Episode #187 - XPeng's AI Day, Audi Re-brand non Re-brand, What Trump's Win Means

The podcast begins with Tu and Lei briefly discussing the XPeng's AI Day where XPeng unveiled a few different strategic initiatives including the development of a robotaxi and the design of its own silicon to help run it. 

The biggest news from XPeng was that they are entering the EREV space. 

The conversation then moves over to Audi's brand launch in China and Tu and Lei's differing views of the 'why' and how successful they ultimately feel it will be. Tu points out that it won't be in production until mid-2025. 

Tu and Lei spend the rest of the podcast discussing the implications of another Trump presidency, one influenced by Elon Musk and the other Silicon Valley VCs that backed his candidacy. 

Tu emphasizes that this runs much deeper than giving Tesla the advantage in the US and points to all the AI and space exploration investments that have been made by the tech bros. 

Transcript

CEM #187 Transcript
Recorded 11/8/24

Tu Le:

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 today 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 you don't miss anything from us in the future. Also, I'm confident that Lei and I are two of the world's best at doing this. So help us get the word out 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 it at SinoAutoInsights.substack.com, which of course I encourage you all to do. Lei, a in the last 72 hours the world has shifted Lei. Can you please introduce yourself?

Lei Xing:

Yeah, still digesting, still processing Lei and Tu. This is your co-host Lei Xing, former chief editor of China Auto Review. And this is episode #187. The theme of the episode is: oh dear! Oh dear, Trump is back. Audi launches Audi in China.

Tu Le:

Relaunches.

Lei Xing:

Launches the AUDI brand in capital letters and Xpeng P7+ does the minus on pricing and does the plus on pre-orders. They have the fastest pre-order for any of their model, ever. So those are some of the “oh dears.” And we talk about the first oh dear.

Tu Le:

Let's move that to the last. 

Lei Xing:

You want to do that last, okay.

Tu Le:

Let's talk about more of the straightforward stuff because the biggest oh dear is really just you and me sharing an audience but talking to each other about what we think and how the world has changed in the last four years since he's been president, how China is a lot different. Remember, this was pre-COVID, and he moved into a situation as president the first time. And so, you know, so let's start with XPeng. You know, and I know they've had an AI Day a couple of weeks ago, and they talked about a lot of things and then launched the P7+ in China orders for the P7+. So can you tell us a little bit about that, Lei?

Lei Xing:

Yeah, so on the day, I think it was on the Election Day, the evening, China time, Xpeng had the AI Day, and then a couple of nights, actually the night after they launched the P7+, which was revealed about a month ago. And we saw it at the Paris Motor Show when they announced the pre-sale pricing of RMB209,800. So about $30,000. And then that was a mic drop moment, right? And then when they announced the pricing, starting price of the P7+ at the launch, RMB189,800. So about $26,000. The playbook has been pretty familiar of how these prices are continuing to be in the range where we think they're undervalued a bit. But that's how, I mean, this whole last month, they've had this tactic in play and now they have possibly a model that's receiving even more I guess the receptive response from the MONA M03 and the MONA M03 is even cheaper but it's a smaller vehicle in the low RMB100,000 range. 

Tu Le:

And the P7+ is a sedan. And the MONA is...

Lei Xing:
It's a sedan, it's about five meter long it's bigger than…

Tu Le:

So it's a long sedan, it's a big sedan.

Lei Xing:

Yeah it's bigger than Model 3, I think they compared it to, interestingly enough, they compared it to this jargon right now called the 56E, which means 5 Series, A6L and E-Class. But they also said it had the space of an SUV. 

Tu Le:

Best class.

Lei Xing:

So let's say the GLE, X3, those type of vehicles. And I'm thinking. And the other significant thing about the P7+ is they already have these vehicles on the lots ready to be delivered pretty immediately. So there's a chance that we may get to see 10,000 P7+s, 10,000 MONA M03s in the month of November.

Tu Le:

I think it's important to look back at the P5 launch a few years ago. I think you and I, we weren't specifically impressed with that vehicle. Looked okay, more like a shared taxi vehicle than anything significant, but we thought it was going to sell pretty well. It had two LIDARs standard as an option at the time, feature packed and it didn't do well. I almost feel that this P7+ is that P5 moment, what should have been the P5 moment. So, building momentum, filling out the capacity for their factories in Guangzhou, a lot of momentum. 

Lei Xing:

And Zhaoqing.

Tu Le:
And then AI Day, they talked about AeroHT, their eVTOL, they talked about a Kunfeng…Kunpeng AI chip?

Lei Xing:

Kunpeng, well, Turing, Turing chip and the Kunpeng, yeah.

Tu Le:

And then the Tsai, Tsanghai platform. Was is the Tsanghai? But it was a neural network platform that the chip will run on to run what they introduced as a concept as robotaxis. And so everybody and their mother is getting into personal robotaxis in China. And so super ambitious. They are now, I believe in almost 40 countries as well, or launched into 40 countries, XPeng is. So this is three years in the making because originally they had launched their international operations a few years ago, but they had some hiccups. They revamped the entire team and now it looks like they're building that momentum again and having more success because at the Paris Motor Show there's a ton of foot traffic, a lot of excitement for that presser. And so good for them. It looks like they're trying to extract as much value as they can at these prices. And that means no end in sight to the price war at least through this year.

Lei Xing:

Yeah, I think currently Xpeng out of the “WeiXiaoLi” (NIO Xpeng Li Auto) is on a roll, domestically, globally outside China. I think two significant headlines out of the AI day was actually the announcement of the entry into EREVs, official announcement, that's been rumored for quite some time and now they made the announcement. But the sly thing that Xpeng did was not calling it EREV, they called it a super electric platform, but I call it the SEREV right the SEREV, because they call it the super electric range extended EV.

Tu Le:

Because it's the biggest battery on the market currently.

Lei Xing:

The funny thing is they talk about that having the 430-km range on pure battery mode and then the 1400 kilometer.

Tu Le:

Hold on, Lei. Remember, we have Americans here, so it's about, 430 km is a little over 200 miles.

Lei Xing:

Yeah, but it's pretty, it's already good, right? Even for a BEV to have that kind of range and then 1,400 kilometers combined. And at the same time at the P7+, one thing I thought was He Xiaopeng emphasized is the efficiency. They now have the 60-kWh battery that does 625 km of range which is what over, that's about 400? 

Tu Le:

600 km?

Lei Xing:
It’s about 625 km right, that's about 400 right?

Tu Le:

Okay, so that is 360, 360-ish.

Lei Xing:

Yeah well yeah and that's pretty significant for a 60-kWh battery, that's 10 km/kWh and he said four, not four cents but RMB0.04/km cost based on the night charging prices. These are things that stood out to me and also at the AI Day the other headline was the ability to upgrade your older vehicles on the chipsets from the 820A to the 8295, from the one Orin chip to the two Orin chips. I think that's something that is first that we've heard that can be done.

Tu Le:

Well, ZEEKR did it because they screwed up. And this was three years ago in the 001 because they were having latency issues, they were having issues with their infotainment system. So they offered to upgrade the chipset in the ZEEKR 001 for their customers. This is part of the Xpeng strategy as opposed to ZEEKR where they had a customer. service issue or their customer engagement issue that they remedied by eating a bunch of money.

Lei Xing:

Yeah, and then the other part about the P7+ is really continuing on with the MONA M03, ditching the LiDAR. I tweeted that Xpeng is someone that was fast in moving LiDARs onto their vehicles and they're as much as fast as they are on ditching LiDARs. And that happened within the last 3.5 years starting from 2021 Shanghai Auto Show, you were there, the P5 was claiming to be the first production smart EV with a LiDAR and now these upcoming models they're going into this End-to-End, large model based autonomous driving which has become an industry consensus. And Tesla in some ways feels validated because they've been having that approach, the vision only.

Tu Le:

As technologists and autonomous vehicle startup CTOs in the United States are bashing Tesla for not having the right tech stack in their vehicle to go fully autonomous. So there's this definitely dichotomy and difference in thought process when it comes to what will get you to Level 4 and Leve 5. And it's a yes LiDAR and a no LiDAR camp, effectively.

Lei Xing:

Yeah, and I think over the last 1.5 years since I've had the opportunity to go back quite a few times now, just seeing with my own eyes the capabilities of the ADAS with the LiDARs. And now this vision only just within this 1.5 years, 18 months, the progress has been astronomical, I think. It's difficult to, I mean, being in the West, if you're not in that, this thrust of technology progress, I think it's difficult to understand, but that's what has happened.

Tu Le:

I think what's really important here, Lei, is that philosophically is one thing from whether or not using LiDAR is necessary. I think they'll all agree that it's helpful because it creates more of a redundancy among all the different sensors. And we're getting to a point where LiDAR is not cost prohibitive anymore. But once you've taken a certain path, it becomes very difficult to retrace those steps and then go on that other path. And so we know Baidu is dual pathing it. They're using a hardware software stack. The RT6, isn't it, has LiDAR, but they do have a software suite that's doing vision only, and that's being utilized by JIYUE, just some reminders. So Baidu is kind of sort of hedging their bets a bit. Tesla is definitely not. And it looks like Xpeng has also decided to take a certain path, which validates Tesla a bit.

Lei Xing:

But having said about Xpeng ditching LiDAR, it's far from saying LiDAR is done. 

Tu Le:

Yes.

Lei Xing:

No, no, that's not what we're saying. Lidar will continue to have significant presence. If you look at the Hesai, they just had a major deal with LeapMotor. RoboSense continue to put it on, LiDARs onto some of the Geely vehicles. I think ZEEKR, GAC AION. They will continue to have their place and with the commoditization of the LiDARs anyhow going into the hundreds of RMB cost range, they'll still have their place. 

Tu Le:

Well, there's going to be a place for LIDAR specifically on the commercial side. And so...

Lei Xing:

Yeah, the robotaxis side, the commercial side, even the private EVs will continue to see them. But clearly the industry now has the consensus at least every competitor is talking about End to End. It's talking about this large model. That's where the direction is.

Tu Le:

And this is where I think traditional automotive analysts need to really start to incorporate Moore's Law into their thinking because in the traditional automotive space, we're talking five-year product lifecycles. But now the silicon really dictates or the innovation on the silicon side really dictates and the AI side obviously, dictates how fast things will change and technology will increase or innovation in vehicle technology increases.

Lei Xing:

And good point to mention our previous guest, Maxwell Zhou getting that $100 million investment, significant in that it was from an automaker, not from some local government fund or, you know, it's been a long time that we've had that kind of investment. And part of the reason for that is because they're moving into this Vision Language Action model or the VLA model, and they're expecting their technology to be deployed in a significantly more number of vehicles in 2025, Great Wall Motor being one customer. And in this kind of environment, I think I feel like, you know, with the WeRide and the Pony IPO, there seemed to be some kind of thawing on, I guess, on the of the investment into these tech companies more recently. 

Tu Le:

Well, but then that might change with this huge oh dear. Oh goodness.

Lei Xing:

So that's why this is an interesting moment.

Tu Le:

It just shows that Americans are capitalists at the end of the day. And if they see an opportunity to invest in a technology or a company that they feel is going to have a good return, either the sector or the individual company, then most will write that check to invest. Or many, I won't say most, many will write that check to invest. Now, let's talk Audi. Let's leave oh dear to the end.

Lei Xing:

You know the reason I use oh dear is because Audi in Chinese is Ao Di, it sounds similar to oh dear so there was a pun intended.

Tu Le:

Let me start here, Lei, and you and I were trading direct messages earlier this week and you seem to be a lot more sympathetic to Audi's plight. I am not. Audi, to remind our audience, for years, and I'm talking since I moved to China in 2009, until probably 2016, 2017, and you correct me on the dates, Lei. Audi was known as the government official's car. And specifically, Audi was one of the companies that launched the L version of their vehicles. Because the government officials never drove, they always sat in the back. And it was always a black Audi, never an A4, either an A6 or an A8. And living in Beijing, you and I saw many of them on Chang'anjie, in CBD, everywhere we went. So fast forward to the kids who are now at the purchase, the vehicle purchase age. What they remember about Audi is that it's a government officials car. And this is really, really left that brand in China at a crossroads. Whoever came up with this brilliant idea that we're going to pull away the rings, but not change the name or launch a brand-new brand. I just don't, I think it's not taking the Chinese consumer very seriously because it needs to be more than just a facade change. It needs to be an entire different way of engaging with the consumer, can't just be, and it's not even a name change. It's just a logo change. That's the thing that gets me and irks me a little bit. And you and I, I'll just say it. I just wonder if Audi thinks the Chinese consumer is just not very sophisticated, kind of dumb, because you and I know the Chinese consumer can see right through that. You and I know this. So that's why I was tough on them.

Lei Xing:

Audi has been in China since 1988. They're the first kind of the foreign premium brand to really be in China and start production. Well, maybe Toyota Crown was kind of even longer ahead of them, but they started with the Audi 100, Audi 200, and then the A6 is what really started their kind of the positioning, right? The official vehicle “Guan Che.” And then the A6L is what started this trend of extended wheelbase, long wheelbase phenomenon in China, okay, those are the history. But speaking of the dumbness, this either is the dumbest move or the most brilliant move from Audi. And my position is for the longest time, even though it might still be less significant, Vorsprung durch Technik, I finally have some resonance with it because they've taken this bold move. Maybe not so bold to you but forget about the history, forget about the four rings. We have AUDI. That's the fresh image I think Audi is trying to portray in the post-JV smart EV era. And I call it the Chineseification of the premium brands. The significance not so much about the name change, but the dependency on SAIC Motor’s Chinese supply chain and the core components players, Momenta. So having a soul of Chinese tech with the design of an Audi and that design actually is not anything resembling Audi, the current Audis. If you block the Audi logo, that E concept looks like any of the EVs from a Chinese EV startup.

So I think that's the aim of Audi, it’s just, maybe this is the new Audi. This is showing our commitment, showing, you know Audi CEO was there. Oliver Blume was in Shanghai again this past week meeting I think the city mayor because also the China International Import Expo was happening. So it remains to be seen, but they're moving fast, right? I think like 18 months, 24 months, this vehicle is up and launching probably within a year's time. Looks like a station wagon, shooting brake. All the specs, all the pricing, they're really benchmarking on the current China Smart EVs. So good luck. I applaud Audi on doing this. And trying, I think that they're trying. Volkswagen, Audi in particular are trying the hardest in China. That you can agree with me, right?

Tu Le:

I completely agree and I know you like what they're doing but we aren't the target market. Because the target market is about 15 to 20 years younger than we are, you know and I know having grown up in the United States the brands that we remember when we were in our 20s and 30s, it just burned into our memory banks. And so it just needs to be more than a superficial change. And I feel that's a superficial change. 

Lei Xing:

It's a start.

Tu Le:

How I see it, Lei, is like, yes, yes, yes. And you and I agree that they are working hard. The one thing that I think it points to is that it's the, it points to the desperation of the legacy automakers trying to build a bridge with the belief that this next set of fully developed electric vehicles for the China market is right on the horizon. But they know that there's this chasm that they've been sliding into and because of the price war, because of their lack of competitiveness, with their current set of products, it just makes it really difficult for them to see any light. So.

Lei Xing:

The other detail on this part is a company under SAIC Motor called Z-ONE, “Ling Shu Ke Ji,” which was founded three years ago. And I believe this is the CARIAD for SAIC Motor. And remember, Volkswagen brand is depending on Xpeng for the China Electronic Architecture for their models starting in 2026. So Audi is actually depending on this Z-ONE company under SAIC for the architecture, for the computing platform. 

Tu Le:

So here's what I don't understand, Lei. Go ahead.

 Lei Xing:

And then with Momenta for the autonomous driving part of it.

Tu Le:

Here's what I don't understand. Audi and Huawei have a partnership too. Is that just for the infotainment then?

Lei Xing:

I don't believe that's for this specific SAIC partnership. I don't think Huawei is involved.

Tu Le:

So, Audi standalone has a partnership with Huawei. Audi SAIC joint venture is going to use Momenta. Is that how we should look at it?

Lei Xing:

Yes, well, the other part about with Huawei, I think it's more collaborating on the V2X testing part of it. It's not anything on production vehicles, I don't think.

Tu Le:

Okay, because it's, this is where it's really confusing to me. And you and I know that Audi and Huawei have had a long-standing relationship. And so it only makes sense that they would try to deepen it for at least the China market.

Lei Xing:

And also for Audi in China, it's becoming more and more complicated. Let's put a list down. So there's this SAIC Audi, two parts of it. One is this new Advanced Digitized Platform (ADP) vehicles, three BEVs. They have also SAIC Audi producing some of the other traditional ICE vehicles. I think the A7L or some other models that are being locally produced. There's the FAW-Volkswagen, which produces the Audi A6L. There's the Audi FAW NEV, which produces the PPE-based Q6L e-tron, the SUV. There's Audi China. And there's several years ago…

Tu Le:

“hen fu za” (very complicated)

Lei Xing:
Audi also signed a deal with SAIC and FAW on the network in China. So it's becoming a very complicated setup for Audi in China with these different partnerships.

Tu Le:

And this also just that 30 second description that you had offered up. Now think about all the diverging priorities that each of these entities might have and how Audi is in the middle getting pulled in a lot of different directions. So as they, the brand is at a moment of extreme weakness in the China market, their Chinese joint venture partners all have different ways of how they believe they want to build on top to bring Audi back to prominence, this along this while SAIC is working with its own EV brands. And so, but, let me ask you, Lei, what do you think of the car?

Lei Xing:

I think the car is, like I said it's a typical what you would expect from any China smart EV, design wise, it's very Chinese. 

Tu Le:

Chinesey? Is that Chinesey? Is that a word?

Lei Xing:

I think it's very Chinese. I think our good friend from JIYUE, Frank (Wu), a design perspective, I think he'll smile because of that, A to A, A-pillar to A-pillar, 

Tu Le:

Coast to coast.

Lei Xing:
The coast to coast screen, right? Very simple, there's no buttons unlike any of the Audis currently on the market. The design, the rear, the front with LED wrap around lighting, illuminated logo, those are, yeah.

Tu Le:

A couple of observations I made. They called out a Chinese brand. They didn't say Tesla. We're targeting the ET5 Touring, number one, which is a semi-successful product for NIO. It's not a smash hit. And so that was a little bit odd. The second thing, it doesn't start production until mid-‘25. So when you announce an unveil, so to your point earlier, XPeng, we're at 38,000 units. And they announced this within weeks. We have to wait another seven months, eight months. The specs might be different. They might not be competitive. The market may have moved. I joked around. I wrote this to somebody just this morning. I said, that's like, in Chinese years, that's two or three model years away!

Lei Xing:

The only thing I'm worried about this E concept and this shooting brake is really the price. I think on the technical specs, I think it will match the China EVs, even on the autonomous driving part of it. I think in coming 12 months, you'll see significant capabilities come out of these foreign brands in terms of ADAS. But at the RMB300,000 price range for this car. That's what I'm worried about.

Tu Le:

This goes back to how you and I say the China market, the premium China market, China segment is not defined by price anymore. One post that I saw this week on CNEVPost was that BYD is doubling down on their intelligent driving division, which means that they're likely going to pull down even further pricing and increase the feature set. So to your point in nine months, seven months, eight months at RMB300,000, is this going to even be a relevant vehicle at that price point? And so will the features match even in Xpeng? I think it's, I think, I just don't think that's going to be the case.

Lei Xing:

Yeah, but I think it'll resonate more with Chinese customers than the, let's say a Q6L e-tron from the Audi FAW from PPE. That I think I'm sure of. But I'll end on saying on this AUDI, basically the tactic is, Audi is treating this as their China EV, smart EV startup with progress through Chinese technology, Vorsprung durch Chinese Technik, that's what I'll say.

Tu Le:

Well, this goes back to me in 2016, 2015, 2016 in Beijing talking to my German friends. They were delusional back then thinking that software was some simple thing that they could master in a short period of time. I had spirited debates, and you've met some of these people. We consider them good friends, right? I mean, we share beers together whenever we're back in China, but some of the guys that I talked to, they're gone. They're back in Munich, they're back in Ingolstadt, they're back in Stuttgart, but they were naive. Again, they were arrogant and we're seeing some of that, you know, because they had some awareness and I'll emphasize, no one was predicting that even at the most optimistic forecast, we're not looking at the number of Chinese brands, the price war, all this competition and innovation features at this value five, six years ago. So it caught everyone by surprise, but they were aware that the Chinese were creeping up, Tesla was making its way, and they just really thought that how hard can this be? And so is it too late that they've embraced a Chinese partner, a Chinese technology, and try to integrate it into their German brand, their German design? I don't know. I mean, that's the million-dollar question. We do know that the current products aren't competitive.

Lei Xing:

Yeah, well, in order to survive in China, the Germans have capitulated. That's how, you know, I'll put it.

Tu Le:

This is when Volkswagen Group is trying to get smaller in Europe, Stellantis is trying to get smaller in Europe, the German government and the German economy is kind of at a crossroads. So rock hard place. And on top of that, oh dear, let's talk about oh dear. So you and I, before we jumped on, not that surprised about Trump winning. Surprised at how he dominated.

Lei Xing:

How it turned out. Yeah.

Tu Le:

And so spent, I normally send the newsletter out on Wednesday. I waited until Thursday because I had to kind of process everything, think through all the things that he said. I'm going to dismantle the IRA. The UAW was against him. And so that kind of pushes him against the Big 3, I think. And then Elon was his biggest endorser, I think significant endorser anyways. And so, what does that all mean now? And it's something that you and I, our opinions will evolve over time, depending on, at least for me, who he appoints to treasury, who he appoints to the State Department, who he appoints to trade and all these other things. But I mean, what is your initial take? What are your initial thoughts like?

Lei Xing:

So first of all, it wasn't surprising. Again, I think it was interesting to watch every four years this process on Election Day. At least we have this democratic process and the way, I think the way Biden and Harris came out and they had their kind of the concession speech and those were their best speeches actually I think in quite some while since the election started. The biggest difference is exactly Elon. Trump 1.0 is when Elon got the green light to have the 100% ownership of Giga Shanghai, the first foreign automaker to do so. But he wasn't involved in politics. Trump 2.0 is when Elon becomes almost a right-hand man to Trump. And Elon is pro-China. Trump is anti-China, mostly. So, Elon becomes the biggest pawn for Trump, or Trump becomes the biggest pawn for Elon, I think, when it comes to China. And so, I think the decisions that will be made compared to Trump 1.0 to Trump 2.0, I don't think it'll be as clear cut as saying, I want to put 200% tariffs on China EVs. I'm going to do that because you have Elon in the middle. And considering, I think you also mentioned that in your newsletter about this FSD on both sides of the Pacific, getting approval of FSD in China and getting that regulatory clearance now that the Congress is all pretty much Republican, fast track that for the U.S. I think already when Elon had that Cybercab, he probably already was saying some of the things in anticipation of Trump being the next president. Maybe he knew already. That's why he said about California and Texas getting that Cybercab or the unsupervised FSD. And Trump...

Tu Le:

As the richest person in the world, I don't think he makes huge bets on losers. Let's just say that.

Lei Xing:

Yeah, and Trump, he did say, he was very adamant about putting tariffs on anything coming outside of the U.S., including Mexico. But he never said he doesn't want manufacturing from Chinese companies in the U.S. Has he ever said that? I don't think so. But that's where you pointed it out. You made one prediction in the newsletter saying that within the four years, that could be changed, but within the next four years, we may see some Chinese company producing in the U.S. The possibility of that is not zero.

Tu Le:

I, this was six or seven months ago, I pointed to a speech that Trump had and the media picked up on the, I'm going to double the tariff to 200%. The very next sentence he said, but I'd welcome a Chinese automaker to build in the United States. And so,

Lei Xing:

That's the interesting...

Tu Le:

I actually think within the next three years, the reason I said four is because it'll take time to physically build the factory, not because the decision will take that long. One thing that I didn't emphasize in the newsletter is that we have two huge egos, Elon Musk and Trump. At a certain point in time within these four years, they're probably going to disagree.

Lei Xing:

Yeah, how long does that bromance last?

Tu Le:

And like principally disagree. Exactly. That's what I'm not sure of. But I had spoken to a friend of ours, Joe Lowry, and if you look at the heat map where all the investments are for the Inflation Reduction Act, they're in red states. So it's in Trump's best interest not to pull the Inflation Reduction Act. And Elon, he wants to keep the $7500 in my opinion because the more EVs on the road, the more sales for him. And I think he firmly believes that Ford, GM, and at least the Western automakers aren't able to match his vehicles. Now, I firmly believe that he thinks the Chinese can but you know, a scenario. I'm sorry.

Lei Xing:

Without the tariffs, without the trade barriers, without the trade barriers, demolish them. 

Tu Le:

Yeah, in so...

Lei Xing:

And he's against the subsidies, by the way. He's open, Elon, I think a few years ago he was on a talk. He said, get rid of him. He's not for the credits.

Tu Le:

It is. You know, this is where you wonder some of the things that Trump says and Elon says are for effect, and some of them they mean, I don't, you know, I'm not an expert on deciphering either.

Lei Xing:

Yeah, it's the walk the walk versus the talk the talk, right?

Tu Le:

Yeah, because I look at it in its entirety and you bring in Peter Thiel, you bring in Andreessen and I wrote this in the newsletter. These venture capitalists, these very, very wealthy venture capitalists are heavily invested in AI firms. Peter Thiel is invested heavily in Palantir, who already has huge contracts with the U.S. government and Andreessen, they're looking at AI companies as well. And so I just think it's driven by money, not on, okay we're going to reduce taxes on the rich. I think that only helps them marginally. I think that what they're trying to do is, you know, get their company's technologies, the invested company's technologies into the U.S. government. So that's how they're going to become trillionaires because SpaceX could dwarf Tesla eventually. And if SpaceX is now open to other countries that the Biden administration wouldn't have allowed them to sell to, you know, and so I don't, this is where you and I just happened to be at that intersection Lei because we spent so much time in China. Geopolitics needs to be, considered with every single decision now. Because even at the consumer products level, and I had pointed out two instances in the newsletter where Skydio, the U.S. drone maker, has now not allowed to buy Chinese batteries for its drones. And then a lot of automotive firms or capital equipment makers for silicon. they're trying to get Chinese suppliers out of their component level, their bill of materials for the capital equipment. That's a slippery slope and we're not ready. We, as in the West and the U.S. are not ready to reshore all that stuff. It creates a lot of exposure for American companies. And so I hope cooler heads prevail. I don't know how that's going to work yet, but again, you and I, because we've lived it, just have to think when we're thinking about business decisions that companies are making, we're also kind of thinking about 3D chess on the geopolitics side.

Lei Xing:

In the short term, before he gets into office, in the next couple of months, there will be a mass scramble on hoarding products, most likely. That's likely to happen. But in the short term, as far as the effect on the China EVs are concerned, I actually believe there's nothing. There's no effect. Because whatever the current policies from the Biden Administration, they're already in place. North America, except Mexico, is on the back burner of every China EV manufacturer. They don't have any specific or clear roadmap announced yet. The 100% EV tariffs, on the solar panels, on the batteries, the software ban, those are probably will continue to be in place, which is already a door closed type of setting. So the only wild card is the reception of a China automaker producing in the U.S.

Tu Le:

Lei, if anything, if you think about it, Tesla and BYD might be reconciling their strategy for Mexico now because Trump might very well tariff vehicles imported from Mexico. There's a likelihood, I don't know the percent currently, but the likelihood has increased significantly that BYD is now calling their lobbyists in D.C. or in trying to figure out, what's the read here? And do we start it to really, really fully, I mean, I'm sure Stella (Li) 's thinking this through right now, because it is just an amazing turn of events.

Lei Xing:

So there were some rumors, on the night that Trump won the election that Elon was on his way over to China. But that didn't happen. There were rumors out of China media. 

Tu Le:

Mm-hmm. That's, I think that's just kind of…

Lei Xing:
But look for him to make a trip, right? I think you and I expect him to make a trip before the end of the year because they are expecting the FSD to get approval in Q1 2025.

Tu Le:

Not likely in its full form.

Lei Xing:

And you know the competitors in China, they're all open arms, you know, do it. Let's have FSD be available in China and we can compete.

Tu Le:

So here is the compare and contrast. In the United States, you know that I'm looking for a car. FSD works full stop. Now I'm going to be a responsible driver, and I would supervise myself. You're never going to see me in the backseat of a Model Y while it's driving me. But if you look at GM, their SuperCruise. It only works on the highway, so it's very limited. I think BlueCruise is the same thing. So in China, yes, the Level 2+ systems are geofenced, but we drove 90 % of the 1,500 miles we drove, Lei, in the Xpeng G9. We used their intelligent driving system. So it's not as limited. The systems in general, right? All of these systems in general aren't as limited in China as they are in the United States. Now, in the United States, that might be the company's decision and not the government's decision. And so, point being, FSD is one of many in China, where FSD in the United States is still very unique, and a difference maker, and a difference maker for Tesla.

Lei Xing:

Yeah, FSD leads in the U.S., but it's only one of maybe lower tiers of levels in China, given the current competition.

Tu Le:

So that's really all I had. I'm sure we will continue this conversation about a Trump presidency for the next four years starting in 2025, obviously over the next several months. But I think you and I agree mostly on a lot of things. And I think we also have a wait and see attitude on a few things too.

Lei Xing:

And then also the other effect is the how Europe will work with Trump and some of the regulatory environment toward China.

Tu Le:

Let me also be clear on one thing. These tariffs on non-EV components. If inflation and the cost of things was a huge issue for the American citizen and one of the reasons they voted for Trump, if he tariffs…

Lei Xing:

He's not helping, right?

Tu Le:
I think, yeah, I think 80% of the SKUs that Walmart sells are made in China. And I have to admit, I've been back two years Lei, you've been back three and half or whatever, things are more expensive. I mean, for the longest time, for the time that we were in China, interest rates on homes were like 3%. I think interest rates right now are like 6.8 or something like that average. And so that alone is on a half a million dollar home, $250,000 home is hundreds of dollars a month difference. I think, Lei, that you and I will be even more important to listen to and to hear, not because we're going to be right all the time, but because we're going to be thorough. And I think that you and I complement each other on a lot of things. And so to our early listeners and watchers, thank you for following us. I think you're still going to get a lot of good knowledge and understanding if you continue to watch and listen. So thanks again. I don't have anything else, Lei. So... Unless you do, we can close it out.

Lei Xing:

Yeah, just to update on the China EU talks. They had a week of meetings in China with the directorate general officials. And looks like there's been technical progress, which to me means something is about to go down. The only thing left to do is really to do it accordingly with the validity according to WTO rules. And that talks will continue next week. So I'm hopeful that there could be something that can be reached supplementing the tariffs. How that will work, I don't know, but you know, we may have some political solution.

Tu Le:

If there's a tariff reduction, wouldn't be surprised if over the corresponding weeks there's more announcements of Chinese companies investing in Europe.

Lei Xing:

Yeah. So that's.

Tu Le:

So. Hey man, we're rounding the corner to the end of the year. So thanks again everyone for listening. Good morning, good afternoon. We will talk with you all next week.

Lei Xing:

Likewise.