Episode #206 - Trade War, Tesla Juniper Sales, Porsche China Needs a Hug

In this episode, Tu and Lei discuss the current state of the automotive industry, focusing on the impact of tariffs between the US and China, the performance of major automakers like Porsche, and the shifting dynamics in the premium market in China. 

They also touch on the upcoming Auto Shanghai 2025 and the implications of new product launches in the EV sector.

Transcript

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Tu Le 

Welcome to the China EV & More podcast. 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. For those that are new to the show, welcome. And to our loyal listeners, welcome back. We ask that you smash that subscribe and like button so you don't miss anything from us in the future. I'm confident that Lei and I are two of the most knowledgeable people in the world doing this. So help us get the word out about this show to others. My name is Tu Le.

I am the Managing Director at Sino Auto Insights, a global management consultancy that helps organizations bring innovative and tech-focused products and services to the transportation and mobility sectors. I write a free weekly newsletter that we pull many of our discussion topics from. You can sign up for it at sinoautoinsights.substack.com, which of course, I encourage you all to do a...

little bit under the weather Lei that needs to get better before he jumps on a plane for 18 hours. Can you please introduce yourself?

Lei Xing 

Yeah, good morning. And showing some love to Porsche too. We'll get to Porsche in a minute. But this is your co-host, Lei Xing, former chief editor of China Auto Review. And this is episode number 206. So let's recap at this moment the tariff situation.

Tu Le 

Yes! I did this on purpose.

Lei Xing 

China has 125 % tariffs on everything imported from the US. US has the reciprocal 145 % tariffs on 145 % things imported from China into the US. The 25 % autos and parts tariff is still in place.

Tu Le 

This is a 145.

Lei Xing 

25 % steel and aluminum is still in place. And there's been talks of the listing of Chinese public listed companies in the US. There's been talks of possibly getting rid of the tariffs on the import of China EVs, many Chinese EVs into Europe. And that's the latest.

But it's been constantly changing the last week. Every day it seems to be the number gets a little bit higher. And then China came out today saying, we're done with playing this game. 125 % looks like the final tariff that they'll have because China says it's becoming a joke. We're not going to increase anymore because it's

economically meaningless if we do it. And whatever US decides to do, we're not going to budge. That's where we stand. And I just saw an interesting number. China imports, imports about just under 20 billion dollars of automotive components from the US.

I just saw this number so I thought that was interesting. So we say we kind of say that China you know in terms of automotive EVs is not really that much affected but everyone in some way or form as you know is affected. Yeah I just start off with with those kind of numbers for reference.

Tu Le 

According to chat GPT.

Lei Xing 

you

Tu Le 

The number one exporter

for the United States is oil, seeds, and grains. Number two is mineral fuels and oils. And then third is electrical and electronic equipment. Now we're talking in 2024, there was about $144 billion worth of exports. So it sounds like...

The tariffs that the Chinese government has put on the United States commodities or products will hurt the heartland of America a little bit. obviously, the tariffs on Mexico and Canada are really creating a lot of uncertainty in my backyard, which is...

the state of Michigan and in the Midwest. I think there's been a muted response from the state a little bit, except for some of these economic development folks that I work with on a daily basis. One of my friends, Glenn Stevens, who is the head of Mich Auto he's been in his car driving around trying to advocate. He's been on media interviews and so...

This is a really, really...

critical moment, I believe, because it's really starting to crystallize, Lei, that the Chinese are really, really competitive with their products. I don't think there's any denial anymore with that. I, well, I take that back. I think there's a certain percentage of Michigan folks and automotive folks more rank and file than leadership that are

burying their heads in the sand and don't want to know how uncompetitive some of some of the automotive spaces here in the United States. And. I think there's a certain number or certain group or certain percentage of people that don't know what to do. Because everything coming out of the media outlets seems so dire. We can't catch up.

You see Porsche's numbers and that's one of the reasons of why I wore this shirt. But yeah, go ahead.

Lei Xing 

No, but the issue is not so much the tariffs themselves. think in terms of what you said, what they don't know what to do is given what happened this past week, that every day could be something different that come out of Trump's mouth. How do you prepare for that? How do you address what to do when one day he says, you know, okay, we're going to pause.

then the next day or the day before, right, the stock market drops. I think that's the uncertainty that the irrationality of these announcements, you can't plan for it. And that's the headache, right? More than the terrorists themselves.

Tu Le 

So the United States,

the uncertainty and the whiplashing, we feel in the United States, could you imagine if you were the leader of Germany, the leader of France, the leader of the UK, the leader of Australia? they rely, generally speaking, historically on the United States being

the backstop to kind of set, they obviously have their own individual goals and initiatives and priorities, but the United States was a trusted source for.

What's the right word? You know, reliability. But I wrote in the newsletter that it'll be 12 years where it's just been a roller coaster ride following the United States from a international policy, domestic policy, from an economic policy. And so I, in being back in Michigan, I feel it personally.

with friends, ex-colleagues, family. it's one thing to say, I'm going to put tariffs up.

At least Lei, you know that it's a serious situation and then you plan around that. It's another thing to say, I'm going to put tariffs up and then two days later, just kidding.

I'm gonna pause this by 90 days because you can't, to your point, you can't be definitive with your response to the new policies. And it paralyzes businesses to be quite frank.

Lei Xing 

Yeah, and there's been different response of actions from these automakers in the US. Employee pricing, no change pricing, given the kind of the inventory that they had and then there's stoppage of importing of vehicles. don't know, Audi maybe announced something. So yeah, that is a great short. Exactly.

And while I think on the China side, the actions are never stopping, as we've seen that new models, sales numbers that have come out, whether they're up or down, China seems to be, if we look at these German automakers, the numbers that they announced, every region except China were up.

Uh, and like we said, it hasn't bottomed out yet.

And plus on top of that, the tariffs, both ways for some of these manufacturers. and yeah, so this global trade war is now becoming really a China-US trade war, pretty much, because other countries have been on pause. Everything went down back to the 10 % base tariffs.

Tu Le 

The only good news, Lei, is that because the Trump administration put a pause on tariffs for the other countries, the things that are coming from Vietnam, South Asia, they still should be around the same price, but everything else from China is going to increase significantly. And I was reading this morning, preparing for this podcast that there are ships now that

Lei Xing 

Yeah.

Tu Le 

have are not going to leave China with. And so I don't want to create a panic, but they were like, there could be situations where in the next month or six, seven weeks, there could be bare shelves in some stores.

Lei Xing 

Yeah,

about these mom and pop shops both in the US and in China when here you have people that are stopping orders for Chinese products and these mom and pop shops go out of business and the trade, know, whatever the number was like over half a trillion dollars of trade that could be cut in half between China and the US and that'll affect tons of companies.

on both sides.

Tu Le 

Yeah, I-

Lei Xing 

I

Tu Le 

I'm normally... pretty,

I think I'm able to kind of think through, try to place a 3D chess and some things, but I'm really at a loss. Now, let's do this Lei Let's, you wanted to go over some more March numbers from the foreign automaker. So let's do that. And then we can move over to the EU, that rumor about the EU lifting tariffs on Chinese vehicles because

I'm sure you have a perspective and I have a perspective on that. what other numbers? So the one thing, if you're wondering, people are wondering why I'm wearing the Porsche shirt is because, um, like you said, they still haven't found the bottom in the China market and we're talking, they might get to, uh, it is 42 % was there, uh, the

continuing to shrink 42%. So they almost, they lost almost half of their sales. And this continues a downward trend that's been three years in the making.

Lei Xing 

Yeah.

Yeah, 42 % less than 10,000 units a quarter. That's a psychologically it's disheartening because that means 10,000 and then we average it out. We could be looking at 40,000, 45,000 for a market that was getting close to 100,000 units in the late 2010s.

There are several reasons for that because of the intense competitive environment which Porsche stated in the presser. just lack of, I think, the competition, whatever Xiaomi SU 7 Ultra compared when they launched, compared the specs to the Taycan Turbo GT. And every spec was...

better than the Taycan Turbo GT and how do you compete? And maybe also in terms of allocation, allocating the vehicles to other regions, plus the fact that in Porsche China, they're resizing the dealership footprint. That's their priority this year. So...

Yeah, but I guess from Porsche's looks like it was worse than they expected on their own. But I mean, last year was 30 % off, right? So not surprising. For all the German manufacturers, Whatever Volkswagen group, Audi, the BBAs.

This is gonna be a down year, still. So first quarter is a representative of that.

Tu Le 

Hey, this is going to potentially be a down decade. If the United States, if we continue to have tariffs on EU imports, automotive imports, Porsche is going to have to build here. Audi is going to have to build here. And that'll take time and a lot of investment.

Yeah, I don't

I thought Porsche three or four years ago was immune to a lot of this stuff. But I also want to point to the fact that it might be the canary in the coal mine. There are a few things that aren't in Porsche's control. The Chinese economy. The tariffs from the United States really pulling down the Chinese economy or the sentiment on the Chinese economy even further.

Rich people aren't as rich maybe in China. And so I'm curious to see the Rolls numbers, the Bentley numbers, the really, really ultra premium vehicles to see if there's any softness in that demand in the China market.

Lei Xing 

I'm certainly not down or not. That don't look pleasant.

And yeah, I think BMW was down over 17%, Mercedes down 10%, Volkswagen Group was down 10%, I think. And their sale of BEVs was down significantly in China in the first quarter. I think it was like 25,000 units as a group.

And while they're preparing their offensive, right, the next stage of offensive of these in China for China models coming up, which are slated for 2026 launch. So still a painful 2025 to get taken care of. And then we go from there. And really, it's a huge bet.

And I'm not sure, know, these in China for China, especially with this, they're also going to announce this, that the Horizon based kind of the NOA system for their new models, the level two plus plus. We'll see how that goes, how that compares with the rest of the competition.

Yeah.

Tu Le 

The

really increased anxiety from the Porsche team and the Porsche management was that prior to the Trump administration, they felt that the United States could be a bit of a pressure release valve for them because sales are increasing in the United States. with the tariff situation and now the tariffs making their cars more expensive, number one.

But the tariffs creating sentiment for people like you and me having a lot less confidence in a growing economy in the United States that also is going to vehicle sales. So whereas they thought, okay, we can level off and try to find that bottom in the China market, that 42 % which blew my mind, blew my mind.

And we're talking a company that only sells 300, 320, 330,000 units a year. So one, 10, 100, 1000 vehicles is actually pretty material from how it hurts the company.

Lei Xing 

Yeah, luckily there's only the 25 % tariffs on autos remains for now, at least for the next 90 days,

Tu Le 

I guarantee you. any other March numbers from foreign automakers?

Lei Xing 

That was the most I think we have.

think GM reported numbers, I forget the numbers, I mean, it's gonna be all down.

Tu Le 

So what are your thoughts on the veracity of the EU lifting tariffs on Chinese EVs?

Lei Xing 

If I take a word out of von der Leyen and the president of EU commissions mouth, she said everything remains on the table. So my view is that this is not new news because the discussions have been ongoing ever since they went into effect. And now with the recent talk between Le Qiang and Wanderley and the minister of commerce, Wang Wentao and what's his name?

the EU economic minister, Sefkovitch. I think this came out of the talks that they want to talk about this minimum pricing. So I think to me, it's just a continuation of talks that have been ongoing. And everything remains on the table. But it will be very hard for the EU to walk back and say,

given that they've done so much studying into it and put that into place, unless really something that China compromises.

that will make them do it to eliminate these tariffs. Unless that happens, I think it's very hard to walk back from what's been in place.

Tu Le 

for me.

also emphasize that the US-China trade war is also going to really hurt the Chinese economy at a moment of weakness already. So it's not just the United States that's going to suffer economically. And it becomes a stare down almost between the US government and the Chinese government who can endure the most pain because there will be pain.

And so if the EU lifts tariffs, then that

to me indicates that Von der Leyen has spoken with Ola, has spoken with Blume has spoken with Zipse And no, but let me finish.

Lei Xing 

yeah, they've had this automotive industry

round table already.

Tu Le 

But let me finish.

They went from, believe we can compete still, to we're surrendering and we need China's cooperation. So we have to give them something substantial in order to do that. That's kind of how I look at it. They went from.

the automaker leadership in Germany and Europe, generally speaking, was like, I'm still optimistic that we can find a bottom and that we can salvage the China market. And I think it feels like they've lost that optimism. it's almost like a, if they are to pull the tariffs, which I don't think they will, will they reduce them? Perhaps.

Will there be, there's going to be some requirements, I believe, local requirements to manufacture locally over a certain period of time. Because I point back to XPeng and GAC using MagnaStyle to ship kits to Austria. I don't think that's going to be enough for the EU to be

Like, yeah, if you guys all do that, we'll lift the tariffs. I think there needs to be substantial manufacturing being done on EU soil. And eventuality that X number of employees get hired or X number of vehicles are manufactured locally.

Lei Xing 

The European automaker, especially the Germans, they would be happy because they are against the tariffs.

Tu Le 

Yeah, you know, I

don't know if they're wholeheartedly against the tariffs Lei. I think it's a mianza thing, it's a face thing that they can't say, you know, because they can't be like Tavares and say, we need to protect ourselves. And then 10 months later, he's like, we love Chinese cars. We should have free trade.

Lei Xing 

Right.

diplomatically.

Yeah, sure. remember, yeah. So remember that.

I remember at the end of March, the Ola and Oliver, were in China for the China Development Forum. They were there for about a week meeting various constituencies. yeah, the talks are ongoing, but like, you know, it's...

Tu Le 

Here's the big thing, Lei, and I'd love your thoughts on this.

The has shifted. The understanding of premium has shifted in the China market, but the Germans and the Americans and the Japanese just didn't get that memo yet.

It's almost like these stages. The Germans were like, we don't need to do that. yeah. How hard can it be? And then, holy cow, this is really hard. And now it's like, we're going to lean into it because China is such an important market. And to show our dedication to that market, we're going to locally design things. Okay. But.

It took them 100 years to perfect how to build an engine, right?

Lei Xing 

Yeah, this went into motion only two years ago, 2023, right around the shock of the last Shanghai Auto Show for Volkswagen to say we want to cut development time to what, three years, 36 months? Still quite long by Chinese standards.

more increasingly what you do, do what the Chinese do, Whether it's the four letter Audi brand or the SSE motor had an event two days ago. They had a gallon night and they said something I thought was interesting. They had this fantastic four of Chinese smart driving companies.

And these four companies, guess who? It's called the DIDA HUA MO, which means Horizon Robotics, DA is DJI, HUA is Huawei, MO is Momenta.

that SAIC Motor and their partners Audi and Volkswagen will be using one of these four to be able to compete.

Uhhh...

And the Horizon, right? I talked about the Horizon Superdrive that Volkswagen is launching as their level 2++ next year.

Tu Le 

You know, the crazy thing too is that as more more connected vehicles hit the roads in the EU, I don't hear that many people talking about how we're going to regulate data security, data privacy, and cybersecurity. So these are open-ended items, whether they're imported from the United States, whether they're European domestically built connected vehicles or...

imported from China. We can point to countries, but a lot of bad actors aren't affiliated with countries. So that needs to be addressed. I think...

Everybody is just reacting to try to put out as many fires as they can. But long term that needs to be understood a lot better and regulated. The EU should lead the way because they're much more concerned about individuals' privacy when it comes to data.

Lei Xing 

Yeah, China is more faster, it's less strict.

And then a couple of new products that were launched this past week the Han L and the Tan L from BYD a significantly lower price than their pre-sale pricing One and then B10 the lead motor B10 launched and while they launched that model starting at $100,000 RMB $15,000 they announced the giveaway of their high

highway NAP. They're adding that free. it's a non-price cut price cut, right? And retroactive to earlier buyers. So they're giving money back. So the bloodbath continues. And Chery announced their series of hybrid products at lower prices two nights ago.

Tu Le 

as

As we lead up to Auto Shanghai 2025.

Lei Xing 

Yeah, and Tesla even launched a cheaper Cybertruck in the US. I said it was contagious.

Tu Le 

Wow

Lei Xing 

Yeah,

$62,000 after credits.

Tu Le 

40,000 units sales in 2024. I'd say that's a pretty big disappointment from a sales standpoint, but that's what happens when you design to the extreme and then you jump into politics. So anyways.

Maybe this is a short one, because I don't really have that much more. You saw that TechCrunch article about Slate Auto. There's an article in TechCrunch. It's not much of a scoop, but it does detail the company. There's a manufacturing conglomerate called Re-Colon Build, and it's a Jeff Bezos-backed initiative where

Lei Xing 

what, which auto?

Tu Le 

basically bringing back manufacturing. One of the...

companies it's supporting is a company called Slate Auto. It's based in Troy, so it's right in my backyard. About 300 employees, they're going to have a launch event later this month. And it's gotten some external funding according to the TechCrunch article. And they're targeting a $25,000 electric truck, pickup truck.

Lei Xing 

yeah.

Tu Le 

And so I wrote a lot about it in this week's newsletter, because I reminded everyone that the Ford F-150 Lightning was supposed to come out at $40,000. The Cybertruck was supposed to come out at $40,000. And so the idea that an American company right off the get can get to $25,000.

especially in this environment where the tariffs are in place? Impossible.

Lei Xing 

Yeah.

Well, you know, speaking of, we have another US Smart EV startup out in the West coast that's gloating right now because of this tariffs, right? And they're about to launch the FX and supposedly the $30,000, $25,000 EREV. yeah.

Tu Le 

No, I applaud them. don't

begrudge anyone. I have an issue with throwing out a number that's not likely. Now, can they get to 25,000 and be profitable? Maybe. But it would take probably a half a million units of sales, two, three, 400,000 units of sales.

Where's the capacity for the mineral mining? Where's the capacity for the mineral refining? Where's the cell capacity to build those things? You're not gonna buy those cells from a Korean or a Japanese manufacturer here in the United States, not affordably. And so again, that 25,000, it just seems like we're chasing a ghost.

Here's the away bias that you and I have.

That thing is going to be so decontented.

And then we jump on a plane next Saturday, both of us, and then see what we can buy in China for 30,000 or $25,000. And we're going be like, that's the away bias that you and I have because we know what can be purchased at 25, $30,000 in China. And it's going to be substantially more from a value and feature standpoint than anything that the United States in the short term is going to be able to launch.

Lei Xing 

Yeah. Yeah.

Tu Le 

So.

Lei Xing 

China's spoiled bias.

Tu Le 

Yeah, so, do you have anything else man?

Lei Xing 

No, I think this is the last or second to last one before we yeah next Friday Will be the last one that we do in the US right right before the auto show Just it's gonna be the yeah Biggest by far in the world 36 360,000 square meters 13 halls

Tu Le 

See you until next

And they're moving it to Puxi, is that right? Did they move it to Puxi?

Lei Xing 

Nearly a thousand companies.

Well, it's always been there, the flower, China... Puxi, Puxi. Yeah, it's in Puxi. So it's a maze. Every year we go there, it's a maze. Trying to figure out where to go. And then really, think if you're gonna... Yeah.

Tu Le 

Yeah, that's in Pudong, isn't it? it's in Pushe, okay.

And then I

will always remember you and I kind of doing our thing. Because I think you and I mean to be together, but then we just kind of get lost. And then I will always remember being at the show in Shanghai last time and then getting a bunch of WeChat. Hey, man. Hey, man. Are you at the Tesla booth? And I run over there. I run over there.

Lei Xing 

You

Tu Le 

And then by the time I get over there, I was like two buildings over to two flower petals over a wonder flower petal over. And, and then by the time I get there, all the Bao on in the black shirts or black jackets are like surrounding the Tesla booth. So, my goodness.

Lei Xing 

Yeah.

and Lei Jun

and his entourage is gonna be another spectacle walking around. I hate that.

Tu Le 

Let me take a look at comments or questions here real quick.

So let's do this. We'll dive a little bit deeper next week into the Shanghai Auto Show. But while I'm reading some of these messages, what are your expectations for this year? Have you heard any rumors or anything?

Lei Xing 

About the show Well, we we've already seen Volkswagen announced a big that there's seven plus one kind of the lineup Mostly the Volkswagen brand and the two Audi brands, right? The four rings Audi brand and the four letter Audi brand they're all launching their new vehicles So expect a lot of China tech collaboration from the foreign automakers again

Tu Le 

Yeah.

Lei Xing 

And then big SUVs, big SUVs. That's the thing. From Li Auto Mega. Yeah, Mega is launching two new editions. One, I think, an ultra edition, and then another, a home edition. Yeah, like a face, you can face to face, you know.

Tu Le 

Like a didi Like a didi

Lei Xing 

And I'd really actually pay more attention to the Chinese tech companies exhibiting there. There will be two halls dedicated to this Chinese tech and supplier base. You know, the Momentas, the lighter companies, all the ADAS, they're probably worth a tour, you know, rather than the...

Tu Le 

Here's a question from SPX Lei. With the trade war escalating and TikTok being forced sale by US, as unthinkable as it might be, could Shanghai Giga and MegaPak Shanghai face similar forced sale situation or even worse fate?

Lei Xing 

the OEM.

I hope not. I think that's the last... I really can't see that happening. If it does, then that means that the U.S.-China relationship is really just tanked to the bottom forever.

What do you think?

Tu Le 

I don't see it either. Number one,

Tesla employs a lot of people in Shanghai. Number two, Tesla still brings excitement to the space. The brand does.

Lei Xing 

Yeah.

Speaking of Tesla, Their March numbers is quite good.

Tu Le 

And in.

Lei Xing 

and only a small portion of that 78,000 units were exported.

So it's damn good and they're still...

Tu Le 

So

the three years of free money is working a little bit.

Lei Xing 

It's definitely working.

Tu Le 

Let's see how long it works, because we knew that it would get, we knew the sales numbers would get goosed because.

Lei Xing 

And also, yeah.

Tu Le 

People were waiting for Juniper. Some people were waiting for Juniper. And then in addition, there was an incentive placed on top of that. So let's look at April, May, and June to see if there's a consistent theme there. Because I would, go ahead.

Lei Xing 

And NIO and Onvo just announced heavy, heavy discounting of or addition of incentives. And that seems to pull up demand based on the weekly numbers. So we'll see how April is. But yeah.

Tu Le 

Here's another question.

Is there any precedent cases of critical industry company being targeted? So, SPX, I look at it this way.

China wants to show the world that it's friendly to foreign companies. so to Lei's point, I think you're pointing to nuclear options that I don't think we're there yet. And I don't think we're gonna be there for quite some time because like I said, Tesla is actually, a lot of these...

Like TikTok, how many employees do they have in the United States? They're all salespeople, effectively. It affects the influencers, but Trump doesn't really care about that. And so I don't know if I can think of any targeted company, a US company anyways.

Lei Xing 

Well, China is

what they're doing investigation into DuPont, I think. Right. DuPont. mean, could that happen? Possibly. They can blacklist companies, which they announced several US companies during this recent week. If you put Tesla in there. No, but right. But if you were to put Tesla in there, then

Tu Le 

Okay.

Yeah, you're right. yeah, Tesla is not DuPont. DuPont is not Tesla.

Lei Xing 

That means that the relations is really, like I said, gotten bad if we get to that point.

Tu Le 

So those are the only comments that I have. Conrad gives you kudos. You're right about the trade stuff earlier when you talked about it. So I thought this was going to be a pretty early ending, but we've been on for 45 minutes.

Lei Xing 

Yeah, well, it's only

44 minutes, so it's earlier than our...

Tu Le 

That's still long. thought it was going to be like 30, because I was like,

but I don't know. So next week I will be in San Diego for two days. Qualcomm is having an event. They're trying to create demand for a autonomous vehicle chip. And so.

Lei Xing 

Well, we talked about that, that they're moving into

this, you know, they do the smart cockpit, but now they're providing the lead motor. I think as a matter of fact, the B10, they're suite of the smart driving, right? The chips. So kind of competing with the Emidia.

Tu Le 

What's the deal?

So I don't know what to expect, but I'll check out, ask a bunch of questions, and then come home for two days, and then jump on a plane again for a long flight. everyone, good morning, good afternoon, good evening. We will talk with you all. Thanks for joining us, and we will talk with you all next week.

Lei Xing 

Thank you. Bye bye.