Episode #186 - BYD Keeps Smashing Records, Germany Legacy Inc Continue Struggles, Avoiding a Trade War

Tu and Lei discuss BYD's continued success and marvel at their ability to break record after record. Tu points out that their operation efficiency is one big reason they're able to continue this blistering growth. 

This leads to a larger conversation about October sales and the sales drops of the European automakers (BMW, Mercedes, Volkswagen Group, Porsche) and how much they should be worried about their future prospects. 

This leads to a discussion about both Stellantis and Volkswagen Group and their recent outwardly vocal pleas to get smaller to shed costs. 

The podcast closes out with a tariff discussion and how the EU and China may be able to avoid a trade war since both sides really don't want that.  

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• 9:15 (Cont.) Episode #186 - BYD Keeps Smashing Records, Germany Legacy Inc Continue Struggles, Avoiding a Trade War

Transcript

CEM #186 Transcript
Recorded 11/1/24

Tu Le:

Hi everyone and welcome to the live China EVs & More podcast. We will open the room up at around the 40-minute mark to anyone who's keen to ask us any questions. So feel free to post them into X or YouTube. In the next hour or so, 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 this morning is based on our opinions and should not be taken as investment advice.

Those that are new to the show, welcome. And to our loyal listeners, welcome back. We ask that you smash those subscribe and like buttons so that you don't miss anything from us in the future. Also, I'm confident that Lei and I are two of the best in the world doing this. So help us get the word out about this show to others. 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 that at sinoautoinsights.substack.com, which of course I encourage you all to do. A day after Halloween Lei. Happy Halloween, sir. Can you please introduce yourself?

Lei Xing:

A back to the state side Lei, and good morning, good morning from my side. This is your co-host Lei Xing, former chief editor of China Auto Review. And this is episode #186. And we start off with the scary number. I'm staying on Halloween themes here. Because here we just had a Halloween last night yesterday. BYD, half a million NEVs sold in October. What's your initial reaction? I mean, when you look at that number, let me tell you mine. Even for you and I, for as long as we've watched this industry and the market, I still can't wrap my head around half a million units in a single damn month. I mean…This number just came out. So…

Tu Le:

The one million units in a quarter just happened in Q3. And so I was on CNBC two nights ago talking about how that was amazing, but that we would expect well larger than a million units for Q4. So now they only need 250,000 units for November. December to hit that million units and I'm thinking they're going to be able to do it maybe in November. What do you think? And remember that October was only three weeks.

Lei Xing:

Yeah, so they're going to, I thought they're going to get to the 10 million units in December, but looks like they're going to get it done in November. And right, it's, they're on track at the half a million, that's 6 million units a year.

Tu Le:

And we should always marvel at not only the velocity at which they launch new products, update current products, update current technologies, but also the fact that they're able to, on the operation side, not only build the vehicles, but build the batteries, build the chips. So it's not just I'm going to order from a bunch of suppliers and then put everything together and then ship it to customers. They're responsible, as most of our viewers know, for building their own batteries and fabbing their own silicon or a lot of their own silicon. So the fact that they're so operationally efficient and able to continue to push records every month, every quarter, every year, to where I think five years ago they were barely at a million units. Now they're going to track to 6 million units likely in 2025.

Lei Xing:

So yeah, some historical perspective. BYD was stuck on about half a million units annually for as long as I could remember before the pandemic. Half a million units…

Tu Le:

Yep. Half a million. They did that in one month!

Lei Xing:
Yeah, half a million units annually, mostly ICEVs. And now they've done half a million in one single month, completely NEVs. And from September to October, it was nearly a 100,000-unit jump. And I'm just looking at the chart I'm putting together for October. So SGM Wuling, and Geely Auto, they both did over 100,000 NEVs in October. And BYD did the same number, but that's the difference from September to October. It's just hard to fathom. It's very hard to jump from 400,000 to 500,000 in one month.

Tu Le:
So to peel the layers of the onion back there at 1.3 million last quarter or 1.13 something like that. 

Lei Xing:

1.13 million last quarter. Yep.

Tu Le:
Yeah. And so they on the BEV side, they were lower than Tesla in Q3 by about 40,000 units, 30,000 units. So it's only a matter of time before unless Tesla in the next three, four or five months launches a new product or a majorly refreshed product that would bring new customers that wouldn't normally look at Tesla into the fold. It's only a matter of time. I think in 2025, they'll surpass, BYD will surpass Tesla as the number one BEV maker in the world. 

Lei Xing:

And we can kind of argue because Tesla's kind of indicated that they can achieve a minor growth this year, which means half a million BEVs globally. Now we can kind of argue and debate which is the more significant achievement. Half a million NEVs in a single month from BYD or half a million BEVs in a single quarter globally from Tesla. It’s hard…

Tu Le:

I think you can have both. think you can walk and chew gum at the same time. But, the crown for number one selling vehicle, remember last year it was number one selling electric vehicle. 

Lei Xing:

It's still the model Y.

Tu Le:
This year it's going to be the number one selling vehicle, the Tesla Model Y. So Tesla is still breaking records and both very, very impressive, although it just seems like BYD is accelerating its momentum and Tesla is kind of currently at a level pace. And that's what's amazing to me because you just said starting in 2019 or until 2019 or 2020, however you want to look at it, BYD was struggling to get to 500,000, 600,000, 700,000 units.

Lei Xing:

And let me, I just looked at some new, latest numbers putting more perspective into this half a million units and the 1.13 million quarter. Out of those 1.13 million, the three models I'm looking at is the Seagull, the Qin L, the Song PLUS, the three models are all below $20,000. They accounted for 35% of those 1.13 million units.

Tu Le:

And they have, when you separate the DM-i versus the BEV, they probably have over 2,000 models for sale, at least.

Lei Xing:

Well, I mean, those models launched at the end of Q2, including the Qin L, their volumes have ballooned in Q3. And in Q3, I think they just launched like at least a dozen new or additional variants. So this is nonstop. And I think of a BYD is simply a three-thing game: cost, efficiency, and a wide range of models, currently $10,000 to as high as $70,000, $80,000, and everything in between.

Tu Le:

And so this is where everything's rounding out because of Fang Cheng Bao, Denza and Yang Wang. So the brand hierarchy goes BYD, Denza, Fang Cheng Bao, or is it the flip-flopped? Denza, Fang Cheng Bao, and then Yang Wang. And I think BYD is going to have a lot more difficulty with the Fang Cheng Bao and the Yang Wang brands, especially in the export markets or the international markets. But I spoke with Leah, you spoke with Leah at Paris. They're in 95 countries now. So, the crown of international is again, only a matter of time before BYD really becomes a major player, of the 1.13 in Q3 that were sold, I think 90,000 were exports. So still pretty small base, less than 10%. But I think that, not only is the size of the pie growing, but the percentage of exports will continue to climb above 10% especially now that the tariffs in Europe have been launched and we're going to see probably the ratio of BEVs to PHEVs creep from 55-45 to probably 40-60-ish in 2025 and beyond because BYD, number one, globally PHEVs have become higher profile, a bit more in demand. That seems to be the cleaner path for BYD to increase its sales volume in Europe.

Lei Xing:

Yeah, so half a million. And then the other headline was the Q3 revenues topped Tesla's Q3 revenues, right? So those are the positives. The negatives, Stella Li was on the record recently in the media saying how messy Europe was in terms of getting a foothold into Europe. I think you've probably seen the reports at the Paris Motor Show. Germany numbers are not so good. These are things that's going on at the same time. So it's not without growing pains, but they're chugging along.

Tu Le:

Oh man, Lei, it just seems like in Europe, the consumer side of Europeans are very open to the Chinese brands. A lot of foot traffic at Hongqi, a lot of foot traffic at BYD, a lot of foot traffic at Xpeng. And this is going to clash, I think, really, really dramatically against the struggles, and we'll talk about this more a little bit later in the show, but the struggles with Stellantis and Volkswagen Group, there's going to be a consumerism side, I want the best value, or the national pride side, I think, with some Europeans, especially in Germany, Italy, less so in France maybe because Stellantis has two brands there and I think we'll see refreshes for the Peugeot and Citroen brand. Obviously, Renault seems to have been reinvigorated by Luca (de Meo) and his team and so it's going to be really really interesting. I'm hopeful man that GM, Ford saw the excitement of the 4, the 5, in the Paris Motor Show and are like, okay, we need to pull in smaller vehicles, build some excitement around those, and then launch them as fast as we can in the United States. Because the best remedy for China EV Inc. is bringing some heat via competition and value in the products that you launch in the next 20 months.

Lei Xing:

Well, it seems for Ford and GM, the script has been flipped a little bit, especially considering Ford is stopping production of the F-150 Lightning for the remainder of the year, while GM seems to be on the up with their newer EVs and what they're going to do in China. 

Tu Le:

Specifically the Equinox and the Blazer.

Lei Xing:

Yeah. Yeah. And then I'm looking at quickly on a little bit more on the October EV sales. Quite a few number of brands got new record highs. These included LeapMotor, almost at 40,000 units. Xpeng almost 24,000 units. NIO, sixth month with above 20,000 units. I think ONVO did a little bit over 4,000. Xiaomi, they did 20,000 units as Lei Jun said they would. Even ID., SAIC Volkswagen ID. got over 14,000 units. And our good friends at JIYUE, you know, it's not that high, but it's better than last month, over 3,000 units.

Tu Le:

Yeah, and the 7, it's called the 7. 

Lei Xing:
07. It’s called the 07.

Tu Le:
07. Honestly, the naming is super confusing because the ZEEKR is 007, the JIYUE is 07, and they're completely different vehicles. The JIYUEs seems to have gotten some pretty good reviews.

Lei Xing:

Yeah, I mean, that's what almost at the expense of Joe Xia constantly doing live-streamings to market, he's become their chief marketing officer you now, this guy's on live stream all the time from my WeChat feeds.

Tu Le:

So one of the major things was the live stream 24 hour 15,000 km, was it, Lei?

Lei Xing:

Something like that, I don't know how many that was, I mean, that livestream though, what showed was that they did over 2000 km in ADAS mode.

 Tu Le:

Which is Baidu’s

Lei Xing:

I mean, every which way you can market it.

Tu Le:

Which is Baidu system and it's vision only.

Lei Xing:

Yeah. And then, Li Auto, I think Li Auto worth mentioning a little bit as they've been resilient. They're now doing consistently 50,000 a month with no new products and with MEGA not really playing a role. So it's really the 6, 7, 8 and 9. 

Tu Le:

Any role, any role. They're not really playing any role.

Lei Xing:

Yeah. and that shows you how, and they've continually beaten Huawei, their set of EREV products. And the earnings yesterday, I think they had, something that they mentioned was in the RMB200,000 and above NEV market, they're number one at 17.3%. And in the RMB200,000 and above everything market, they are a top three, beating some of the German premium brands. That's in Q3. And in Q3, I think worth mentioning is a major milestone in the China NEV market is more NEVs were registered than ICEVs in the passenger vehicle market. Pretty big. 

Tu Le:

So now it's flip-flopped. And one other statistic that I think is really important is that in Q3, one of every three NEVs sold in China was effectively either a BYD, the Denza, Fang Cheng Bao, or a Yang Wang. One of every three. So.

Lei Xing:

Yeah, roughly, I mean, they're going to do over, based on the current, I mean, two more months, they could do a million units in the remaining two months and they'll get to 4.2 million units. A third of...

Tu Le:

Okay, let me ask you this question, Lei. Do you think they'll get to one and a half in December?

Lei Xing:

One and a half you mean in Q3 or? Not in a single month no.

Tu Le:

You don't think they'll get to one and a half in December.

Lei Xing:

Not in a single month. If you're talking about Q4 1.5 million, that's pretty, very possible, I think.

Tu Le:

Well, I think they'll get closer to 2 million than 1.5 in Q4. Because I feel that Tesla is going to really dial up the incentives to finish out 2024 in a big way. including, and I'm hopeful that they do that in the United States too potentially.

Lei Xing:

Well, the 0% APR thing is going on in both markets. And likely Tesla will extend that into the end of the year. Right now, it expires at the end of this month.

Tu Le:

And we haven't even begun to talk about, depending on who the next President is, what Tesla's moves are going to be in China.

Lei Xing:

Well, you know, I actually don't think the outcome of the presidential election will affect Tesla that much in China. I think it's still dependent on the type of incentives they have in place and the type of new models coming out, either the refreshed Model Y or the cheaper Model Y. We're not even going to call it Model 2, right? It looks like it's going to be a cheaper version, smaller version of the model Y.

Tu Le:

Whenever any analysts describes a version being cheaper, that just means de-contented. So expect, so we're not probably looking at it physically from an industrial design, interior standpoint, because it's pretty, pretty bare bones already, but we're probably looking at lower range. We're probably looking at less digital features, which is if you think about it, Lei, in the China market is a non-starter. People are, companies are packing more features into lower price. And so that is a delicate dance that Tesla is going to have to really think hard about. How can they make it less expensive while also maintaining the high feature set in order to compete against ONVO, against MONA, against all these other brands, ZEEKR.

Lei Xing:

Yeah, but still, like right now, the Model Y in China, we have not seen these onslaught of Model Y killers really dent the Model Y sales that much, at least not yet, which is an interesting phenomenon that they...

Tu Le:

There will not be one single vehicle that will.

Lei Xing:

Yeah, it's a whole bunch of these killers, the JIYUE 01, AVATR 07, the ZEEKR 7X, ONVO, you know. But that's the interesting thing.

Tu Le:

And Lei, you had talked about some of the sales of the Chinese brands. So I wanted to pull in some numbers here, minus 30%, minus 13%, minus 19%, and minus 15%. That is year over year sales decline for Q3, for BMW minus 30%, Mercedes minus 13%, Porsche minus 19%, and Volkswagen Group minus 15%. Okay, and so I feel like I say this every month, they still haven't found a bottom. number one. Number two, if you look at Porsche and Volkswagen, this is in addition to the 23% sales declines that they had that year or last year. And so this pie, now, overall sales volume is increasing a little bit in 2024 for the China market, but the market share that they're losing is getting filled by NEV, Chinese domestic players. And, this has forced Volkswagen Group to talk about just a month ago, they were like, we're going to close one facility. Now they're looking at three facilities. Now they're looking at reducing salaries by 10%, freezing them for two years. One thing that is really, really glaring, and I'm not a part of negotiations obviously, is the fact that no executives or there are no management proposals that say we're going to reduce our salary to a million dollars. No one said that. And so that's where it's like, okay, I feel like I'm so important that you need to pay me 50 million for flushing this company down the toilet.

Lei Xing:

Well. But that is only a gesture, a goodwill gesture. 

Tu Le:

Man, it's symbolic.

Lei Xing:

Yeah, it's symbolic, but in the second round of their bargaining, I mean, Volkswagen put out a statement saying really, yo, our employees, we need you to do your part and get 10% less pay, please. Otherwise we cannot, you know. It's like a survival, matter of survival really, unless we have to shut the three plants. And this BYD, the half million NEVs is just that much salt on the wound on these foreign automakers.

Tu Le:

You almost look at it like all the sales losses from Volkswagen Group. Let's create context. Volkswagen Group at its peak was well over three and a half million unit sales, I believe, Lei. You correct me if I'm wrong in the China market for annually. 

Lei Xing:

4 million group-wide. 

Tu Le:
Yeah, four million, right. And Mercedes, Audi, BMW traditionally have been between 750 and 850 in the China market. So from an absolute volume standpoint, Volkswagen Group is bleeding much more heavily than any of the premium brands.

Lei Xing:

The one number I remember in Q3 earnings was 42% drop in operating results. That was the one number I remember. And 2% operating margin for the Volkswagen brand. And they wanted the long-term to get to like over 6%. I mean, how are they going to do it? Cut salaries by 10%, shut plants.

Tu Le:

Hey, so let me finish my thoughts. So Volkswagen Group's losses, they're being picked up by BYD effectively. Because collectively, all the other EV makers in China, they still don't add up to the half million units that you're talking about from BYD or a million units in one month kind of thing. And Stellantis, another important point to make about Stellantis is that the Grand Cherokee, the Wagoneer, the Grand Wagoneer, the Jeep, they were all consistently increasing in price during COVID. And we got to the point where the Grand Wagoneer was selling for $120,000. And so now their goal because U.S. consumers have rejected those prices. Their goal is to get U.S. inventory levels down to 330,000 units by the end of the year. So Q3, they bled 50,000 units of inventory. Now, I looked yesterday, because my brother works at Stellantis, I was looking at a 4xe Grand Cherokee. There aren't currently a ton of great deals for Jeep or for those vehicles. And so my expectation is that Q4 in order to get to that 330, they're going to have to put some, a lot of money on the hood, which Tavares is unwilling to do at this moment. And you compare that to how happy he looked in Paris when he spoke at the Leap Motor press. So. Urgh…

Lei Xing:

Yeah, it looks like, he's out, right? He's out by the end of next year. 

Tu Le:

End of next year, think, yep.

Lei Xing:
So it's somebody else's problem, most likely, to really...

Tu Le:

I think he's just trying to hold on to this year's pay and then next year's pay, you know, 60, 70 million dollars or Euros or whatever you want to call it.

Lei Xing:

And I'm thinking of these numbers, half a million units. That's exactly the number that Volkswagen mentioned that they're losing and they needed to shut the plant, right? Two plants worth of half a million unit of capacity. yeah.

Tu Le:

And let's stop there for a second, Lei, because this is the reason to have dialogue between China and Europe because while Volkswagen Group is looking at, and we talk about half a million units, but that's thousands of employees that are going to be laid off. The irony is that maybe due to the tariffs, but also looking at who voted for them and who voted against them from the European Commission, the Chinese EV companies might be the ones that rehire those people to work at their factories in Europe. And so I'm not saying they would come to the rescue. What I'm saying is that it would be the shift of employment from what traditionally was what seemed like a European right, where if you were working blue collar and you did everything right, you would have this job for your life. At least Volkswagen Group had made that commitment. Now they're trying to take that back because the room is on fire and they feel that they need to really, and this is a true restructure. This is not, we need to lop off a little bit of fat. This is like, we need to right size. And to your point, three factories, because we always have to remember if a vehicle has 40, 50,000 parts, so there's a few thousand employees at the factory and then tier one, tier two, tier three suppliers, we're talking maybe a million people losing jobs because a couple of factories are being closed.

Lei Xing:

And back to China, Ralph Brandstatter, the CEO of Volkswagen Group China, recently has been on the record saying that they are content with losing market share, the so-called value over volume contentness. And they're still betting, I think, on 2026 when those CMP, China main platform, and the collaboration with Xpeng on the B-segment SUVs, these products come out, they're betting that they will right the ship with these type of products, but I'm just worried that if those products don't work, I think they are in danger, very much danger. Because by then, the China EV brands, where will they be, the type of features, the tech, how they feel, how they drive, the way they can command pricing, premium. I just put a big question mark on that 2026 bet. It's very scary, you know, but they seem to be confident that they’ll, that's when they can pounce and get back in the game.

Tu Le:

So. You and I know that two years is a long time in China terms, in China time. And so, not long ago, I'm saying less than 10 years ago, the foreign brands collectively accounted for more than 60% of total sales in China. Now that I think they're right around 25% or 20% as the pie has gotten bigger, as the China market has continued to grow, now take out the COVID years and you'll see this trajectory like this. China market in the next five, seven years could get to over 30 million units. Could they still sell a million units into the China market, 2 million units into the China market? Not at the current trajectory. And I'm not sure I have a ton of confidence in the current team to be able to, again, it's not about skill sets, although for European brands specifically, for German brands specifically, the software development and the digital services is really going to be this bugaboo that they struggle with. But hence, Volkswagen Group is working with Xpeng. I think their better days are behind them. You know, and this is kind of sad because you and I know that Volkswagen has been, as long as we'd known as little kids, right? Because you and I are just car people, regardless of the work that we do because of your father and because of where I grew up. And to believe that my sons might not see the Volkswagen brand the same way I do is kind of crazy, isn't it?

Lei Xing:

It is a little bit sad considering this year is Volkswagen's 40 years in China. I mean, they built the Chinese auto industry, to put it in simple terms. 

Tu Le:

I'm going to give GM some credit on that too.

Lei Xing:
GM, right. I mean, but Volkswagen was earlier, right? How the joint ventures work, the North and South joint ventures, 50 million vehicles sold in China through those two joint ventures and imports. And they've contributed as much to the auto market, Chinese auto market as anybody has, if not more than. It's nasty. It's the Darwinian competition, right? Yeah.

Tu Le:

So, and I want to…

Lei Xing:

I mean, it's not like we're happy that they're not doing well, right? Nobody's, you know, it's just…

Tu Le:

I want competition and they're not competing. 

Lei Xing:
Which we saw at the Paris Motor Show, very healthy, very, you know, we saw that, which is great. But in China, it's just another story.

Tu Le:
And being just outside of Detroit Lei, and having the Reuters conference fresh in my mind, speaking with a lot of OEMs, there's still a bit of whataboutism and denialism here. And we got to get past that. And we got to get super laser focused on how we're going to make things better. Now GM they're out there getting it done. They had big mistakes with the Ultium batteries and the Blazer launch initially, but it feels like they're learning. I know that Ford and GM for sure, and Stellantis to a lesser extent are starting to really reshape who they hire and the skill sets that these folks have, which is a win, but Volkswagen group can't do the turnaround without the Union in Germany, GM can't do it and Ford can't really do it without the UAW's cooperation. So will Cavallo or is it Cavalla or Cavallo? 

Lei Xing:

Yeah, Cavallo. Yeah.

Tu Le:

And what's the guy's name on the UAW? I forget his name. Anyways, the UAW head.

Lei Xing:

Yeah, I forget his name. (Sean Fain)

Tu Le:

Let's not focus on the rhetoric, but let's focus on the results because they're not going to soften what they say in the media. But there needs to come to, there needs to be this come to Jesus moment where the unions see that these companies that are at a moment of weakness. So, yeah, anyways, I don't want to dwell on it too much. But let me say this, Lei, if I was living in China right now and I could get a MINI Cooper E for $20,000, I would probably do it.

Lei Xing:

There's just too many to select, I mean, it's hard to, at that price range, I talked about the RMB100,000 premium EV, right? It's the oxymoron that is what it is in China. 

Tu Le:
Man, so let me see here.

Lei Xing:
And speaking of those cheap EVs, maybe we should end on the EU tariffs, which was voted into, well, which went into effect basically on October 30.

Tu Le:

So we knew that they were going to happen, we just didn't know what the numbers were going to be, but you and I kinda sorta knew that they might've reduced them a little bit, but they weren't going to eliminate.

Lei Xing:

Yeah, so at least I think from this, the moment this started, despite all the, what, the discussions, the dialogues, the objections, the whatever, I think the outcome was pretty decided given EU Commission, I mean, the way they put out this 200-page document, right? Detailing all the investigative details. I mean, that was a foregone conclusion, except few tweaks of, you know, from 39% down to 35%, right, for SAIC Motor. So the latest Ministry of Commerce just confirmed that they have a team from the EU Commission coming over to China, continue this current dialogue on price, the so-called price undertakings and there's been some misunderstandings I think between Geely and SAIC Motor put out a statement saying they did not negotiate with the EU Commission individually while the EU Commission in that document said smart, Volvo and SAIC Motor submitted individual price offerings in addition to the CCME, which is the organization that's representing all the Chinese EV companies. So there's been some development recently that's been interesting aside from the tariffs themselves. So I think in the short term, those discussions will continue, but the likely of something that says, we're going to give you a much better tariff, that's slim. I think that's slim. And the prospect of this is in place, right? And just let's just face it, suck it up, you know, launch PHEVs, right? Do what you have to do.

Tu Le:

Well...I think what's really important, is, yeah, I think that the EU and China are negotiating, or least China is negotiating, because they also see, and Jeff, Jeffrey had posted this in the comments, so thanks, Jeff, for the few comments. We may be coming to China. Before the end of the year, there's probably a 30% chance for me. I'm looking at making a quick trip, but we'll let you know for sure. But the Biden administration last month had talked about connected software being restricted and then connected hardware being restricted three years after that. And the Chinese government is probably trying to continue that negotiation to make sure that the EU doesn't have that on their radar. And so they're looking because that would effectively keep the Chinese companies out of the European market as well. the EU is negotiating because they still want that foreign direct investment into countries. And so that's going to need to be resolved somehow because that's still open-ended, okay?

Lei Xing:

Yeah. I just don't think Europe will do that considering the interests of the Europeans, especially the Germans, in China. Never say never, but I think currently it's just the EV tariffs in place. That'll be the point of discussion.

Tu Le:

I don't think they want to do it, but I don't think they can leave it open the way they have. Because whoever the next president is going to be might pressure the EU. And so, because right now it just seems very open-ended. There's not really a clear policy from the European Union or the UK government about that stuff. And so with the United States taking its current stance, that means the EU needs to comment about it. The UK government needs to comment about it or create a set of new regs for themselves.

Lei Xing:

And it looks like the EU Commission, I mean, from Dombrovskis, I mean he's very open on saying that, you know, we continue to discuss, we are, you know, to see any sort of solutions that can be reached. That's the thing we don't see from the US, the willingness to discuss even. So, it gives, the things on the table…

Tu Le:

Well, we're a week from electing the next president, Lei. I just don't think that it would look very tough for either candidate to be like, yeah, we're open to negotiating and having to sit down with China.

Lei Xing:

Exactly. then the other issue that was recently in the headlines was China supposedly directing the China EV companies where to invest or whether to invest at all into the countries that voted in favor. My own personal opinion is I question that first of all and second, it's probably a non-issue because look at where the investments have been made already. Most of it is not in the countries that voted in favor of the tariffs. Maybe something about producing, I don't know, Stellantis producing some of the LeapMotor possibly vehicles.

Tu Le:

In Italy?

Lei Xing:

Right, that could be an issue, but I don't think that headline on the directive is an issue. Local production is obviously a way to circumvent the tariffs, right? And that's been happening. But I personally don't think it's much of an issue. Anyways.

Tu Le:

Yeah, I think that the Eastern European countries are much more favorable in general, just because of the labor rates. And there's already a bit of an automotive supply base down there, and then if you look at, I was talking to somebody at the Paris Motor Show, in Morocco has also really been able to attract foreign direct investment from automotive companies. So perhaps Northern Africa is an opportunity, whether it's Northern Africa or Turkey, it looks like they're also trying to bring in foreign direct investment and automotive capacity in those areas. And strategically, it would make sense for the Chinese companies just because it's so close to the Middle East, so close to Africa, still in Europe, and you could go back to Asia or whatever. I'm looking at the newsletter. don't have anything else today. I looked at all the comments. Not a lot going on with the exception of Jeff's couple of comments. Karma seems to be returning. Favors to BMW stores here in China. Two large groups failed. Insolvency lost BMW franchise agreements.

Lei Xing:

So BMW just closed down one of their 5S stores in Beijing. And then right before, wait, maybe, I don't know whether we talked about this. I checked out the BMW and Mercedes IONCHI supercharging station. That was interesting. And it was good, I think different variety of EVs being charged there. Going back to Li Auto a bit, the thing about Li Auto is they're right now making the bet on the eggs part of the equation while they're doing pretty good on the chicken, the EREVs, before they launch the BEVs. I think that's an interesting kind of focusing on building all this infrastructure, which is still quite important to these brands. And hence why BMW and Mercedes did what they did, right?

Tu Le:

So these employees at these 5S locations, the good ones will likely get picked up by the Chinese EV makers and like the NIOs and things like that because BMW obviously has robust training programs and it's a premium brand. so I think a NIO could, or they could just kind of slide into a NIO role pretty seamlessly in China. So, hey man, happy Halloween, belated Halloween. It's starting to get cold here in Michigan. And so.

Lei Xing:

Well, I tell you, we're in the home stretch and speaking of Halloween, it's scary to think we're two months away from saying 2026 is next year.

Tu Le:

Oh my god.

Lei Xing:

And remember, like we started doing this in early 2021. So 2021, China sold 3.5 million NEVs. And BYD sold 3.23 million NEVs in the first 10 months of this year.

Tu Le:

So.

Lei Xing:

Very scary

Tu Le:

Numbers to think about for next week. Well, I'm not traveling next week and I don't think you are. So we'll be back at this Friday 9 am next week. So thanks for joining us, everyone. Good morning, good afternoon, and good evening.

Lei Xing:

Likewise, bye bye!