted, I predicted, it's, yeah.

Tu Le:
And I think what's important is that the 150 brands that Bloomberg says are currently in the China market. They can't last. 99% of them won't ever see a foreign market.

Lei Xing:
We kind of saw what happened to HiPhi and Human Horizons, right? That's done pretty much done. The latest casualty.

Tu Le:
One of the guys had tweeted a picture of the HiPhi CEO selling soy sauce on a live stream in front of a HiPhi X. So desperate times, man, desperate times. So what's clear is that we know that there are amazing products in China on the clean energy side. We likely won't see most of them in the United States, because the other important dimension I'd written this in the newsletter is this could be a way for the United States to close the loophole of manufacturing in Mexico. So they didn't want to or we, as the U.S., the U.S. government didn't want to have to open up, reopen and renegotiate the USMCA which is the revised version or updated version of NAFTA. This looks like a possible way for them to do that, because let's assume that every Chinese EV maker uses Chinese suppliers for all these control units, for all the software that they're using for Level 2+ intelligent driving. And the other thing that is not crystal clear to me, Lei, is it only intelligent driving software? Or is it also connected?

Lei Xing:
Probably both, because really anything that collects data, right?

Tu Le:
Yeah, so I had mentioned that they should create a framework regarding which cloud services can be used, whether the big issue that they brought up is that data, U.S. consumer data moves to China, is moved over to China. I don't see Chinese EV companies, long term I do, but short term it's going to be very difficult to find a second source for, a non-Chinese source, for a control unit, and multiple control units and intelligent driving system. I do know that there are a few car guys on the pod, so hopefully they're nodding their heads. Sourcing is just going to be really difficult when you exclude China from where you can source things from. It's going to be much more expensive, and it might be impossible for certain commodities.

Lei Xing:
And same goes for the China EV Inc. for eventually entering the U.S., what are they going to do? It's almost like Google vs. Baidu or Tencent vs. whoever, right? In China, for China, in U.S. for the U.S.

Tu Le:
One of the things that will be interesting to look for and watch Lei is that you and I know that the European automakers have a different situation in China than the U.S. automakers, they still have a lot to lose. They've been losing quite significantly over the last few years, but they still are reliant heavily on the China market, not as much for GM and Ford and Stellantis. And so, there's got to be data hawks, national security hawks in the EU administration that want to also do something similar to what the United States seems like they're going to propose. So there's going to be this behind closed doors fighting about how far they want to go. The UK they don't have any manufacturing to really protect. And so their first significant issue was the national security aspect of it. So see, keep an eye on those two, because if they adopt a very restrictive Chinese technology policy, that's going to freeze out China EV Inc. from two of the largest markets in the world. They're going to have to figure out what to do with the excess capacity and where to send it.

Lei Xing:
Yeah. And it looks like China has already submitted a lawsuit to the WTO for the EU tariffs. I think there's the, what is it called, the resolution mechanism, dispute resolution mechanism. What it’s trying to do to the U.S.? I don't know.

Tu Le:
There's a bit of irony here, Lei, just because we have to remember one of the outcomes could be. And I'd mentioned this already last year, two years ago, is that a Chinese autonomous vehicle company is likely never going to be a significant presence, have significant presence in the United States and vice versa. American autonomous vehicle companies, Waymo, Cruise, they never, they don't test in China, they don't have any vehicles. GM went as far as investing in Momenta, a Chinese autonomous vehicle company, so they saw or they suspected that this bifurcation was going to happen. Okay. So it's kind of like the Chinese government is complaining about TikTok being restricted or banned, but we can't use Facebook, Twitter and those things, and media tends to forget, that they need to also bring up the fact that there are no social media, western social media allowed in China. But the fact that we allow TikTok. And I understand it, the United States like open market, blah, blah, I get that, but there's a bit of irony there.

Lei Xing:
And there's, so there's Chinese, let's say, Chinese LiDARs on U.S. autonomous vehicles, but there's also Chinese bodies on U.S. autonomous vehicles soon with ZEEKR supplying the next generation for Waymo, but Waymo uses its own LiDAR, I believe. So that's an interesting tag team.

Tu Le:
They had acquired of a LiDAR startup. And it was like an aqua hire kind of thing like Apple does. So you're absolutely right.

Lei Xing:
So somehow, China XX Inc. still finds way into the U.S.

Tu Le:
The other thing, too, the interesting thing, there's what's that called, Ouster? Is it Ouster?

Lei Xing:
Ouster. Ouster, yeah.

Tu Le:
And then Luminar. So there are American LiDAR companies. Velodyne blew up, but.

Lei Xing:
Well Velodyne kind of became Ouster. So.

Tu Le:
Yes. And Ouster is one of the really, really advocates for these restrictions. So, which, and I didn’t get my head around…

Lei Xing:
So Ouster had a lawsuit with Hesai. I think Hesai probably won, if I remember correctly.

Tu Le:
The one thing is where and then the other beneficiary is the Israeli company that you and I interviewed. Omer.

Lei Xing:
Innoviz.

Tu Le:
So if we think about it from the other side, if there are some ambitious western technology companies in Europe and the United States that need some investment, their valuation likely increased or will increase if and when this policy is published. So there's going to be pain in the short term, just because again, from sourcing standpoint, it's going to create a lot of headaches. And it's going to force a lot of companies to trace their supply chains up to the tier 3, tier 4, tier 5 level.

Lei Xing:
We just have to wait for fine print.

Tu Le:
So let's move on.

Lei Xing:
We talked about sales. We talked about this restriction. What else?

Tu Le:
Let me look at my…

Lei Xing:
You talked about Mexico, so MG is supposedly building up shop in Mexico.

Tu Le:
And it should be noted that MG is likely going to build ICE vehicles there. Initially, initially.

Lei Xing:
And somehow I mean it's difficult to see MG selling in the U.S. for some reason. I just don't relate.

Tu Le:
Actually, I wanted your opinion, one of the other things that I think it was a very important last week that we did, and I don't believe we talked about. It was Audi looking at not using their logo on the next generation electric vehicles in China? So, you and I know the history of Audi in China, but can you tell the audience what the digital natives think of the Audi logo when they see it?

Lei Xing:
The joke is, what do they do? Do they put one more ring, make it a five ring logo? But I mean Audi, right, traditionally has been kind of the executive limousine for officials.

Tu Le:
For government officials.

Lei Xing:
That's no longer the case. I mean all ABBs, they're no longer resonating with some of the newer generation consumers. They face as we talked about this competition from the China EV Inc. Li Autos, AITOs, the latest being the Stellato which ABBs might be smiling because they only got 2,500 orders in the first 24 hours. 

Tu Le:
But that's an expensive car. So.

Lei Xing:
It is. Well it’s starting at just under RMB400,000. So right at the heart of what ABB sells, right?

Tu Le:
So hold on, but let's back up. Can you tell them Stellato is or what Stellato is?

Lei Xing:
It’s the third brand that Huawei has launched in partnership with BAIC.

Tu Le:
So Beijing Auto.

Lei Xing:
Yeah Beijing Auto. It's a luxury limousine. I'd say a 7 Series style.

Tu Le:
It looks a little bit generic, it looks a little bit generic.

Lei Xing:
Yeah.

Tu Le:
It's the C-Class sedan about the size of an S-Class or 7 Series.

Lei Xing:
Then now we have the 4th one, which is called the Maextro, not the maestro, but the Maextro or Maextro from JAC. “Zun Jie.”

Tu Le:
You yi diaer qi guai, man. It's a little strange.

Lei Xing:
Supposedly another sedan selling with possibly prices into the RMB1 million or $150,000. And

Tu Le:
A quick reminder to everyone, executive sedans normally, and it was popularized, the L part of an executive sedan was popularized in China because the people that buy them don't normally drive them. They normally sit in the back and they have a driver.

Lei Xing:
Yeah, and Audi is, in fact, the first one that did this with the A6L many many years ago, I think in the early 2000s, they started doing this L and everybody followed, right? Mercedes, BMW.

Tu Le:
Well, because of the government officials.

Lei Xing:
Yeah, exactly. But back to that Audi news about that logo of this newer generation based on the SAIC electric platform, neither SAIC nor Audi have confirmed anything.

Tu Le:
That's a trial balloon. They just wanted to see what the reaction would be.

Lei Xing:
I don't see it as it could be a tweak of the logo or they just slap the Audi letters without the logos, who knows. But to me, it's insignificant, because either way it’s a difficult hill to climb.

Tu Le:
It's not just because of the logo.

Lei Xing:
No. Part of the reason is, but.

Tu Le:
And you and I, it was kind of in your face because we lived in Beijing during the heyday of the A6, the A6L. So living in Beijing about a mile away from Tiananmen and Zhong Nan Hai, you saw freaking A6, black A6s everywhere in 2008, 2009 2010 when I moved. I saw A6s and you could tell and you knew it was a government official vehicle or a military vehicle because the license plates are different. So if it wasn't obvious enough that it was a government official, you just need to look at the license plate. And because we lived in the equivalent of Washington DC where all the government officials are. We just saw…

Lei Xing:
The Cadillacs of China. 

Tu Le:
We just saw so many A6s on the road in Beijing.

Lei Xing:
But now you have Hongqi which is doing alright I'll say, taking a lot of shares away from that too.

Tu Le:
And a little bit of background on that is that I think in 2012, there was a new policy, revised policy that kept the price that you could pay for an official vehicle, limited the size and displacement of the engine you could purchase. I think the preferred vehicle list left Audi off of it. So it just became nationalized, but the background is that in 2008, in early 2000s through 2012, the kids that grew up around that time saw these Audis and associated this vehicle with being a government official car, these digital natives, these kids that grew up in the early 2000s, early 2010s. They are now Audi's target market and they can't shake the thought of Audi being a government official car. So generally speaking,

Lei Xing:
Yeah, again, this is not an Audi problem. This is a foreign legacy problem. So imagine in two years, when the Volkswagen SUV comes out with the Xpeng inside, pretty soon, this Audi EV comes out with the SAIC platform inside. You wonder the market reception how that's going to be like. And given there's still, Volkswagen still sells, you see, I'm being nice to Volkswagen again. 

Tu Le:
You are.

Lei Xing:
Still over two, roughly, let's say, 2 million Volkswagen branded vehicles in China. That's pretty good volume, no longer as good as 4 million, 3 million a few years ago, but those are still consumers, right, that still looking for that brand for that logo, will Xpeng kind of retain that relationship? That's the thing that we're kind of looking at, right? If not, then I don't know what happens.

Tu Le:
If it's successful, it doesn't make sense for either party to stand pat. They should likely increase or increase the intensity of that relationship somehow. Whether Xpeng contract manufactures for Volkswagen or acquires a larger stake. Stellantis owns about 20% of LeapMotor. We'll likely start to see that lines are going to start to blur, especially because of this bifurcation. Chinese IP is going to be leaking into foreign automaker vehicles all over the world, in my opinion.

Lei Xing:
Yeah and SAIC Audi, I think they have the A7L, a couple of other models that hasn't done well ever since I mean compared to the northern FAW-Volkswagen Audi. Just haven't done really well in terms of market performance. It's really difficult for this new play to have an attraction given the current performance. It's not doing that well.

Tu Le:
Speaking of ABB, you want to just talk about Merc and their Level 4 approval?

Lei Xing:
Yeah, so I mean Merc, first of all, I think it's the first foreign brand that has gotten this approved in Beijing, right? Both the urban and the expressway. And you would, I think the robotaxi companies they get these permits is very normal every few weeks. They get these newer permits. But I mean Merc actually they've done, they've worked with Tsinghua University. They've done this in the back for over a decade in China now, this localized testing of autonomous driving. So it's not that surprising that they got this. Are they going to put a robotaxi? I don't see that happening now, but…

Tu Le:
So they’ve slapped hardware software stack onto a few S-Classes

Lei Xing:
Bucket, bucket.

Tu Le:
Yeah and they are testing them in and around Beijing.

Lei Xing:
Yizhuang. Some familiar roads I’ve seen in the videos that they put out.

Tu Le:
This makes sense to do it in Beijing because Merc is headquartered in Beijing regionally.

Lei Xing:
They have that new R&D center in Beijing as well. So I mean it's just basically in China do what the Chinese do, does. BMW is right on the heels. I think two of the ABBs. Audi to a lesser extent.

Tu Le:
One thing that I would like to talk about and get your opinion on was what there was a newsletter or a post last week that talked about. I didn't read it. It alluded to the fact that the Chinese government wants to kick out the foreign legacy automakers from China. And I think that's an incorrect statement. I think it's absolutely wrong. Number one, the foreign automakers are doing a good job of kicking themselves out of the market.

Lei Xing:
Exactly. I mean Skoda, right? I posted some numbers on Skoda. 7,100 units sold in the first half. I mean these are…

Tu Le:
That’s 6 months, that's not a  month number, that's a 6-month number.

Lei Xing:
And Skoda is among a few of the foreign brands that are really, very close or if not already of meeting their judgment day in China, Chevrolet being the other one.

Tu Le:
That's dead man walking, Skoda is dead man walking.

Lei Xing:
Dead man walking, exactly. But not. That doesn't apply to, I'm being nice to the foreign brands. Again, whoever is trying the hardest they're trying to be relevant. These brands that have significant volumes in China.

Tu Le:
The reason that I bring that up Lei is because I want to get your opinion because my thought is that the Chinese government actually wants some of the foreign brands to be pretty competitive in the China market, because they want to be able to point to China being a friendly place for foreign brands, for international competition. So to go to zero on foreign legacy sales in China would not allow them to point to a competitive, friendly market to foreign companies. It just doesn't make sense on its face.

Lei Xing:
The same goes for many of these Chinese brands, right? It's survival of the fittest, basically. HiPhi is gone, who's next? Evergrande is probably done, we talked about that last episode.

Tu Le:
There should be a few more that need to go away. They're doing their best to be zombies. There could be a couple that take the export only route like AIWAYS. And so.

Lei Xing:
Right, some of these plants are being shut. Honda, for example, some of the lines are being shut, production lines. It's, I mean as a company, you do what you have to do to cut costs. But at the same time, last episode we talked about this AVs taking over drivers, right? This livelihood of people making a living.

Tu Le:
That is going to be a decent sized challenge for the Chinese government. How fast they want to automate manufacturing, taxi services.

Lei Xing:
Hence the recent incentives that included the RMB15,000 toward the purchase of an ICE vehicle 2.0L and below, not only the RMB20,000 for NEVs. That shows you it is consumption. It's not the drive for NEVs, it's the drive for consumption, which helps, hopefully to make these manufacturing keep running.

Tu Le:
That is the key. And I think we're about a week or two away, let's say, beginning of September. We're a few weeks away from the mad dash to year end.

Lei Xing:
Yeah, so really we're at a kind of a lull in the say the dog days of summer, but once the end of August which begins with the Chengdu Motor Show, it's a new round of headlines, I would say.

Tu Le.
Yes. And there are companies that would just react. We talked about this last week for about 30 seconds, but the…

Lei Xing:
Then Xpeng just produed the first job with the MONA M03. It's launching probably next week.

Tu Le:
ONVO is going to start delivery.

Lei Xing:
ONVO in September.

Tu Le:
So folks, there are still new brands and new products being launched in the China market. If that wasn't enough.

Lei Xing:
Ridiculous. Ridiculous. 

Tu Le:
And you're seeing, really at least in western media a little bit more, the Chinese CEOs popping up on my feed, Lei Jun is very popular on western social media. And but actually, I wanted to ask you because I didn't get a chance to click into it and read it. What's the thing about SU7 frunk flooding with water?

Lei Xing:
I haven't seen that. It's news to me. 

Tu Le:
Yeah, there's a headline that said that owners are afraid of their frunks getting flooded with water.

Lei Xing:
So I'm hearing, so aside from that I’m hearing a lot of issues with the recent OTAs that have been pushed out for wider use of their NOA ADAS. There's been some bugs. So I mean that's this growing pains, right? It’s their first model done only in 3 years. So.

Tu Le:
And this is expected, so remember, if a new technology, if you get it into the hands of more and more people, more bugs, more problems, more challenges are going to occur, just because there's just more in the wild and people doing things that maybe weren't anticipated. So it's not about the problem. It's how fast and they react to it to fix it.

Lei Xing:
And does it, can they take care of that frunk problem through an OTA like what Tesla has done in the 1.68 million “recall?”

Tu Le:
Yeah, to me, that's, I think everybody needs to kind of rethink the word recall, because it elicits a different type of thought.

Lei Xing:
The Tesla stans hate it.

Tu Le:
I would too.

Lei Xing:
But there's really no. What do you call it a virtual recall?

Tu Le:
So like a service update or a bug update, I don't know. But that is, let me see here, is there anything else. The one thing that I think I saw was fairly interesting. Vietnamese. I'm Vietnamese ethnically. So very, very curious about the culture of the country. What happens there? I was reading this article where VinFast owns 95% of the charging infrastructure in Vietnam. They just launched a small vehicle, a little bit bigger than the Wuling Hongguang MINIEV, does fairly well in the Vietnamese market. There aren't a lot of third-party charging infrastructure yet. BYD has entered Vietnam, I believe. They were interviewing Vietnamese consumers. And one of the things, this is a challenge for the Chinese brands when they go to foreign markets, not this particular issue, but the types of challenges they might run into. In every Chinese passport, they have a map of the nine-dash line and nine-dash line for those that don't know. Southeast Asia. The Chinese government claims a lot of the South China Sea as their own. While the Philippines, Vietnam, they also claim part of the South China Sea as their own. A big dispute with that. One of the comments was if the GPS shows the nine-dash line on the BYD vehicles, I won't buy it. So, anecdotally, my friend who is married to a Chinese national. They bought real estate in Vietnam, because normally you could just send information digitally. But because she had a Chinese passport, they didn't recognize because of the map of the it was quite so they had a lot more difficulty to purchase the apartment. And so this is these types of challenges are really, really deep rooted. Okay, I'm not saying, though, again, not the exact same challenges in other markets, but it's not going to be a cakewalk for all these Chinese EV companies, right? So.

Lei Xing:
And that's the peculiarity of operating in any market. And in China, specifically, the foreign automakers have had their share of mishaps. Let's say the Koreans with SAAD, sometimes the foreign automakers or not even automakers, the foreign brands, using the wrong maps, “wrong” maps of China that have backfired. This has had happened in the auto industry, by the way, with some of the foreign brands.

Tu Le:
What happened in airline industry with the websites and things like that?

Lei Xing:
Exactly. So you have to be careful, but yeah, I mean that's the cultural and the local challenge that anybody faces when you enter a new market, right? Aside from the geopolitical barrier?

Tu Le:
So that's all I had, man. Let me see here. There's anything on the newsletter. No, that's all I had. We can open up for questions. If you want to raise your hand, I'll look at the comments here. A question for the end, Jeffrey, who recently moved to Guangzhou. Any idea how many more micro EV producers are present? How many teeter on vaporising due to the bigger players absorbing everything?

Lei Xing:
Micro EV?

Tu Le:
I would think like Hongguang MINIEV type of cars, I think.

Lei Xing:
So FAW Bestune just launched the Xiaoma which is Little Pony at RMB24,900 starting price.

Tu Le:
That's cheaper than some golf carts.

Lei Xing:
Yeah. But.

Tu Le:
So there is an island in Hong Kong. Dude, I forget what it's called, but there's an island in Hong Kong that doesn't allow cars. They only have limited license plates for golf carts. So golf cart on this island could cost $200,000. So, anyways.

Lei Xing:
But in general, I think that micro EV that started out by Wuling Hongguang, that's kind of faded as you make the upgrades. And the bigger model is selling cheaper. And there's some pandemic effect, right? I mean for a lot of the younger female that wanted to have their own transportation during the pandemic, right? So Wuling Hongguang MINIEV was the right for urban setting was pretty. It's cheap.

Tu Le:
And it still pumps up GM sales numbers, too.

Lei Xing:
It's what you would call the mobility enabler “Dai Bu Che,” right? So.

Tu Le:
Jeffrey, I think what's important to remember is that it gets saturated in China. There's always Latin America. There's always Southeast Asia where those cars, I think, could do pretty well, because the infrastructure is not as well built out. And so having a vehicle with 100 miles of range or 80 miles of range, it would still be, but affordable for $5,000, $6,000, $7,000 is still a win. It's an opportunity for Southeast Asia, because if you look at Thailand, Vietnam, Indonesia, Malaysia, a lot of people still get around as a family vehicle on two wheels.

Lei Xing:
So Air EV I think, is the number one selling EV in Indonesia, probably.

Tu Le:
So still a lot of opportunity on that micro side. I and I'm hoping that there are some cities in the United States that restrict city center, large vehicles from entering city center, and we'll start seeing micro EVs in parts of Manhattan where you don't see an F-150 driving right next to it. Another comment he made rush hour here in Guangzhou is so pleasant due to being all EVs fresh air and relative silence the sea of green plates. I don't know if Chris wrote this first or it looks like Chris wrote this first, I checked the AQI in Guangzhou. Yesterday it was 17 incredibly clean cleaner than the beach towns of California. That's because California has those freaking forest fires, unfortunately. But definitely, they say you are as stupid and outdated as your own team. So it doesn't look like there are any questions. No one's raising their hands. So maybe we can end it on that note. Man, I know we talked about video and I'm behind a little bit on learning how to do it, but let's try to do it next week.

Lei Xing:
We’ll get there soon enough.

Tu Le:
Let's get there next week. Summer, middle of summer is just madness for me because of I'm basically a chauffeur. And so anyways. 

Lei Xing:
Same same. 

Tu Le:
Yeah but I got it times two dude.

Lei Xing:
Exactly.

Tu Le:
So anyways, everyone have a good weekend. Good morning, good afternoon, good evening. We will talk with you all next week.

Lei Xing:
Likewise. 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.