Episode #182 - September Sales, Global Competition and EU Tariffs

In this episode of China EVs & More, Tu Le and Lei Xing dive into the booming September sales figures in China’s EV market and the ongoing impact of geopolitical factors on the global automotive industry. They analyze the latest trends, such as the shift towards EREVs (Extended Range Electric Vehicles), China’s competitive dynamics, and the EU’s new tariffs targeting Chinese EVs. Additionally, the co-hosts explore the future of vehicle design and innovation driven by consumer and market demands in China.

Key Topics Covered:

•September Sales Records: Analysis of exceptional sales performances by key players, including BYD, Li Auto, and NIO.

•Stimulus Impact: How China’s recent economic measures are driving consumer confidence and boosting EV sales.

•Global Competition: The challenges faced by legacy automakers like GM, Ford, and European brands amidst the rise of Chinese EV makers.

•EU Tariffs: Implications of the newly approved tariffs on Chinese EVs and their impact on global trade dynamics.

•Future of Design: Predictions on how China’s market preferences are shaping global vehicle design and form factors.

This episode offers deep insights into the dynamic and rapidly evolving EV landscape, providing listeners with a comprehensive understanding of where the industry is headed.


List of Mentioned Companies

Automakers:

1.BYD

2.Tesla

3.NIO

4.Li Auto

5.XPeng

6.LeapMotor

7.ZEEKR

8.ARCFOX

9.AITO

10.Deepal

11.Chang’an

12.Dongfeng

13.GM (General Motors)

14.Ford

15.Hyundai

16.Kia

17.Cadillac

18.Buick

19.SAIC Volkswagen

20.Renault

21.Stellantis

22.Great Wall Motor

23.TANK

Technology and Battery Companies:

1.CATL

2.Gotion

3.Mobileye

4.Intel

5.Qualcomm

Other Key Mentions:

1.Ministry of Commerce (China)

2.Macron (France)

3.EU (European Union)

4.Stellantis-LeapMotor Partnership

5.Refraction AI (Autonomous Delivery Startup)

This list highlights the wide range of companies and entities discussed in the podcast, reflecting the multifaceted dynamics of the global EV and mobility sectors.

Transcript

CEM #182 Transcript
Recorded 10/4/24

Tu Le:

We are live, just so everyone knows, we are live on YouTube, LinkedIn, X. So, yeah, let's get moving. 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. We will open the room up at around the 40-minute mark to anyone who's keen to ask us any questions. 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 viewers and listeners, welcome back. We ask that you please help us get the word out, smash that subscribe button and you know, of course, 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 of course I encourage you all to do. A early riser Lei, can you please introduce yourself?

Lei Xing:

Well, good morning to an exhausted Tu and conference hopping Tu, busy week for you. We'll maybe talk a little bit about that later. 

Tu Le:

Busy week for EVs, in Europe.

Lei Xing:

Yeah, later in the show. This is your co-host, Xing, former chief editor of China Auto Review, episode #182. And we start off with the EU member states…

Tu Le:

Let's save that. Let's start off with September sales. Yeah, let's...

Lei Xing:

You want to start with September sales? Okay, we start off with September sales. Record, record, record, record, record, record, record, record, record. That basically sums up the golden September now turning, that have turned into Silver October. China is still on holiday break. More than half of it has been surpassed, but still on holiday break. But really good news with the stimulus packages, record EVs. 

Tu Le:

Can you talk about that a little bit?

Lei Xing:
Yeah, so I mean, the last week, right, it was that dash.

Tu Le:

Let me stop you there, Lei. So the economy is in a little bit of a funk, real estate pricing is down, and unemployment for youth is high, and the economists all over the world were wondering if there was going to be a stimulus package from the Chinese government. They were wondering when and how large. And so I just teed that up so you can kind of describe what they did.

Lei Xing:

So I can share a personal story. I'm still paying off a mortgage for an apartment in China. And I'm expected to pay just a little bit less because of that new interest. Maybe a couple of hundred RMB. But I think for many consumers, it feels good to have more, psychologically, if not realistically, to have more to spend. I think, and that you saw the stock market, I think, what, jumped 20% in a matter of days, couple of days, right? It's...

Tu Le:

And a few hundred RMB, which is about $50, $60, $70, is actually not insignificant for a lot of people.

Lei Xing:

Yeah, I mean, you just feel better because what you have felt before that you did not have these extra because the savings rate is still pretty high. I think it's over like 30%. But now I think you feel much better because you have that in the back of your head that you're going to pay less on your mortgages. And maybe I can use that some of the liquidity to consume something else, EVs for that matter, right. So that was good going into the break. And then on October 1, I mean, record, record, but basically that list that I shared, the sales chart, that's pretty much everybody announcing sales on the first day. I mean, that was over 1.1 million. Including Tesla I estimated around 100,000 units total out of…

Tu Le:

I saw that, it looked high.

Lei Xing:
Yeah It looked high, but I mean that's September right end of the quarter and they announced the Q3 production and sales so China again will be a significant share of that. It was good to see finally many of these brands really get into the groove. NIO, five consecutive months of 20,000 and above. NIO brand alone, right., plus a little bit of the ONVO. Xpeng as expected 10,000 MONA.

Tu Le:

So Xpeng and NIO, towards the end of this year, are expected to get a large boost from the MONA and the ONVO.

Lei Xing:

Yeah, so going forward, they'll have pretty good monthly sales numbers. LeapMotor picking up another high. JIYUE, our good friend JIYUE, congrats. They're seeing some uptake on their sales. Still low, 2,600 units, but compare it to just a few hundred units a month earlier this year and they must feel good about themselves. Others, some of these not often,

Tu Le:

Li Auto at 53,000 units.

Lei Xing:
Li Auto exactly, I mean, no new models, right? Maintaining that leadership over AITO, 18,000 units, I think, over AITO. And then for one week, Li Auto was above ABB.

Tu Le:

And we should note that Li Auto is not the only EREV game in town anymore. LeapMotor, who doesn't compete with them from a price standpoint, was really the only other EREV brand, but now more companies are coming out with hybrids and EREVs.

Lei Xing:

Yeah, and we know that AVATR 07 is coming out with the EREV version. Xpeng is planning for EREVs next year. Others, VOYAH, right these, not to mention BYD. 60% PHEVs, 40% BEVs, 400,000 units.

Tu Le:

And we think about this, Lei, XPeng is going to come out with an EREV. GM is looking at hybrids, Ford already has some hybrids in the U.S. market. GM said, we're going to launch hybrids. It's going to take two years. XPeng is looking at EREV. They're going to try to launch something next year. So the timing is just off when it comes to the legacies being able to bring to market new products.

Lei Xing:

Yeah, and Hyundai, right? Hyundai within the next couple of years. And I was going to say some of these other less talked about brands, they're certainly moving up the charts as well. Something like a Dongfeng eπ and Dongfeng Nammi, which our good friend, Daniel Kirchert is trying to bring to the European market that NAMMI, I think it's called the Box, a little smaller EV. Qiyuan, Chang'an Qiyuan, Deepal, Deepal went over 20,000 units, EREVs right? That's another major EREV player. So, ARCFOX, I think ARCFOX is even doing better with over 10,000 units. Xiaomi, right? They're expecting 20 in October and 100,000 done by the end of November.

Tu Le:

We should remember that the market is growing too, so we should expect to see numbers generally across the board increase just because the market is growing as well.

Lei Xing:

And supposedly October has less selling days but I mean we could be

Tu Le:

They have less selling days because of golden week.

Lei Xing:

Golden Week, right. But it could still be another record month for many of these brands. Yeah, I mean, just running away, running away. And the only, I think that chart, the only foreign brands I put up was Tesla, estimate on Tesla, SAIC Volkswagen ID., I think they had another record month, 13,000 units. But remember,, the ID.3 is discounted in order to get those numbers, heavily. And Buick, Cadillac, the XT5, the Envision Plus, they had this limited time, what's the English term for Xian Shi Yi Kou Jia, the limited time of knockoff price or something? RMB130,000 off of XT5.

Tu Le:

For those that are wondering, that's almost $20,000.

Lei Xing:

Yeah, and then that's it. I mean, yeah.

Tu Le:

$20,000. It's closer to 18 if I'm not, so I don't sound like I'm exaggerating too much. $17, $18, thousand.

Lei Xing:

I mean for as long as we've talked about this on this podcast and for as long as you and I have watched the industry, I mean, I personally don't think I've seen that many sales records happen on the same day. I don't think I've ever seen anything like this. And that just shows you where the market is.

Tu Le:

But here's the key, Lei, and I think you would agree with me on this. Everyone is eating, but how many are eating enough to be major players late into 25, early into 26? Because they've also, over the last few years, invested heavily in capacity with the expectation that the market is going to continue to grow. And so if utilization rates at the factories are still pretty low, which is likely the case with the exception of a Li Auto, an XPeng and a NIO who have some brand recognition. They have new products, you know Li Auto doesn't, but again, they seem to be pretty resilient and consistent with their sales.

Lei Xing:

And that's because they're relentless at making their existing vehicle newer through their VLM and end-to-end capabilities. I think that OTA update is quite rapid in terms of how fast they push it out to update the vehicles.

Tu Le:

Which it's a double-edged sword because the buyers from a few months ago will get upset because it seems like the newer buyers always get a bit more value than the older buyers.

Lei Xing:

Yeah, and then for the case of ONVO, I think Li Bin in an interview, he basically said, you know, we're standing on the shoulders of NIO, right? The customer understands the capabilities of the ONVO through the NIO foundation. That's number one. And number two, the family-oriented positioning and touting, I mean, something as trivial as a big fridge, the biggest fridge on offer probably, and the efficiency of the vehicle I think 12 kWh/100 km, you know those these are the things that the consumers they want to they're paying attention so they're giving them what they want, right?

Tu Le:

And as the ONVO L60 ramps, let's very closely keep an eye on Model Y sales and or stronger incentives from Tesla for Model Y as we close out 2024 because I think Li Bin is hoping and expecting that ONVO sales will take from Model Y sales.

Lei Xing:

Yeah, well, I mean, yeah. So they're expected.

Tu Le:

Also, Lei, I think what's also very important is that, as you'd mentioned, that NIO Foundation, they have to be trying to pull customers from the NIO app, which has high engagement from non-NIO buyers, non-NIO owners.

Lei Xing:

Right, so the interesting thing is, again, NIO brand itself was over 20,000 units and then you add the 832 from ONVO. Now going forward, how much of that ONVO will account for the NIO group? Will the NIO brand fall below the 20,000 or will NIO brand continue at the 20,000 while you add on top of that the NIO the ONVO brand. That's something to watch. Same for Xpeng, for the MONA.

Tu Le:

Because, we'll, let's point back to one of the things we said a couple episodes ago. It's not about price that creates the segments. So you could see an ONVO L60 perhaps being compared to an ES6 and the Chinese consumers looking at those without looking at the pricing to determine whether or not they're going to buy the ONVO or the ES6 because the ES6 has been in the market now for several months without really many new upgrades.

Lei Xing:

Well, it looks like they are upgrading the ES8 into the fourth iteration. So that's going on at the same time. And then I just thought of something on Li Auto again. They mentioned in their presser that they have 17% of the, I think it's the NEV market above RMB200,000.

Tu Le:

17%, ok.

Lei Xing:

17% and they said three brands including Li Auto covers about half of that market. So that's really...

Tu Le:

At the expense of a Porsche, at the expense of some of the German brands.

Lei Xing:

Yeah. And just in a matter of a week, that RMB200,000 and above market just got a lot more cutthroat with the recent launches, right? R7, AVATR 07, ZEEKR 7X. And can they continue to grow that market share or will they be eroded? Same for Tesla, right?

Tu Le:

Let's give our newer audience an understanding of how fast a typical Chinese EV company moves. ZEEKR is three years old, correct? Something like that? 

Lei Xing:

JIYUE is three years old. Three and a half years old. 

Tu Le:
So ZEEKR is seven years old, six years old?

Lei Xing:
ZEEKR is three and a half years old.

Tu Le:

I mean three and a half years old, right, exactly. So they have the 001, they have the X, they have the 007, they have the 7X, I'm missing one. They have the 009, they have the 009. Is it OO or 00? I always say zero, okay. So three and a half years, that's what, five products? It is ridiculous.

Lei Xing:
Yeah. And they’ve delivered 340,000 units. And the Li Auto probably within a matter of days will deliver their one millionth vehicle already, less than five years.

Tu Le:

Out of their Changzhou factory. Because they're building the, in Beijing, which ones are they building in Beijing?

 Lei Xing:

They're also building the MEGA in Beijing. 

Tu Le:

Yeah, the BEVs out of Beijing.

Lei Xing:

And BYD will hit 10 million cumulatively in December, sometime in December. I mean, it's a matter of time, maybe it already is, that ICE is already out of the vocabulary for maybe for us and maybe for many of the companies that are competing. Whoever, who still talks about ICE? It'll be strange. That's how it feels.

Tu Le:

And the other thing, Lei, think is the other thing that's really interesting. And I think we should bring up is that I think if you talk to the Chinese government, you talk to the EV brands, you talk to any people like us that follow the EV market in China and globally, very closely, popularity of EVs surprised everybody like how fast the market has grown in such a short period of time. I don't think anyone would have told you that, hey man, we're going to see a 50% take rate within five years. So.

Lei Xing:

And I think people, even including us, still underestimate where the market could go. I mean, Li Bin was very aggressive. He said 80% within a couple of years, the take rate. I don't agree, but it's difficult to fathom.

Tu Le:

He has more data than you though.

Lei Xing:

He does, he does. 

Tu Le:

So, somebody who is sitting in Detroit who pretty regularly talks to staff at the OEMs and the tier ones. This puts the OEMs at a really, the legacy OEMs, whether you're American, Japanese, Korean, or European, because OEMs never want to build different powertrains for all these different regions. And when you look at electric vehicles and ICE vehicles, the architectures are completely different. And the design, the physical design, because you have the transmission tunnel and you don't need the... So this idea that, okay, the OEMs want to just continue the ICEs in perpetuity. The longer they sell ICEs and invest heavily into ICEs, the less they're going to be able to focus and invest on the EV side, which makes them less competitive globally eventually. And this is the conundrum because they still need to generate revenues from ICEs to invest in the future, but there's not a perfect time to switch over. And so this is the challenge.

Lei Xing:

Well, you know, speaking of hometown Detroit, by the way, congrats to the Tigers for advancing. Something they'll root about in Motown and the latest numbers out of Ford and GM, we're finally starting to see good numbers actually. 

Tu Le:

Green Shoots, Green Shoots from GM.

Lei Xing:

Yeah, I mean, the Blazer and the Equinox. Ford announcing that latest incentive of throwing in the home charger and new subscription rates for the Blue Cruise. I mean you know what, that's taking a page out of the China Playbook, I think. You got to. right? You got to...

Tu Le:

We have a pulse. We have a pulse. 

Lei Xing:

You have a pulse. Yeah, so I think it's great to see though the hunt…

Tu Le:

We are clearly not out of the woods. I think what needs to happen is the mistakes that they make on the battery platform side, on the software side, how fast can they clean those up? Now, from a physical industrial design standpoint, that's going to have to be next model year. But from a software standpoint, can they work as quickly or almost as quickly as a Tesla or a China EV Inc.? Because I'm not expecting them to be as fast yet, but it's important to know. And I'm glad you did because I wasn't even thinking about that, but Equinox at around $30,000, $35,000, that's a good deal. I've driven it, it's nice. It's not $35,000 China EV Inc. nice, but it gets them in the game. And it's at a price point that's affordable to most in the United States.

Lei Xing:

And yeah, I mean the numbers clearly showed, right? Those are the top selling EVs or GM in Q3.

Tu Le:

And the LYRIQ is doing actually pretty well in the United States.

Lei Xing:

Yeah. Right. GM Ford, Hyundai, Kia. I think Kia is, like EV9 here is selling pretty well.

Tu Le:

You know what's frustrating, Lei, is that as GM and Ford seem to be gaining some momentum on the EV side of their products, our good friend Afonso tweets just now that Rivian still has supply chain issues for a component. And so they were capped at around 14, 13 and a half thousand units deliveries. And I shake my head, scratch my head. If you can't ship, you can't sell. If you can't sell, you can't generate revenue. So the operations team, the supply chain team, however you want to call them, whatever they're called at Rivian, the sourcing team, they need to be camping at the supplier and helping them build this part. Because when I was at Apple, man, we didn't sleep. We, and don't get me wrong, you burn out really quickly because there's so much pressure, but this is a gating item for Rivian because I've driven them. You've driven them. You, you like them. I like them. Now the pricing is too high for most people, but the R2 cannot have, the R2, you must have a flawless market launch, or a product launch.

Lei Xing:

Well, yeah, I mean, you see, I think Rivian over recent weeks, they've launched financing incentives, leasing incentives. Tesla just launched the $79,000 Cybertruck, $80,000 Cybertruck, kind of the normal, more normal Cybertruck. And right, thinking of Q4, you know, they have to get over 500,000 units to get to the 1.8 million. I don't know if they'll get over 500,000 units to be honest, unless drastic measures are being deployed on top of the zero interest, 0% interest.

Tu Le:

So the missed opportunity for me, Lei, is that the Model Y is not being offered at 1.99% financing anymore. 

Lei Xing:

No, it's not. I thought it is now.?

Tu Le:
Well, remember it just turned October, so I checked again to see if it was still the promotional rate.

Lei Xing:
But they still have the zero down, I believe, in place, which is another kind of the incentive. And Q3 also mentioning Tesla was over BYD in BEV sales globally by about 20,000 units. Pretty good, but BYD, yeah.

Tu Le:

But this is the thing, we can expect, so BYD's pie is still growing, the overall pie. What you had just alluded to is Tesla's pie, overall pie is not growing anymore. It's going to be flat. It's going to be at or close to 1.8 million units, which means that year over year from 23 to 24, zero growth. And eventually BYD on the BEV side will, every month, be more than Tesla. Okay? That's just a matter of time. But, and we'll talk about this in a second, the EU tariffs allow for more PHEVs to be sold in Europe without a major penalty. So BYD, expect more PHEVs in the long run over the next several years. Let's say, not several, let's say next few years. Cause right now it's like a 53, 54 to 47 kind of thing BEVs to PHEVs for BYD. I expect PHEVs to be 60% of their sales just because of the EU. 

Lei Xing:

But it already is, based on September numbers.

Tu Le:
So yeah. Yeah, sorry. But the global popularity of PHEVs is again, dialing up. It's increasing. I think more people are looking at dipping a toe and their idea of dipping a toe in clean energy vehicles is a PHEV. so BYD is still just running on all cylinders.

Lei Xing:

Yeah, the interesting thing is the LeapMotor TO3 and the C10 being launched in Europe right now are BEVs. So that's interesting and we'll see whether the EREVs will make their way into those 350 sales outlets.

Tu Le:

I think LeapMotor feels a bit protected when they're in the EU just because their big brother Stellantis has such an outsized influence.

Lei Xing:

Yep. So, yep, good thing. So if we compare and contrast, LeapMotor has the Stellantis leverage. BYD has the plug-in play. And Tesla has the lowest EU tariff among all the companies that are affected by the tariff. 9%, 19% plus the 10%.

Tu Le:

So you're saying, I think you're alluding to the clear paths that these three brands have versus everyone else.

Lei Xing:

Versus some of the others. Yeah. And

Tu Le:

So let's talk, let's talk the EU tariff, like let's do that. Can you update everyone? The vote was had.

Lei Xing:

I mean, after all of these political posturing, negotiations, talks, discussions, I mean, I didn't expect anything else, to be honest, that this was going to be passed. The minute that this anti-investigation, subsidy investigation started a year ago, that was pretty much a foregone conclusion.

Tu Le:

It was how much? That was the percentages that were in question.

Lei Xing:

Yeah, yeah. The fine print is discussions are still ongoing of a possible political solution. What does that mean? What are on? Yeah.

Tu Le:

Well, let's take a step back. Let's take a step back. Germany voted no tariff. Italy voted tariff.

Lei Xing:

Reuters reported that they apparently voted no against the tariffs. Yes.

Tu Le:

French, yes. Italians, yes. Spain, no. Germany, no. But they got enough support.

Lei Xing:

Poland, yes, I think, yeah. And then 12 other, yeah, 12 other countries abstained from the vote. So, but the rest of.

Tu Le:

They didn't want their products to be targeted in China.

Lei Xing:

And the rest of the 15, 10 voted in favor. I think Germany's no is a clear signal and the result of these German automakers lobbying. They were pretty adamant. They're on the record, Zipse, Blume, Kallenious, many occasions saying this is, you know, we want to vote no.

Tu Le:

And did you see, you saw, Brian Gu was on a round table with Macron.

Lei Xing:

Yeah, Ola, they shared the same table also with Habek, the German vice chancellor, and also the former EU trade commissioner. That was an interesting talk. And that's where Ola said, no, we want to vote no. And Brian, I think something very important he mentioned was the competitiveness driving the industry to where it is, granted that there has been subsidization. We're not going to argue about that, the ultra-competitiveness is a big reason for where the industry today is for those records in September and for the many of these brands that are emerging to be the frontrunners. And he simply wants to bring affordable, high-tech, high-quality EVs into Europe. From a business sense, who can blame him? And also the former EU Trade Commission. She was very blunt. She said, you know, China can offer that. And the EU cannot. But from Habek's perspective, I think he's against the tariffs, actually. But I think he's coming from the point of this threat that the Chinese are going to take over Europe. Difficult thing to comprehend, I think, for lot of politicians, that there's this scariness. And if you want...

Tu Le:

So, go ahead.

Lei Xing:

No, and then the last thing, if you watched toward the end of that dialogue that Macron, he spoke, and he spoke specifically about the China EV subsidization. He's like, you know, if China is over-subsidizing and if the US is, he said something about China and the US doing the things why should EU not doing something similar? Basically, that's his argument. I mean, he was pretty clear that he's very pissed about actions in China and the U.S. And why should EU not do something? That's his argument.

Tu Le:

So there's a few things going on that I think is important. At least what I see and feel talking to people here is that there's an inevitability to the Chinese EVs coming, okay? I think there's a lot of confidence in Brian when he's speaking at that roundtable that they believe their products are more than competitive for the EU. Now, I think he also realizes that it's going to take some time for XPeng and MONA to really create awareness and trust with the European consumer. So I think they're willing to make that investment because in 2024, as you know, they've aggressively moved into foreign markets. Whereas, so they had a false start in 2022, basically gutted that international operations team, did nothing really in 2023, except try to correct the mistakes that the original team made. And now they're making a concerted effort again to move back into the international spotlight. And it's not just Europe, they're moving into other parts of Asia as well. And so I think they really, really do see opportunities and they don't want to be too far behind from BYD. They're trying to draft BYD's momentum against BYD's momentum. And so the last thing that I'll kind of throw at you, Lei, is, to your point about Macron, does the EU follow the United States on the connected software restrictions? 

Lei Xing:

I hope not.

Tu Le:

Because that would be the formal door kind of closing on exports.

Lei Xing:
Nail on the coffin right sort of yeah almost.

Tu Le:

Because, but the one thing that's much different from the EU to the United States’ perspective is that the EU is still welcoming foreign direct investment into the EU for manufacturing locally. But this moves into, the world is bifurcating. Right now it's the United States and China that's bifurcating from a technology standpoint and from an electric vehicle standpoint. But now, the big thing is, will the UK follow the U.S.? Because when I was in London, one of the things that they talked about was, what do we do with the data and things like that from Chinese EVs? So the UK could also really follow that. Will Canada follow? Will other regions and countries follow? And so there's still some uncertainty outside of who the next president of the United States is going to be. And so part of that negotiations and lobbying for lower tariffs or no tariffs, there's probably also this softening of don't restrict our technology in the EU, I bet.

Lei Xing:

China and the EU, there have been intense talks. China and the US, nothing, as far as I know. And Ministry of Commerce put out a statement this morning saying, basically recapping the kind of the discussions, intense discussions that have taken place in September. And there'll be another discussion on October 7. There's a technical team among the two meeting and the commerce ministry did say they will consider everything to protect the interests of the Chinese companies, retaliatory measures, explained. What could those be? We don't know, but I think there's still hope among the two sides that whether it be investment promise, whether it be minimum pricing, that a potential political solution can be reached. So that remains to be watched, I think, for the better of this month. I don't think it's the end of the world for the China EV Inc. And I don't think it helps the EU automakers that much anyways to protect them from injury, the so-called injuries. I think the China EV will still find their way into Europe. Xpeng being one example.

Tu Le:

I think the more important thing, Lei, you know, we talk about EVs a lot, there seems to be a lot of overcapacity on the battery side in China. So I think that's also an important aspect that we should point to because the EU and the United States, there's going to be a lot of capacity coming online in the next three years, not only on manufacturing, but mining and refining. it's going to create arbitrage opportunities and probably a little bit of, you know, who's going to, whose IP is going to be running these battery cell factories. Because in Michigan, CATL has partnered or looking to partner with two of the Detroit 3, indirectly with GM and directly with Ford. And Gotion has famously been looking to open a factory in Michigan as well. That's not right now super popular politically. And to answer your earlier question or your statement, I'd say that the Chinese government is kind of backed away from engagement with the U.S. government just because they know Biden is leaving. And so to have to negotiate or discuss or lobby the Biden administration when he's going to be gone in January is probably not something that they want to do, especially if they make any progress and then all of a sudden they have to start over.  You know, I think that that's probably one of the reasons you're not hearing about, the Chinese and the Americans are engaged in trying to negotiate or talk through the 100% tariff and the connected vehicle restrictions. One of the things that I think could be indirectly related to the restrictions we talked, we'd heard about from the Biden administration about connected software is that WeRide is delaying their IPO in the United States. I don't know if you saw that.

Lei Xing:

Yeah, well, I mean, as it stands today, here's what we have. The 100% EV tariffs in place in the US, 100% EV tariffs in place in Canada, as high as 45% EV tariffs in Europe for the next five years. At least that's the process. That's where we stand today. It's interesting as we look forward to the Paris Motor Show, being in France, which is the most adamant about, you know, in favor of the tariffs, roughly a dozen Chinese brands will exhibit at the Paris Motor Show. And Stellantis, Leap, Volkswagen, Xpeng are going to be on the same stage in Europe for the first time. All with this background of this now EU tariffs voted in place, it's really an interesting time. And I mean, the Chinese brands are saving pretty much the global auto shows, especially the European ones. And even the homeboys, hometown boys, Renault.

Tu Le:

That's why it's so disappointing.

Lei Xing:

Renault, Stellantis, all of these, they have something to do with the China EV Inc. It's pretty interesting time for everything to have played out as they have.

Tu Le:

We should let everybody know, that you and I will both be in Paris for the show. You're going to be there, you know, like a ninja, like a couple days and you're out. I'll be there for a little bit longer. I'll be there a little bit longer. So.

Lei Xing:

Yes. Yeah, that's yeah.

Tu Le:

That's all I have. actually, I go ahead.

Lei Xing:

I mean, I was there two years ago. That was the first time I traveled internationally since the pandemic. LeapMotor had a small corner. If you didn't notice, they had the TO3 and the C11 in a very small corner. And now they're part of the Stellantis. Two years. How the industry changed, that epitomizes how the industry could change in a matter of months, right?

Tu Le:

And it seems the only real alternatives with all the protectionism and the walls coming up is partnership and dialogue. You know, so I just don't know, at least in the United States, how successful a brand going alone into the United States outside of BYD is going to be when entering North America. The climate right now is just not great for entry, but it's an unstoppable force. The Chinese EV industry is an unstoppable force. And you said five years for the EU, let's say three or four years at the most for the United States before a Chinese EV company eventually tries to find its way in. Now, if the connected software and then hardware does the restrictions do take effect, they're going to have to work with tier-ones from the West in order to sell those products into the United States. So like you said, it never gets old in this industry. So I'm glad you and I do this show because it's a great excuse for us to keep up to date on everything.

Lei Xing:

Keep up to date, rift.

Tu Le:

Yeah, so that's all I have. There are a couple of comments. So let me read this from Dil Yen. Why do you think ZEEKR dropped Mobileye from all its cars but left it in the new 001 WE 95-kWh rear wheel drive?

Lei Xing:

Have they? Maybe I'm not up to date on that, but it looks like, well, Mobileye has been facing some difficulties in some of their businesses, right? They killed the LiDAR part of it, right? 

Tu Le:

Yep. Supervision they have now, because…

Lei Xing:

And then kind of the recent Intel possible takeover of, Intel of Qualcomm adds to this kind of the complexity. Intel owns Mobileye, right? And Mobileye is listed. I think there's strategic direction. And it simply comes down to the cutthroat competition again in the Chinese market, which supplier you use to get you to the best feature, best function, functionality. And Mobileye is behind.

Tu Le:

You're being too nice. I just think Mobileye’s technology is yeah, behind.

Lei Xing:

Yeah that's the simple. And then for somebody like a ZEEKR who moves fast and who launches three different generations of the model in the same year. I mean, it's like, sorry, I have to, you know, choose whatever is the best for me and bye bye. You know, that's how the competition is. It's too bad.

Tu Le:

It's like running a marathon. And I had alluded to this a couple of episodes ago where the Western suppliers can't keep up with the Chinese EV companies. So Chinese EV companies want to source from the Chinese tier-ones and tier-twos because they've been conditioned to be able to keep up or at least try to keep up better than the Western tier-ones. And as for why it's in the 001 but not in others. I don't know that to be a fact. I'll check that out. But there's probably some level of contract requirement for because the agreement between Mobileye not with ZEEKR, it's with Geely, correct?

Lei Xing:

Yeah. Maybe it is with ZEEKR. I'm not sure. I'm not sure of the arrangement, but I think, yeah. 001 is the one that has the NZP while the other one is also, but I think that's the one that started with the Mobileye. What is it called? 

Tu Le:

Supervision.

Lei Xing:
Drive or something? Yeah. Supervision. Supervision. Yeah. Yeah.

Tu Le:

Supervision is the, yeah. So the, and here's a, I'm going to plant a little seed. I was on a discussion with Jack.

Lei Xing:

Talk about your week or something if you have time. Or if you want.

Tu Le:

Okay, yeah, hold on a second here. But let me save this. I was on a video discussion with Jack Wiest, which is the Intel Auto head. He got moved to Beijing recently and he lives in CBD. So that is going to be dropping next week. I was interviewed by Junko Yoshida, who covers, who has a media outlet. Yeah, so if you're interested in learning more about Intel strategy for China, then tune into that video drops next week. Now about me, the Michigan Tech Week, it's the largest conference tech conference in Michigan. It's held at Michigan Central and New Lab where you've been too Lei. Great event for founders, and I was part of the planning team. So it's really, really good. It's investor heavy, partner heavy event. so I've been down in Detroit almost every day for the last five or six days because not only for the conference, but there's always after parties, just like any major conference. And.

Lei Xing:

Sure. That's why I said you're exhausted.

Tu Le:

Yeah, and then, you know, I get invited to these after parties, but I want to be a part of my kids’ life too. And so I've been driving back, going to events. I mean, driving back, going to like, like your volleyball, my, my kids’ sports. So it's been a crazy couple of weeks. but you know, I…

Lei Xing:

Well, it's silver October, right?

Tu Le:

Yeah and yesterday I did a workshop at Michigan Tech Week to talk about global EVs and batteries. Really engaging crowd and asked a lot of great questions, seemed to be surprised about some of the things that, some of the facts, some of the data, some of the numbers that I'd thrown out there. So we're starting to see at least locally in Michigan, a bit more curiosity, wanting to know more about what's going on because if this has nothing to do with the Chinese car companies, but Stellantis is in the news every day here because sales are just tanking. And they had kind of put the scrooge to the customer a couple of years ago by making Grand Wagoneers $120, $130,000 SUVs.

Lei Xing:

I'm seeing a lot of those in my neck of woods.

Tu Le:

Well, they're probably heavily discounted. Let's just say that. If they're new, if they're new, they're probably, they look nice. My wife doesn't like them, but I mean, they're big. They're really big, yeah.

Lei Xing:

Yeah, I call them school buses.

Tu Le:
Yeah, so yeah. And then yesterday there was a thing called, no, Wednesday there's a thing called On Demo Day where it was at Ford Field and investors throughout the Midwest. Some, some even from like California flew in and it's different than a pitch day or a demo day. The founders actually get desks and the investors reserve times to sit down with the founders to learn more about their companies. And it's important to me.

Lei Xing:

It's like eight minute dates, right? Or something. Just go around like, yeah, speed dating, yeah.

Tu Le:

Yes, yes, speed dating. Yes, speed dating. And it's important to me because one of the many hats that you and I wear a lot of different hats Lei, is supporting the mobility founders that are building the next small electric vehicle, that are building autonomous little delivery vehicles, things like that, UAVs. so the, so have you heard of this company called Refraction AI? They do small delivery vehicles. But anyways, they blew up. They went out of business. So that was my last 10, 8, 9 days. And then next week is Battery Show. 

Lei Xing:
Yeah, yeah, they somehow, they changed it to October. used to be with the Detroit Auto Show, right?

Tu Le:

Yeah, well they, because remember it was in Novi, now it's in Detroit.

Lei Xing:

In the Huntington Place, The Cobo Center, yeah.

Tu Le:

At the where the auto show is. Yeah. And so I'm going to be on a panel at the battery show. For those that are going to be in Michigan for the battery show, come find me. Actually, there was another question. Let me read it to make sure that we can answer it without any controversy. So this is from Ryan, I think you know Ryan.

Lei Xing:

Ryan Soh? Mm-hmm. I met him earlier this year.

Tu Le:

Yeah. Okay. When does domestic China call time on SUV? Because the reason why I am, I'll have to get back because I'm not sure I understand that question. Let's read this one. With birth rates at record lows, SUVs for Chinese families feels like the previous generation's taste and preference is the next wave of smaller cars for single women with disposable income. How is the ZEEKR X doing? What is the next market opportunity to capture the imagination of OEMs and consumers that will keep volumes growing and prices rising? Well, so let me let me start, Lei, and then you can riff off of me. First of all, China's a unicorn. Even a small market in China, market segment in China is larger than some country’s entire sales volume. So SUVs are always going to be fairly popular in China and it has nothing to do with having a family, number one. And so I think the B-segment SUV, and I'm not saying like a Great Wall Motor or a TANK SUV. I'm saying the crossover ONVO L60, Model Y type vehicles will always be popular in China and will always be segment leaders. And then I think we're going to get into different form factors on EVs as we move into Level 3 autonomy or intelligent driving, because now all of these instrument panels and front consoles can be configured differently. And I think we're going to see the experience of initial designing for EVs kind of evolve into, how do we optimize space and comfort? But the important thing is as the driver and the front passenger seating evolves and change, maybe it's able to swivel so that these people are able to look at each other and talk to each other. Now we have to figure out, okay, is there car sickness and how do we combat that? And so there's all these different challenges once you make wholesale changes to design. So that's going to be the most fun thing to watch for me as really intelligent driving becomes much more mainstream and automakers that really want to take some risks like a JIYUE, how do they evolve the interior and how it's presented to the rider because maybe they're not the driver anymore.

Lei Xing:

Yeah, well first of all, China is one, is still a new car market, but also at the same time, it's a retention market. So what does that mean? That means the number of first-time buyers are shrinking and the number of repeat purchases, the number of people who may be trading in their existing vehicle, at the current incentives that are in place to do that, and the ones that are buying additional vehicles, given the recent stimulus they feel better to consume, to spend. That's what will drive the market. That's number one. And second, in terms of form factor, I think Ryan probably was talking about the MIX, not the X. MIX is kind of the CANOO style MPV-ish. And then you have something like the Li-Auto-Mega and the iterations of BEVs that come after it, but with a similar silhouette. Station wagon.

Tu Le:

I think he was talking about the X because now he's saying that there's less families, less children. So these smaller vehicles like the X, how are they going to grow in popularity?

Lei Xing:

Yeah, well, I mean, the smaller X, also the station wagons, you know, the sedans, MONA, I think they'll remain popular. GTs, the shooting brakes, right. 

Tu Le:

Denza, Z9.

Lei Xing:

And then for a lot of these families buying, they're more than likely, again, they're switching, they're trading up or switching brands. They may already have a vehicle, but as a family, they want better feature, more cool vehicles. So I think there's a lot of opportunities still for many of these different form factors. And you're going to see that will continue to launch over the coming months and weeks.

Tu Le:

And another, I think, the important thing that will continue is that China is going to drive global design and form factors for Europe and the United States. So what we see in China in two or three or four years, we'll see in Europe and the United States in five, six, seven, eight years. I think China is going to be a leader with that design language and experimentation.

Lei Xing:

Yeah. The thing is, remember that the designs of many of these Chinese brand models come out of Europe. Remember that, right? With these European designers or Chinese designers, in some cases. 

Tu Le:

And American.

Lei Xing:
Could that switch over? Could that be flipped? Meaning the Chinese brands entering Europe will have vehicles specifically designed for Europe, right? I mean those are some of things that could happen.

Tu Le:

Alright man, we've really only talked about two things, but I think we went a lot deeper than I anticipated. But it's good, the tariffs we talked about, and then September sales. alright man, I'm good, I don't have anything else.

Lei Xing:

Yeah, I know you have another busy day coming up. And good luck. Have fun.

Tu Le:

And yeah, have a good parent-teacher conference as well.

Lei Xing:

Yeah, well, it's, all right, you know, and there'll be a volleyball game tonight that we can watch.

Tu Le:

Yeah, okay. So cool, man. Hey, everyone, we're still trying to figure this live stream out. So thanks for joining us. Good morning, good afternoon, good evening. We will talk with you all next week.

Lei Xing:

Thank you again, we'll talk next week.