Episode #180 - Mona & ONVO, Suppliers Too Will Not Be Spared, Tu and Lei's Trip Summaries

Tu and Lei begin this episode with an update on the sales of the newly launched vehicles from Mona and ONVO. They both promise to make a bad situation for Legacy Auto in China even worse. 

Tu shifts gears and discusses how carmakers can still differentiate themselves even if they're using the same technology or more specifically, the same silicon to power the infotainment and intelligent driving systems. 

Tu then also discusses what could happen to the foreign suppliers if they're not able to speed up their level of innovation to keep pace with their Chinese counterparts. 

Lei then details his trip to Germany and his visits to Chinese EV brand dealerships. 

Tu speculates that with everything going on in the European market, the Chinese brands in order to maintain their competitiveness should begin to start reducing prices on their products there. 

The episode ends with Tu describing his trip to Vancouver to be a part of the Electrify Everything Conference sponsored by the Fully Charged team. 

Transcript

CEM #180 Transcript
Recorded 9/20/24

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. To our loyal listeners, welcome back. We ask that you help us please get the word out, especially now that we are on video on YouTube and LinkedIn, subscribe and follow us and tune in again next week.

My name is Tu Le. I'm 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. A video Lei. Can you please introduce yourself?

Lei Xing:
I can't believe we're actually doing this. So this is your co-host Lei Xing, former chief editor of China Auto Review, and this is episode #180 and our first video episode.

Tu Le:
Live video episode.

Lei Xing:
And I guess we're flying the plane as we build it, as you often say, it feels a little bit weird because we're doing this on video the first time, but and having a screen in front of us is kind of jarring a little bit, but we had a little break last week. And we just, we're right in the middle of Golden September. And we're finally seeing the seeds that have been sewn come to, let's say, fruition. We're reaping the harvest, I guess, in this season. And I'm talking about, obviously, the ONVO L60, the MONA M03 getting to 10,000 units produced. And just today, quite a few other latest and the greatest launching, more bloodbath. And we're seeing this play out and I call it suffocation, right? If you and I are the legacy foreign automakers watching, it's suffocating, isn't it?

Tu Le:
For some reason, Lei, you keep on coming in and out. Can you hear me clearly?

Lei Xing:
Yes I can hear you clearly.

Tu Le:
You're coming in and out a little bit. So.

Lei Xing:
Oh, really? Okay? 

Tu Le:
I don't know if the audience could hear you clearly or if it’s just me, but

Lei Xing:
I can hear myself clearly.

Tu Le:
Everything sounds fine now, but yeah, so you said ONVO, and I'm sorry, say it again?

Lei Xing:
ZEEKR, ONVO, MONA M03, and then bunch of others launching. And I'm talking about this suffocation.

Tu Le:
Well, and, let me add Lei that there's a desperation coming out of Europe now, because of the 36% drop in sales of BEVs in Europe in August that was driven largely by the German market.

Lei Xing:
Yeah.

Tu Le:
Sales shrinking. And so what we have is a continued price war with newer, bigger, better products. And I think with what you'd mentioned with all these different vehicles, the Model Y is getting left in the dust, not only from a pricing standpoint, but from a feature standpoint, it's going to put Tesla in an awkward situation towards the end of this year and the beginning of 2025. Unless there's a clear indication that there are major refreshes and or new product in the pipeline for them.

Lei Xing:
We know the new Model Y is coming out. That's one thing that that'll hopefully get some more momentum. But right now…

Tu Le:
But come on. Adding two seats is not really going to move the needle that fast, right?

Lei Xing:
Well I mean just minor tweaks on the styling and new hardware, probably updated hardware. But I was thinking, right, the last couple of days, I've been watching these live streams as I was taking my daughter to school, I put the phone on the dash and I think it's going to become a routine, that every morning which is evening time in China that on our way to school and she's going to start becoming more knowledgeable about the EV market pretty soon. 

Tu Le:
You think she's paying attention?

Lei Xing:
She's a Tesla fan as you know, but and all of these Tesla killers and just the way, if you look at their live stream, the type of innovative tech and features, something you wouldn't think of like a one button glass-breaking thing from the ZEEKR 7X. And I mean these things are just, I think, driving again, if I’m the legacy foreign automakers watching, just driving me crazy.

Tu Le:
So what do you think of the ONVO?

Lei Xing:
I think ONVO, you know, we think of it as a mass market compared to the NIO. Obviously, the pricing point is lower, but like we…

Tu Le:
Significantly lower. 

Lei Xing:
Like we've said in the past episode whether it's the Xiaomi SU7, whether it's the MONA M03 or the ONVO L60, don't look at the pricing to determine whether it's premium or not, right? And that's why I said it's the bloodbath. And all of these models, they are comparing with the Model Y, pricing wise, but feature wise. So you're basically getting much much more for the same price range that you had expected before. So I mean the ONVO L60, the MONA M03 are the volume drivers. And plus, this is the foreshadowing of these groups, brand groups, and extending their arms into different brands with the expectation of then becoming global models. ZEEKR 7X in particular, is a global model. ONVO, upcoming Firefly, because they're going to compete at the lower price points but at the same if not higher tech feature premiumness as the foreign competition, what they already offer. When you think of Mercedes, when you think about BMW, right?

Tu Le:
Let me stop you there. Because the reason that they can offer better features than some of their competitors is because from a hardware standpoint, they're virtually using the same hardware. And I’m mainly talking about the silicon, the Qualcomm, and the NVIDIA chips, because you can build on top of that. And if everyone is using the same hardware from a speed standpoint, from a data processing standpoint, now it's about how good are you at taking advantage of that speed of the hardware. This is where the Chinese and Tesla, to a lesser extent now, are able to be leaps and bounds ahead of the legacy OEMs. So all else being equal, they can do software better. So if there's a minimum foundational level of fit and finish, quality on the exterior and interior, as you'd mentioned, it's not really about how nice the interior and exterior is, because everything, unless it's ultra-premium, everything feels pretty good, looks pretty good. The gaps are pretty consistent. Now, it's about premium connectivity features. And this is where the Chinese companies shine.

Lei Xing:
And you will talk about the smart cockpit, smart driving more so and less about maybe before the kind of oh ok, premium materials, what type of materials and they still do, but if you look at the press conferences of these new models that are being launched, right? It's about what new features that you have, that you innovate, that you don't go. I mean the ZEEKR 7X in particular, I think they talk about quite a few of them, that you don't go with the status quo. And these are some of the things that you may not see, and they're fast. You don't see the foreign legacies when they are catching up. It's just hard for them to grasp, I think, how fast these ideas come out and being put into vehicles at such a fast speed.

Tu Le:
I think what's importantly Lei, is also, if we look at the Xpeng and MONA and we look at NIO and ONVO, these are huge pressure release valves for Xpeng and NIO, because they are volume drivers. And so it brings utilization rates at the factory level 2X, much more in line with being efficient managing costs and amortizing them over a larger number of units. Because NIO, especially NIO, at the premium side, they were selling volume enough volume every month, but this ONVO is going to put them over the top.

Lei Xing:
Yeah with the more family positioning. And speaking of 2X. So the MONA M03, He Xiaopeng he indicated that within the last 3 weeks, they've already 2Xed or maybe not 2Xed but expanded production rhythm twice. And I'm hearing that they're getting, they expect to get 100,000 orders by the end of this month. MONA M03.

Tu Le:
In other words, He Xiaopeng said that they increased the line speed. They didn't double the line speed, but they increased it, meaning that there are more jobs per minute being made. And so that just tells me that number one, demand is increasing or is consistent. Number two, that their production processes they're getting pretty quickly, because they're already building cars on those lines anyway. So the MONA M03 and the Xpeng G6, let's just say that production wise, there's not a lot of difference. Now the parts are different, but the processes should be virtually the same.

Lei Xing:
On the flip side, I think going forward will be interesting to watch. You now have these blockbusters, but the NIO brand and the existing Xpeng models, how will these two new models affect the existing models? The demand for those? It will be interesting to watch, because you do have these pressure release valves. But at the same time, you want to maintain a certain level of volume. I mean how do you balance that out? And we heard today, Geely Holding Group, Li Shufu, he came out and they announced the Taizhou Declaration. Basically, it seems from that, he gave a talk. It seems that they want to focus a little bit now, because now they've become that empire, and certain things they probably want to get rid of. There's certain subtraction you need to do. So I think I'm thinking ahead, yeah these are great momentum, but what about me being a consumer? I was thinking about the NIO ES6 before. Now I may be thinking about the ONVO L60. These things are going to play out.

Tu Le:
But what's, also  I want to stress that Xpeng, MONA to Xpeng, is it a sub-brand or a different trim? Versus ONVO being a separate brand? 

Lei Xing: 
Yeah, those are different. I mean MONA is more of a new, let's say, a nameplate or series, still under the Xpeng brand. But I mean obviously, again, the pricing point is much lower than the existing Xpeng models. So that shows you the simple, it's simple when the price is right. Every problem gets solved, maybe I’m putting it too simply.

Tu Le:
You had just tweeted about the AVATR, the ZEEKR all launching on the same day, there’s four, two other, Denza.

Lei Xing:
smart.

Tu Le:
This is not sustainable, not at these price points, just not sustainable. But if we look at and think through, in China alone, we're only talking about China right now. You think about Volkswagen. So you think about Volkswagen, you think about GM, let's assume that GM and Volkswagen still have a decent mix of German, American suppliers in the tier-one, tier-two level. This if the foreign suppliers aren't able to manage their costs like the Chinese suppliers, then GM and Volkswagen in China are going to be uncompetitive that way, too, on the cost side. So again, another double whammy because the Chinese brands are primarily using Chinese suppliers, because number one, they're used to working together. Number two, the Chinese suppliers, we know they can keep up with the speed of change. I'm not confident that Conti, that Bosch, if this continues that way, they can reduce cost to be competitive with the Chinese suppliers and keep up with the speed that the velocity of how things are changing and evolving. Again, most of this stuff is evolving from a digital standpoint, software standpoint, but there's still hardware components that probably get massaged here and there, have engineering changes that still need some time. But the Chinese suppliers are just working 24x7 to accommodate those changes. And I don't know the foreign suppliers have been able to keep up either.

Lei Xing:
Yeah, and when we heard about stories, headlines of Mercedes dialing down their profit outlook because of China. Not surprising. And two, Volkswagens considering after Germany closing down a plant in Nanjing, one of their plants. One of their quite a few plants, these are on the table.

Tu Le:
I think, from, this points back to you to your thoughts about Geely. I think they look at Volkswagen with these portfolio of brands. They don't want to get caught in that situation where there's too many brands and not enough capital to throw at each of them.

Lei Xing:
And the LYNK & CO and ZEEK is already competing. Here's where I think of some of the not, maybe a more negative side of the things because I remember a couple of years ago and I think we also discussed this that, An Conghui in one of the earnings calls in Hong Kong, he clearly gave a positioning of ZEEKR, LYNK & CO, and the Geely Galaxy. He said ZEEKR would be positioned above RMB300,000. That's gone, poof, right? Because of the market is dictating that you have to make certain moves and you've made those moves. And now it's difficult to balance when you have so many brands, that the whole entire Geely Holding Group, including the Swedish and Volvo and Polestar, and Lotus. 

Tu Le:
I think the other important dimension Lei is that ZEEKR is now a public traded company in the United States? So those are in external investment and investor pressure to perform. So if I was LYNK & CO, if I was the GM of LYNK & CO, I’d feel like a stepchild a little bit, because it seems like ZEEKR is getting all the cool toys that 7X is, it looks like it's going to do some damage in Europe potentially. So, but let's do this.

Lei Xing:
Things are okay so far?

Tu Le:
Yeah now I can hear you completely. Since we're learning. I don't know how the comments are working or anything like that. Hopefully, folks are enjoying the live show, but tell us about your trip to Germany.

Lei Xing:
Yeah, so this is one of the reasons that we didn't get to do the show last week. So I was in Germany, Austria for a week. Starting on the 9th, I came back on Monday, so between that one week, it was pretty packed. I started out in Frankfurt arriving in Frankfurt very early morning on Monday the 9th. I got to check out the NIO House in Frankfurt. Next to it was the Polestar Space. Next to that was the Genesis showroom. And not far from there, just a few blocks is the BYD by Hedin eMobility store. And as you know, BYD has taken the complete sales distribution rights from that partner. So that's kind of their own store now. So.

Tu Le:
That's a control play that's control.

Lei Xing:
And I think I talked to the people there, the sales associates. It's interesting to learn on the ground. The dynamics. One example would be the business leasing is very popular because you get a good deal. I think at the BYD store is 60%, I think, was at least business leasing. And interestingly enough, they had two models, the ATTO 3, and the Dolphin with a signage that said sonderpreis, and in German that means special price, 3,000 Euros off. I think the ATTO 3 was 5,000 Euros off. And I’d asked that the store, I think it was a manager, forget his name and he says we have some stocks and sometimes we have these deals, limited time deals. So let's say a 31,000, 32,000-Euro Dolphin is twice the price of what it sells in China, right? At least. NIO House, I think that NIO House in Frankfurt, it's on a Monday morning, noon time, roughly noon time, morning time. So traffic was slow, but, in the coffee sitting area, there is quite a few dozen of people there doing work. I was like, oh, this has become a wework place. One of the sales of soldiers, he told me that you can basically book ahead on the app, German app, and kind of go in there. They've started doing that because to control traffic a little bit, the NIO House has become interestingly, a place to do work. Obviously, they had all the models that are on sale there. They had one covered, I think it was ET7 being delivered to a customer. The EL8 just started deliveries. Polestar…

Tu Le:
Which is the same thing as the ES8.

Lei Xing:
So EL6, ES6 and ES8 are EL6 and EL8 in Germany, because of that lawsuit with Audi. And then I checked out, next, day was the Automechianka, which is used to be the largest aftermarket trade shows. And I've been to this show many many years ago, I remember it was one of the largest trade shows, automotive trade shows I’ve probably ever attended, just because the pure size of it, all the different halls, 12 halls, all packed, not so this year, it was less traffic, I think, because of the pandemic, because of how trade shows have been kind of affected anyhow. But there was this EVA, so this electric vehicle exhibition expo at the Automechanika, they call it EVA, where this one hall, there were the Geelym, BYD, AVATR, JAC, some others, CATL, and Geely was the only one that had a press conference and I tweeted some of that content. And basically the senior vice president, I think this is a venue not to sell cars to the European customers, unlike maybe IAA Mobility, but more like a PR, it was a statement making event for Geely, particularly because of what Victor Yang, the SVP, he basically said some in the EU may turn the back against us, but we will never turn our back against the European market. So I thought that was pretty much directed at the EU Commission and we should talk about the trade minister’s visit this week as well. Other than that, I think the other booths were not much traffic, because it's not traditionally an automotive car show. It's an aftermarket, it's a B2B so I don't know how it went for the other brands, but it was cool to check out the latest and the greatest right? The Geely Galaxy E5, which is a globally named EX5 for the global market, the AVTAR 07. I sat with Hoi.

Tu Le:
Nice.

Lei Xing:
I sat with Hoi. I met him. I sat in the AVATR 07 and tried out the zero gravity seats. That was interesting. Saw Ash took a picture in front of the LYNK & CO Z10. Yeah, and then it was events with a Magna. I think the highlight was obviously checking out the Graz, Magna Steyr Graz factory where they produce the Waymo robotaxi based on the I-Pace. And the production lines, the E-PACE and the I-PACE, checking out the ARCFOX Alpha S5 and Alpha T5, which is produced by Magna BAIC BJEV joint venture in Zhenjiang on their tech, little test area. And seeing some of the facilities, talking some of the people. And one thing I think that came out of it was the given the current EU tariffs, the possibility, and we heard about NIO denying rumors that they were looking to buy the Audi Brussels plant, the possibility of utilizing the Magna Steyr facility for any of these Chinese brands going into Europe, those discussions are being had. We can just say that.

Tu Le:
Sure.

Lei Xing:
So now given the EU tariffs. I think I was, one of the thoughts that came back with was I think everything every kind of possibility is being put on the table, now of utilizing whether it's a greenfield like BYD is doing or Magna Steyr, or what about Volkswagen producing Xpengs in Germany? Is that a possibility? Would that be put on the table?

Tu Le:
Let me remind some folks Lei that this is not unprecedented. These things that you're talking about where one brand produces for another brand, if we think about Fremont, before Tesla, that used to be NUMMI. And Toyota's and General Motor’s vehicles were built off the same line, using the same platform, different vehicles. I forget what the cars were, I think, the Corolla, one of the Geos, that when Geo was a brand of General Motors, and then in China, BYD builds for Toyota, the bZ4, correct?

Lei Xing:
Well BYD inside.

Tu Le:
Yeah. BYD inside.

Lei Xing:
I think it's bZ3X that's coming out.

Tu Le:
But these things aren’t unprecedented because of the capital that's involved with greenfield sites or greenfield site easily over $1 billion, a billion Euros, and probably 2-3 years in order to get online. A brownfield site, let's say, half a billion, 700 million Euro to get online. That's not to say that there are a lot of old factories that need to be reviewed, examined because if the country where the factory abandoned factory is, if the government is very, let's say, incentivize to get that factory going again. There could be some tax breaks involved, but all of these things need to be considered. Now, the NIO situation in Brussels, it just makes for a weird situation, because Brussels is an expensive EU country. And we look at the competition. A lot of those guys are looking at eastern Europe and southern Europe, where the hourly rates are a little bit less. I don't know how much value there's going to be initially with NIO in Brussels, just because they still have excess capacity in China, too.

Lei Xing:
It's funny. Leaving out of the Munich airport. There was Q8 e-tron. I was looking at it and now looking at back, oh okay, so I mean conjuring or pondering a NIO made at the Audi Brussels plant. I mean, yeah. 

Tu Le:
But let's revisit the sales in the EU, in Germany, down 70% in August for plug-ins. 

Lei Xing:
68.8%. I remember that number now.

Tu Le:
So if we game this out Lei, that means that currently, European legacies are launching electric vehicles in the mass market space, Chinese EVs are increasing their import into Europe. Chinese companies are also looking at building locally in the market. The pie has started to shrink. So this idea that the BYD Dolphin is a 30,000-Euro vehicle, but twice as much in Europe as it is in China, we will start to see these Chinese brands sharpen their pencils, reduce price, just because the market is shrinking. And so there are less consumers currently, long-term, we're going to see more growth. But in the short term, just because there are targets, fleet emissions targets for 2025 that need to be met by the legacy automakers, if they're not, millions, hundreds of millions of euros of fines. So the European Commission needs to review whether that's still a viable goal, these emission targets, or are they at risk, are the legacies are too at risk for being penalized substantially, because the EV space has plateaued or shrank a little bit.

Lei Xing:
The ACEA which is the European Automobile Manufacturers Association. They reported those numbers for August, right? And before that they had a statement on the upcoming the Euro 7, I guess emissions requirements and Luca de Meo has commented on this. I think he was pointing to loss of production of like 1.5 million and fines upwards of 15 billion Euros if I remembered correctly. And so I think you have these industry associations may be lobbying a bit to…

Tu Le:
While you have the Germans lobbying with the Chinese to the EU to dial down tariffs.

Lei Xing:
See, in that meeting between Wang Wentao and what the business community who was front and center, it was Ola Kallenius. That was interesting.

Tu Le:
Strange bedfellows. Strange bedfellows.

Lei Xing:
They just announced that massive investment in the Chinese market, while their sales are causing them to dial down the profit outlook. It's an interesting time. And then after the Magna trip, I decided to stay a little bit longer during the weekend, last weekend in Munich. So in Munich, I went to check out the Xpeng store and another BYD store. And interestingly enough, these are in collaboration with local dealership companies, dealers. One is called Grill. It's a family business, it's the Grill family. The other one is Reisacher. Reisacher is also, I have this little pamphlet. I don't know if you can see from. BYD has four locations with Reisacher in Germany already. So think back to last year, when we were at the IAA, Xpeng had announced they were planning to enter Germany. Remember? And fast forward, a year later, exponent has 24 locations in Germany already. And BYD has four alone with Reisacher. So I think in terms of, let's say, flooding the market, momentum wise, location wise. Yes, maybe. Sales wise, far from. And I think speaking of…

Tu Le:
But it's important to build out that network. It's important to build out that network.

Lei Xing:
I think I got, what I saw was interesting difference between the NIO model and the Xpeng model, because the Xpeng model, one of their strategy is to not work with these big name dealerships, is these smaller regional family owned companies. Grill, for example, they are now into their 5th  generation, sons and daughters working for the family very, I have a, actually, I should show this since we're on video now. Like this. These are family of, they've done this for years, decades. One tactic that I think this is working well for Xpeng is because they're utilizing space of existing dealers. For example, Auto Grill may have multiple brands a in a dealership. It's called an Autohaus. One example was they got rid of Jaguar. Then Xpeng just moved in. I think somehow Xpeng convinced them that the upfront investment for Xpeng is actually minimal compared to a NIO House, maybe millions of Euros for investment. Xpeng gets very small investment into these locations. 

Tu Le:
So based on what you, based on what you said about the NIO Houses in Germany Lei, NIO needs to be careful that they get known for being a work space rather than a car brand.

Lei Xing:
Sure the ONVO and Firefly would definitely help. I think that tactic to me was something very interesting to learn, is to have minimal investment while spreading out your coverage.

Tu Le:
At this point in time, I think the dealers are rolling out the red carpet for them.

Lei Xing:
Yeah. And interesting to see at the Auto Grill…

Tu Le:
For more for traffic.

Lei Xing:
Also something else that Xpeng is doing very, very interestingly is these locations are not at city centers, the Auto Grill Mercedes Xpeng store, just about 30 km from east of Munich,

Tu Le:
Because it's cheaper.

Lei Xing:
Yeah, the thinking is because if people want to buy cars, they want to make decisions to buy cars. They are willing to drive out to these locations to make a purchase decision. 

Tu Le: 
And those popups in city center are so easy now to kind of put together that people can kick the tires, check out the vehicles, and pretty conveniently in a city center pop up and then head to the dealer.

Lei Xing:
And it was interesting to see when I was at the Auto Grill store. A couple was checking out a Mercedes and right afterward, they were checking out the G9, all in the same location.

Tu le:
In the U.S. they have, at least in Michigan, they have these things called motor malls.

Lei Xing:
They call it the Autohaus.

Tu Le:
Each dealer has their own location 

Lei Xing:
With multiple brands.

Tu Le:
It's all in one area.

Lei Xing:
Yeah, and speaking of G9, thanks to Sarah, I got a G9 for a couple days, drove it around. So I drove on Sunday the day before I came back, I drove from Munich to Ingolstadt to check out the Audi Museum and then drove back. And it's interesting because last year, we had a NIO ET7. And right after I dropped you off that day I drove the ET7 to the BMW Museum. For two straight years, I've done something pretty interesting. So the only thing remaining to do is drive something else to the Mercedes Museum.

Tu Le:
And we can do that. Let's do that. Actually, so since I forgot that we didn't have our podcast, I should talk about my Vancouver trip real quick.

Lei Xing:
You should talk about it a little bit. And then the last thing I'll say was meeting Afonso Claudio. We had weisbier right in the center of one of those, I think it was Odiensplatz, the center of Munich, old town. Then…

Tu Le:
Let’s stop for a second for those that don't know, Claudio Afonso had started a website called he eletricvehicles.com. It gained a lot of traction, and so he gained a lot of notoriety. NIO hired him to be a brand ambassador. He did that for a little over a year, I believe, and then went back to being independent and relaunched his website. And it gets a lot of attraction. I would say, among Carnews China, CNEVPost and eletricvehicles.com. I think those are the 3 kind of go to websites. And they all happen to be our friends. And so we have good relationships with all of them and we try to catch up with them when we're in their town or vice versa.

Lei Xing:
And then I went to his home and had homemade dinner. And then one more thing, I went to the NIO Design Center in Munich and had an off-the-record talk with Zhang Hui. I think he was in Brussels based on the pictures I saw in that meeting with Wang Wentao, the business community about EU tariffs.

Tu Le:
He's probably also maybe looking at a couple of factories.

Lei Xing:
Yeah, based on that report from the Belgian newspaper, right? And it was interesting to see they had this poster of thousands of NIO logo iterations. Before at the very last, the current new logo, the new logo, the new brand is born in Munich. That's something that I think people may not know, and that Munich Design office is celebrating 10 years already next year. So hopefully we’ll check it out.

Tu Le:
And it's not lonely. There are other design offices. Chinese brands have design offices in Germany.

Lei Xing:
And NIO Europe, they already have over 1,000 people now. And design obviously, this is something that when Li Bin started out the company, making it a global company already, when NIO established an office in 2015, so chatted with him a little bit. And then returned the car on Monday and then headed back. So it was, I think if I could conclude a little bit is, first of all, flooding is, they are definitely not flooding the market, volumes are still low. Second, I think despite all the EU tariffs, all the, I think they will find a way and seeing the Xpeng’s tactics on the ground. I think Xpeng with the upcoming G6. I think the momentum is, I think it's even if you talk about the sales volume, Xpeng, I think will have a good momentum in the coming weeks and months.

Tu Le:
What's really strange Lei is that we talk about international, and it just feels weird that we don't talk about Li Auto, because they're one of the three, right? They're one of the three.

Lei Xing:
Stay tuned. Not yet. And then number three is just, I think, as we talked about earlier, all things are on the table, everything's on the table.

Tu Le:
So let's do this. Let's spend a few minutes. I'll talk about my trip to Vancouver. We'll open the room up. If anyone has any questions. I don't know what it looks like to raise your hand, but write a comment. We'd love to get your feedback on what you think about the video. I think we're going to try to do this as often as possible especially when we are not traveling. 

Lei Xing:
So on my side. So on my side, looking at your screen on Riverside, you seem to be blurred a little bit. Is that the same for you looking at me?

Tu Le:
Yep. Same.

Lei Xing:
Little blurred, huh?

Tu Le:
Obviously, when it uploads, it should be fine as a recording.

Lei Xing:
I don't know how the live stream is. Maybe it's better, but

Tu Le:
So it looks like NIO Nordic, or at least Afonso says, I'm good looking. No, I'm just joking. It says it works very well. No. So please, if anyone is still kind of paying attention has a question. Go ahead and put something in the comments so I know it works. So I had been invited to be in a discussion at a Fully Charged event in Vancouver, Canada.

Lei Xing:
We've both been to the north this year. North of the border.

Tu Le:
Vancouver is such a great town. It's a beautiful city. And it's not actually called Fully Charged. It's called Electrify Everything Conference. There was two floors, a floor of startups, and then a stage, and then in the basement, there was a little auto show. Polestar had a huge booth, VinFast, had a huge booth showing off, I think four vehicles, 8, 9 and 6.

Lei Xing:
VinFast had a showroom in Frankfurt.

Tu Le:
And so Rivian had a booth there. So I got to see the R3. It was behind a velvet rope, so didn't get to sit in it. Tesla was there with the Cybertruck and then there's another stage downstairs as well. And so but the coolest part was and they're doing this now at most of the conferences, I got to drive a few different cars. So I test drove a Polestar 2, a 3. So that was cool test driving a Polestar 3. I got to drive a Chevy Blazer EV, I got to drive a Rivian R1S, a VinFast VF8, I think one more car, but I really and enjoying how electric vehicles drive. It was a fairly significant ride too, 8-9 minutes, so it wasn't like around the block and back in. Then where the conference center was in Vancouver, I actually turned down, there's a bunch of oneways, like every other road was a one way. I turned on the wrong oneway, and there's a cop at the light. And so I'm driving towards him and I'm like, man, I'm going the wrong way. It's like because he was at a red light. And so I turned around really quickly and he didn't pull me over. So that was good. But really impressed with the 3. I think the Polestar 3 interior, front console’s a bit more evolved than the Polestar 2. Obviously there is a higher-end vehicle as well. The Blazer, I thought it drove pretty well. I think the roughest was the VF8, the VinFast, but from our first experience of being driven, because we didn't get to drive it in LA, the fit and finish has improved on the VF or the VinFast vehicles. That's one thing. It's still not on par with these other guys. Rivian R1S was probably my favorite vehicle drive. I really liked the front console and how everything seems to be much more integrated in the design, the user interface. There's two screens, and then the Rivian was a little bit higher up, but it felt a bit more solid was really cool, man. I spent probably the last 3 hours just getting in line and signing up and trying all these different cars out. And so wanted to see the transportation network. Cuz you know as the consultancy. We help mobility companies, whether it's micro mobility and stuff like that. So just seeing how Vancouver gets around. You had joked at me or poked fun at me because I took the bus, because I was out in the burbs and then I drove, I took the bus downtown. And there's a company called EVO. And it's a car sharing company. It's a public private, and Priuses. And so there's an app, they are parked all over the place. They  get an exemption from parking tickets and restrictions on where you can park. My friend and I used it quite a bit. I couldn't use it because I needed to download the app and I'm not Canadian. And so he had to Uber me around a little bit, but man, that was super convenient. Did a lot of walking. But that's okay. Weather was great, so, overall good experience. The Electrify Everything is, I think it's in the second year in Vancouver. And so it was a bit sparse. But there's a Rolls Royce, one of those EVs, what's the, Spectre? Huge car, can’t imagine, I don't even know how heavy it is, but I can't imagine that it's got to be 7, 8, 6, 7,000 pounds, but so that was my experience, spent four days in Vancouver, ate some amazing Chinese food, because in Michigan, it's not great. But so that was it. Let me check. I actually don't know.

Lei Xing:
I think it's always fun to head out to these other countries. And like really for me. And we'll do this again. And next year definitely right. Munich is coming back. And I remember also in 2022, it's the first time I had traveled internationally since the pandemic to the Paris Motor Show. When I drove a BYD ATTO 3 in the streets of Paris, that was fun. And last year with a NIO, this year again with a G9, keep it going,

Tu Le:
We're going to definitely do something next year in Shanghai. We are going to do another road trip, right?

Lei Xing:
Yeah and I think looking back, you're seeing this mushroom, maybe not so much mushroom, but pop up, right? That, not in great volumes, but at least, on the G9, I posted a little video of a NIO ET5 passing on the autobahn. And I was like, hunked, and I was like hello. It's just good to see, right? The different Chinese.

Tu Le:
I think slowly and sure slowly but surely, we're going to start to see more awareness, more of these vehicles on the European roads. From the looks of it, Xpeng is going to be aggressively moving in. And so in the next 18-24 months, we're likely to see a number of Xpengs on these roads.

Lei Xing:
The only thing I want to add on the Xpeng G9 is G9, is the best-selling model among the P7 and the G6 currently on sale. The reason being they are taking a lot of market from the EQE SUV there is about a 40,000-Euro difference. 

Tu Le:
It's not, it's not insignificant. That's a huge difference.

Lei Xing:
That's number one, number two. The XNGP is not that, it's not what you have in China, but in Germany or in Europe, I guess, they have this LCC with semi-automatic lane change, which is because of local regulations. When you do the stalk, when you make a lane signal change, you have to tweak the wheels slightly, and then it does the automatic lane change. I'll post some videos. Same if you want to merge left or merge right. And then the voice recognition works in English. Great. We had that in April, right? Understand English. What else? It does have AVP which is automated valley parking. I didn't try it out, but and right, the fit and finish very premium, 70,000-Euro car.

Tu Le:
So this is where BYD probably needs to reconcile its Han and Tang pricing, right?

Lei Xing:
Well, the latest models they have is the Seal U which come in the plug-in versions, they'll have more plug-in models coming.

Tu Le:
We're likely to see a 30, 70, like 30% BEV, 70% PHEV in Europe for BYD now.

Lei Xing:
And going back to that NIO Audi rumor, which has been denied. I think maybe the Chinese, the China EV Inc. are going to have, or already have the expectations of this EU tariff being voted, being passed. And that'll be in place for the next 5 years. 

Tu Le:
It's going to accelerate them building locally.

Lei Xing:
Yes and hence with that expectation. It's not surprising to see and hear these headlines of plants and what to do production wise.

Tu Le:
Actually, I'm going to, as Alyssha says, sarcastically sometimes, I'm going to pat myself on the back a little bit because Wall Street Journal a friend of Sino Auto Insights, Mike Colias wrote an article about Jim Farley. Him being scared when he visited Auto Shanghai 2023. A week after I got back, I wrote in the newsletter, virtually the same thing, but about the German executives, they were in awe. They were in. They couldn't believe that the Chinese EV companies had caught up. And so it's good to see that the media, mainstream media is really bringing this to the forefront, because hopefully, if you didn't believe me a year and almost a half ago, you read what Farley says in the Wall Street Journal article. And it's not about subsidies anymore. It's about a better product. And the subsidies help them, because if you look at the German market and European market, part of, I think a major reason we saw sales shrinking is because they pulled away from subsidizing EV purchase or plug-in purchase in Europe. So the Inflation Reduction Act, if it stays in place with the new president, the next president, then it should help EV adoption as well here in the United States. So I think and so. Go ahead.

Lei Xing:
No, I think I 100% agree with Jim Farley, because he was alluding to the fact that despite, and this is my conclusion from this trip as well. I think despite EU tariffs, however they're going to be tacked onto the pricing. There is, the Chinese, they will find a way simply because they have the product.

Tu Le:
And I think what's really important. And we can end on this note, Lei, is that their 100% preference is to export, because they have so much control over costs. And they know their suppliers in China. They know how they operate, and they have excess capacity. All these things matter. Importantly, I don't care how efficient BYD is. When you're building in Turkey, when you're building in Poland, when you're building in Thailand, when you're building in India, when you're building in Brazil, that's a high complexity. Cultures are different. Work, ethics are different, languages are different, currencies are different, laws are different. And so the fact that, will, so I guarantee you there's going to be growing pains and some struggles in the very beginning and for those that haven't seen that Netflix documentary what's that called American Factory?

Lei Xing:
From Fuyao, right? From Fuyao.

Tu Le:
Fuyao glass in Ohio. I would recommend you watch that because it's not going to be easy. That's why they would prefer to export. They know they can't export in perpetuity because you're taking jobs away, but they don't know how to build abroad yet. They have to learn how to do that. Unless they get the type of support that Tesla did in Shanghai, it could be really difficult for some of these Chinese companies. And this could ultimately to be one of the reasons they could fail on international expansion, because they picked the wrong country. They picked the wrong time. Suppliers aren't the same. So there's so many different variables that they can't control that they have so much control over in China. So the fact that the EU is forcing them to really build locally is going to trip some of these players up. 

So, hey, man, I'm glad we moved to video, looking good, dude, looking good. You got to get your background game. See look at my velcro, get one of these signs. So anyways, I know we have a couple, and we're at a weird time. So I know we have a couple of our friends watching us. We appreciate the support, Afonso, appreciate the support, glad you're watching. We're going to do this again next week. So we will see everyone next week, good morning, good afternoon and good evening.

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.