China EVs & More
Electric Vehicle (EV) & mobility experts Tu Le and Lei Xing plug you in to all the latest going's on in the 🇨🇳EV & mobility space that are sure to have effects on the 🇺🇸 and 🇪🇺 regions. Specifically, Tu and Lei dissect the week’s most important news coming out of the China EV/Autonomous Driving (AV), chip, battery, ride-hailing, shared & micro-mobility verticals. Learn more about companies like: #NIO #XPeng # LiAuto #BYD #Arcfox #Seres #Voyah #Xiaomi #Huawei #Tesla #GM #Ford #VW #Audi #Merc #BMW #Didi #Meituan #WeRide #Pony.ai #AutoX #Baidu #Apollo #Hesai #Seyond #RoboSense
China EVs & More
Episode #212 - Stretching Payments & Suppliers Thin, XPeng Turing chips, GM #2 in the US
In this episode, Tu and Lei discuss the latest developments in the electric vehicle (EV) and automotive industry in China. They delve into the implications of new payment terms for suppliers, the competitive landscape among Chinese automakers, and the global strategy of BYD. The conversation also touches on the future of internal combustion engines, Tesla's advancements in autonomous driving, and XPeng's AI innovations. Additionally, they address quality control challenges and the regulatory environment affecting the industry.
Keywords / Companies:
China EVs, automotive industry, payment terms, suppliers, BYD, Tesla, XPeng, quality control, market strategy, electric vehicles
Digital Disruption with Geoff NielsonDiscover how technology is reshaping our lives and livelihoods.
Listen on: Apple Podcasts Spotify
Tu Le
Welcome to the China EVs and 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 to our loyal listeners and viewers. Welcome back. We ask that you smash those subscribe and like buttons so you don't miss anything from us in the future. Lei and I are two of most knowledgeable people in the world doing this. So help us get the word out to other enthusiasts and viewers or listeners about the show. My name is Tu Le I'm the managing director at Sino Auto Insights, global management consultancy that helps organizations bring innovative and tech focused
products and services to the transportation and mobility sectors. I read 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, can you please introduce yourself?
Lei Xing
Good morning, this is Lei Xing, former chief editor of China Auto Review and this is episode number 212. Welcome to a Friday the 13th.
Tu Le
This is the 13th
hole.
Lei Xing
of Friday the 13th pre-Father's Day edition of China EVs and More So happy Father's Day to you too and to all the fathers out there. Happy is might be the theme this week, at least for the suppliers. Because earlier in the week, we had almost every single Chinese automaker.
Tu Le
⁓ happy Father's Day, buddy.
Lei Xing
out statements and this is an area of your probably your expertise because it has to deal with procurement and payment. So these Chinese automakers including Wei Xiaoli and Xiao Mi they promise that they will pay within 60 days no more than 60 days to their suppliers. So that was one of the biggest news of the week.
So yeah, yeah.
Tu Le
Can I quickly explain, Lei, how this works?
So we had a discussion, because last night I hosted a fireside chat with my friend Chris Nolte, who's the co-founder of Bloom. And they are trying to reshore manufacturing. They're a platform that helps small, hard tech companies in the mobility space find contract manufacturers, find logistics providers, and things like that.
Lei Xing
Mm-hmm.
Tu Le
For those that don't know about Bloom, they're based in Detroit, Newlab Chris is a transplant from New York City. For those that may be familiar with the name, he is the founder of Propel Bikes. So electric bike distributor in Brooklyn. And he kind of became, he came notable because of that. But one of the things we talked about Lei was that how the 60 day payment works. So Lei.
You supply me seats, okay? I produce a car that uses your seats every day. Let's say 50 a day, okay? So every day you're shipping me 50 seats. And then you send me a bill.
Lei Xing
Mm-hmm.
Tu Le
So you're out the cost of labor and the parts for those seats. And so you're actually loaning me money, effectively. And I don't have to pay you back in 60 days. you're loaning me 50 seats worth of, or 60 costs of seats every day until 60 days out.
Lei Xing
That's right.
Tu Le
When you don't have a lot of cash, when you're a Lei seat supplier, you're much smaller than a GM, a Volkswagen, even a NIO. So that's 60 days when you multiply it by all of your customers, it stretches you pretty thin. And so that's why it's really important for people to understand what the terms, the payment terms are, number one. Number two, they get honored, okay? Because it allows you
to buy more components, to build more seats, to ship me. I'm oversimplifying this, but that's kind of the gist of it. It's a small loan that you're giving to the OEM.
Lei Xing
Yeah, so there's two reasons that were behind this flurry of automakers announcing the 60-day payment terms. One was the regulations on ensuring payment to small and medium enterprises, which went into effect on June 1st, which specifically requires 60-day payment terms. So that's number one. And second,
is really the fallout from the kind of war awards and the price war, the involution, bloodbath. And China, as a referee, is saying, you know, we need a healthy, sustainable development of the industry. So really, mean, the culprit was really on BYD. And so BYD was not the first, but was one of the earliest to also announce the 60
payment days and I'm looking at just for reference right I'm looking at this table put out by BYD the PR brand head of BYD and he listed the payment average payment terms of several automakers so BYD is at 127 days so that's twice right the 16 a payment requirement
SASC 164, Geely 127, Cherry 143, Great Walls 163, Chang'an 205, Le Auto 165, NIO 195. Now, I haven't had the time to verify these numbers, but that gives a reference of 60 versus 2x, 3x, which is the norm, right? So actually, my question was,
In the West, at least in the US or in the European auto industry, maybe even in China, there's no requirement on you have to have a 60-day payment. There's an industry understanding, but no country or no government has set a specific requirement. It's all at the discretion of the automakers and the suppliers, usually.
Tu Le
Well, normally Lei seat supplier and Tu Le OEM have a master goods agreement. So when you and I initiate a relationship, we will negotiate the terms and conditions and payment terms are normally in that master goods agreement. And then as new programs pop up and we source Lei seat supplier for these new programs, they'll add a statement of work.
Lei Xing
Right.
Tu Le
for that program, but it is honored by the master goods agreement. So the overall commercial and legal terms are in that master goods agreement. So the commercial terms are normally something that the purchasing person and the sales person, they negotiate. And then the legal terms with regards to indemnification and things like that, that's when the lawyers really get involved. And the standard is net 30.
And so, but you can play with other things, Lei, where it says, go ahead.
Lei Xing
Yep.
No, no, was, go ahead. I was saying this is exactly where more questions arrive than answers. Probably what are you going to say?
Tu Le
So there are some levers. So I can say, I can give you net 30 terms. So you send me an invoice, and within 30 days, I'm supposed to pay it. And then, so there's dates. Dates can be postmarked. other, go ahead.
Lei Xing
Yep. Yep. That's yeah.
No, that's exactly where the, now the question come out is because when does the 60 days start? Does it start when you receive the invoice? Does it start when you receive the goods? Right? These are things that were not explicitly stated and these are rooms to play with.
Tu Le
It's technically,
it should be on the invoice date. So if you send me the invoice six months and then try to date it earlier, then there's probably a conflict. But if you send it promptly and you stamp it a certain date, the terms and conditions are obviously not for the 99.9 times things are
Lei Xing
You might write, but that's, know.
Tu Le
fine, it's for that one time in a million where things are. And you point back to that. The other way to play with it, is that part of a goods agreement can also mean that I might send you a 12-week schedule. And you source components based on that schedule. week one. So the current week is always week one. And you know that I'm building.
Lei Xing
Mm-hmm.
Tu Le
50 models that use your seat. So you know to plan, to buy components and then ship those components, right? So there's a planning schedule and there's weekly manufacturing schedule. So you know exactly when to ship them, you know, what date and what time. But part of that negotiation is anything outside of 30 days, anything outside of 60 days, I can cancel.
Lei Xing
Sure.
Tu Le
And I won't be held liable. So you're sourcing based on a planning schedule. And if I change week four or week five and you've already sourced it and I have a 30 day window that says anything outside of 30 days, I can cancel, can change. And you have to have that flexibility to support anything outside of 30 days. Cause I'm still going to hold you responsible if I change my schedule. So.
Lei Xing
That's right.
Yeah. And then,
and then that's where things come in because of all these suppliers, they end up never receiving payment.
That's one of the things. And the second thing that was talked about quite significantly is when you say payment within 60 days, what does that payment mean? One of the things that China does in the industry is the acceptance bill, right? The commercial or the bank acceptance bill, which is used prominently. And there's only two of the automakers.
SAIC and BIAIC group in their statements specifically said they will not use the acceptance bills as payment. So, so right, sorry.
Tu Le
Is that like an IOU?
Is that like an IOU or?
Lei Xing
It's like it's either bank issued or commercially issued like a promise to pay basically. It's not cash. So that was one of the things. And then what happens to the supplier upstream? When you promise to pay your supplier, does that supplier promise to pay? Right? It's like a link.
Tu Le
Okay.
Lei Xing
So the host of questions have come out. I think it's only the beginning of... It was like FOMO, right? If SAIC if BYD is doing it, I'm not announcing I'm the bad guy. So I have to announce it. It felt like that, Yeah, FOMO or peer pressure, yeah.
Tu Le
Yeah, it creates, like, peer pressure.
And
the reason it's important that you brought that up, the tier two through tier five is that if Lei seat supplier is not getting payment that he can't pay or you can't pay down the line because you don't have that credit and you don't have that cash. So it strains the whole system. And one of the ways that OEMs kind of play with things is that
I might ask you, Lei, because I'm not telling you this, but I want my numbers to look good at the end of the month, end of the quarter. I want a big cash position. Okay. So I might not, I might hold off on payment for X number of days extra outside of the net 30, just to show on the balance sheet that I have a higher cash position. Although it'll show up in accounts payable, but
You know, it's just accounting tricks a little bit that the street knows about, but the CFO or the accountants will still play that game.
Lei Xing
Yeah, and so here we are. think this year so far we're almost at mid-year. So two major, I think, events that will mark this year is earlier in the year, we talked about this, right? The kind of the clampdown on smart driving or more careful use of jargons because of that Xiaomi accident. And two, the 60-day payment terms.
to try to show that we want to go in the direction of healthy and sustainable development, rather than just price war, price war, price war, involution, involution, involution. that's, know. Yeah.
Tu Le
This is do a lot to the price war.
Okay. And, the, the, the reality is that suppliers are much, much smaller than the OEMs. And so they're held hostage a bit because if I don't pay you, if my terms are net 30 and I pay you in 60 days, what are you going to do? Like, are you going to stop shipping to me? Sometimes it gets to that extreme.
But the OEMs normally know how thinly stretched you are, Lei, because they do due diligence to understand. Lei's seat supplier, 70 % of his capacity is dedicated to my programs. So that's when I know I have complete leverage over you. Because if I cut all my programs, that 30 % capacity that you have for other customers, it's not sustainable for you to be an ongoing concern.
Lei Xing
Yeah.
Tu Le
Now, so when I worked at GM, an old timer that I love, Ozinski, Ozikowski? yeah. So first week he told me, and we were talking about suppliers. How should I deal with suppliers? How should I talk to suppliers? He's like, look, GM needs healthy suppliers. So I want suppliers to get paid.
Lei Xing
You still remember the name? Alright.
Tu Le
And he's like, I want them to be making money. I just don't want them to make money on me. That's what he said.
So that's the attitude of, and that's old school, that's years ago, but I can't imagine the sourcing teams have changed attitude that much over that time period.
Lei Xing
Yeah, and then the other side of this was the MIIT put out a statement saying they will start randomly inspecting products this year because of the reason. Yeah.
Tu Le
All this is
to tell investors, to tell customers, to build confidence in the system. That's what this is trying to do.
Lei Xing
Yeah. ⁓
Tu Le
What's different
in this situation is that
The reassurances are coming from, well, the accusations are coming from inside the house, from other Chinese OEMs, from suppliers. In the past, it used to be foreign media, foreign analysts.
Lei Xing
Look. ⁓
So
last weekend basically the gloves were off between the basically the heads of PRs of Geely, BYD and stemming from the Great Wall Motor Jack Wei's comments. So the gloves were off at this conference at the Chongqing conference. don't know whether you saw clips of it that Geely, mean, openly in that conference shamed BYD for that fuel tank.
Tu Le
I saw that. I didn't read too much into it, but tell us a little bit about it. So hold on, let me stop you there. What happened in Chongqing? What event was in Chongqing? Can you tell?
Lei Xing
Yeah, but I mean, the fuel tank...
Chongqing is the
annual Chongqing conference organized by the CCPID auto. I won there last year. Yeah. And then, these, were talking about, basically has a PR or a VP of PR from Geely and then BYD. They were openly talking about, we don't participate in the involution. We participate in the technology upgrade.
Tu Le
which is a very, important conference annually.
Lei Xing
And we don't shame on others. don't step on others. And then, right, you have these war of words.
Tu Le
They're trying to take the
high road. They're trying to take the high road.
Lei Xing
Yeah, so, and then like, the head of BYDPR, put out a Weibo and then he deleted it. That Weibo basically pointed to some company in Hangzhou or some company in Hebei province, which everybody knows who the company is. Because I think that the story was that Wang Chuanfu asked him to delete that Weibo because
there was that shareholder meeting and he's like, well, we don't step on others. That's not how we play our game. So just a small part of the bloodbath, right?
Tu Le
Heavy
is the head that wears the crown.
Lei Xing
Yeah. Yeah.
Tu Le
And I don't know if you saw this, Lei, but there is a, it feels like a full-on PR campaign from BYD. And that's not limited to China. So my friend, did you ever meet Tom McKenzie? He was the anchor for Bloomberg. He's out in London now and he interviewed Stella Li yesterday.
I don't know if you saw that in that that.
Lei Xing
⁓ they just launched
the dolphin surf, which is ⁓ the seagull, basically.
Tu Le
Surf, yeah. Right.
And it undercuts most everything except for Jaecoo, Jaecoo, one other, Leap Motor Vehicle, I think, in the UK.
Lei Xing
And it's what,
twice as expensive or three times as in China, but still cheap.
Tu Le
Yep. why
there are critics for that, I don't know. Because I think most Chinese automakers are trying to make money outside of China because they can't do it inside China. But I saw a bunch of people almost like gotcha tweets that say, it's three times as expensive as in China. And it's like,
OK, and? But I mean, if you're an investor, that's what you want. So I don't get that. One person in particular kind of wrote that. You and I know who we're talking about. So I get this ping from Tom, and he's like, hey, man, I'm going to sit down with Stella tomorrow. And so he might have used one or two questions I send over to him to ask her.
Lei Xing
Yeah.
Is there anything interesting?
Tu Le
So that's cool. ⁓
Lei Xing
Did that already end or?
Tu Le
Yeah, it did. It's like a 15 minute interview. The one thing that Stella emphasized is that they are democratizing technology.
She also said that their research shows in Europe that premium buyers are moving to BYD. And he asked her what the, I'll let you watch it on your own. Just Google, for the folks that are wondering, Google Bloomberg, Tom McKenzie, Stella Li. It's about a 15 minute video. It's great. Tom's a great interviewer.
Lei Xing
Mm-hmm.
Mm-hmm. Mm-hmm.
Tu Le
He asked tough questions. They're not like softballs, but he asked her what the difference between a Tesla and a BYD is. She was like, you know, they just have two products and we have, you know, eight, nine products on the BEV side and the PHEV side. And it allows us to also attract the customers that are weary of going straight to a battery electric vehicle. So very interesting. I didn't get to see the entire interview because
I was dealing with some technical issues obviously this morning. yeah, and I feel that number one, so there's the Move Conference this week in London. So I don't know if she's there for that, but I feel it's their opportunity to let the world know that they're a healthy company. They're here to invest.
Lei Xing
I'll take a look at that.
Tu Le
locally, domestically, because she emphasized the hungry factory, the hungry R &D center, and how they're there in Europe to be a partner.
Lei Xing
Yeah, well, why don't you mention we talked about BYD extensively in our Max episode, which is live now, right? Maybe you wanna, I mean, that was our ending for part one, basically.
Tu Le
Yes. So first of all,
We're not great at doing long form video on audio or video. So apologies for the quality of the video. And there was some audio that got a little shaky. There was a comment on YouTube. So many apologies for that. We'll get better. But from a substance standpoint, it's an hour and 45 minutes. So we broke it down into an hour. And the next video will drop next week. But.
We had spoken with Ed White from Financial Times, Jill Shen from TechNode, and Ethan Robertson, who is Wheelsboy. Ethan, very, very opinionated and had a lot to say, so that was good. Jill also, you know, I really like Jill's on the ground. It's different than Western media in China covering. She lives in China social. She lives in...
And so she's very, but she's very objective and she's tough. She's harsh on, on the Chinese companies. So.
Lei Xing
Yep. Yep. Yeah, we have some
tough comments.
Tu Le
But
we all sat down almost like five locals as opposed to a bunch of foreign people talking about the China market. Because one of the things that I wanted to bring Ethan in on is how these things drive. What are you hearing from the brands? And he gives us a good indication of that. He talks about level two.
And how he also feels that it's very, very important to put guardrails up in China. So he was happy to see that the Chinese government stepped up, but I won't spoil it for everyone. think Ed also from a new local media reporter that is kind of Err to the China EV sector, super humble guy, but
Lei Xing
Mm-hmm.
Yeah, he had.
Tu Le
He's a he's a bird dog. He's asking the right questions.
Lei Xing
Yeah, he had
good thought provoking questions and comments. I thought, yeah, from his perspective.
Tu Le
So first of all, thank you to all of them for joining us, number one. And we talked about this when we recorded it. But thank you to NIO, because we did it at a NIO house in Shanghai, in Jing'an Temple. So I called it Jing'an District. It's actually Jing'an Temple District. I invite. So the video on YouTube and the audio podcast is up.
Comments, questions, criticisms, constructive criticisms are always welcome. If you're complaining about how I look or the video, I'm sorry. I'm not sure I could do anything about how I look, but the substance is there for sure.
Lei Xing
No.
Yeah, that was good.
Tu Le
And one
of the things that I think is important that we kind of talk about, because it's really become a Western thing now, the whole involution. what I want to emphasize is that it's not the EV sector that's likely going to blow up in the next few years. If anything does implode, it's going to be the ICE side. Because we talk about overcapacity.
Demand fell off a cliff over the last four or five years. So we know for a fact, Lei, you and I do, that there is overcapacity in the ICE side. Now we haven't heard, I haven't heard, and maybe you can shed some light on the China side, Chinese social media, media side. Have you heard of any factories being closed on the ICE side? I have not.
Lei Xing
Good.
No, I have not. it reminds me of the numbers that I kind of tweeted that the export numbers, I think it was about half a million if I'm remembering correctly. 500,000 and then roughly 200,000 were NEVs. So there's still a bigger portion exported are ICEVs. Although NEVs
is growing at a much faster pace. But right, where do find the pressure release? Also through exports.
Tu Le
And we should also emphasize that Russia and Mexico are taking a lot of those ICE vehicles. Europe is taking a larger portion of the NEVs.
Lei Xing
So.
PHEVs
are going much, more faster than BEVs export.
Tu Le
Yeah, so it looks like the Europeans are really leaning into PHEVs, which bodes well for Tesla, I mean, Tesla, Toyota, and companies that, legacy companies that have leaned into PHEVs. man, it's been quite crazy, huh? Like...
Lei Xing
The world is going crazy. I mean, just look at what's happening now. Here in the US, there's the rare earth. Yeah. And MOFCOM is kind of like, we've granted approvals for certain applications, but that's that. We have Elon and...
Tu Le
man, and rare earths, people now know how important magnets are to everything.
Lei Xing
Trump seems to be amending their relationship after. Yeah, true, right? And then there's kind of a, it's almost like a civil war happening in the US. And then outside of the US, yeah, because of LA, there's this military parade tomorrow coinciding with Trump's birthday.
Tu Le
Or at least the truth. Or at least the truth.
Because of LA.
Lei Xing
Yeah, it's just kind of getting crazy.
Tu Le
Then Israel bombing Iran.
And this
is the crazy, this is the other crazy part. We're heading into summer. So, the new cycle is not going to slow down, unfortunately. And the one local thing I think is very notable is that GM announced a $4 billion commitment to, think three factories, one that I worked at for, for awhile. Yeah. To double down.
Lei Xing
In the US. In the US.
Tu Le
again on ICE vehicles.
Lei Xing
And then yep,
and at the same time there the number two EV after Tesla, is that correct? That's kind of the Strange thing
Tu Le
Yeah!
And they're going in opposite directions. So Tesla's doing this. GM is doing this. But GM wants to build more ICEs. ⁓
Lei Xing
And then speaking of
Tesla, the robot taxi kind of came and went with that little video of, and then you know, I'm promising end of the month that it'll drive you home. I haven't seen it be.
Tu Le
Did you see my tweet? Did you see my tweet? So
I think it was, I don't know, one of the Tesla stans, won't give him any airtime here. He posted a video of all these Robotech, or Model Y's kind of driving themselves. And he was like, what a momentous occasion. And I screen grabbed that and I tweeted, or I X'd.
as Baidu, Waymo, Aurora, WeRide, Pony, all say, hold my beer. So because they've been doing that for, well, Aurora recently, but everyone else, you and I have been in most of those cabs or those robotaxis, all of them, all of them. So.
Not, and I'm talking non safety driver. We've written in a non safety driver by do several times. Yeah. Driverless driverless. Yeah.
Lei Xing
Driverless, driverless, basically driverless, truly driverless,
fully driverless.
Tu Le
And so the STANs can try to make this out to be this momentous occasion, but again, been there, done that. If you're paying attention, you know, we've put videos up for a lot of different companies, Waymo in LA, Waymo in San Francisco. So this is not this groundbreaking thing that Tesla STANs want you to believe, but.
Lei Xing
But I mean it's right end of the month you supposedly driving from the factory to your home delivered to your home. Okay. Well, we'll see about that.
Tu Le
Is that legal? I don't
even know if this is legal!
Lei Xing
That's the thing, right? mean, who's responsible in case of accident? No confirmation.
Tu Le
No, I don't even want
to get that extreme What if it causes a traffic jam? What if it just stops?
Lei Xing
Hopefully it doesn't.
Tu Le
I'm assuming,
maybe they have a remote driver as backup?
Lei Xing
most likely yeah most likely
Tu Le
Most likely. That would
be my assumption. Because then they will never tell us if the remote driver had to intervene. Then they can just say, 100 % success.
Lei Xing
Yeah
Tu Le
So, right? delivered 100 % success, no issues, no traffic jams, no inter, whatever. man. If Tesla could bring out a model two, Elon could stay out of social for a few months. I think Tesla would be largely rehab, maybe, but I don't know if that's gonna happen.
Lei Xing
Father.
I think the significance is
still this is supposedly the first come out of a kind of a traditional, not traditional, but automaker operated robotaxi. That's never been done before. I think that's what Elon is trying to.
Tu Le
Yeah, that's fair.
Yeah, I don't begrudge
that, but, and I love that Elon should be bullish on his company. Elon should be promoting his company. But the thing is with Elon is that he says June 12th, now he's saying June 22nd. And this is right on brand for his delays. And so,
Lei Xing
There's always a qualifier. So basically.
Tu Le
It did.
And but
the amplification from the Tesla army when they don't have the depth of knowledge that they need to to speak intelligently about certain things, that's what kind of I think grates people a lot of the time because they just any negative about Tesla that somebody says that might actually have some merit is just drown out.
by you being a hater. And you know this from your neo experience.
Lei Xing
I don't, I mean, it doesn't affect me or anything. I mean, we try to be objective, right? We're not trying to say the only nice things or bad things, but how resilient, I mean, the stock has been, depending on what Elon says or what he does, that's what the Niels Niels hate.
Tu Le
He knows this! He
knows this!
So, man, it's
Lei Xing
And then the other thing we should mention is on the other side of the world, XPeng G7, which is the...
I mean, it was all about this computing, computing, computing, computing. mean, that was the central thing that was announced of how powerful this Turing AI chip is.
Tu Le
So
let me stop you there, Lei. Our friend, Ed White, who we just talked about, he wrote an article because they went down to Guangzhou to interview He Xiaopeng. So that posted yesterday. So kudos to Ed for being able to go down, speak to He Xiaopeng. They talked extensively about Turing So please go ahead. I just wanted to plug Ed's article.
Lei Xing
huh.
Yeah, so the Touring AI trip, which will be first on the XPeng G7 launching in a few weeks, a couple of weeks, three weeks maybe, they're putting three in this vehicle to have this newer variant called Ultra. Not the Xiaomi Ultra, but Computing Power Ultra, upgrade from the Max. neither am I holding the breath.
and three chips, 2200 tops. that's, I mean, He Xiaopang, showed several slides, right, of how many acts.
Tu Le
Well, so I have to see it to believe it. I have to see it to believe it because
Nvidia chips are really, really good. The Nvidia silicon is really, really good, number one. They've never had a competitor AMD to a lesser extent.
Lei Xing
And I just thought the L3 computing power was a little bit gimmicky because it was pointing to the vehicle possibly having L3 capabilities. I think which is the goal, which is the aim. Even remember XPeng is developing their own robotaxis based on the G9, right? So He Xiaopeng is saying, know, computing power, computing power, computing power.
And he also threw out these models, VLM, VLA, OL, all these jargons. And then he announced the pre-sale pricing, which we know this game by now that is going to be significantly lower when it launches, the actual starting price.
because in my mind the 235, 235, 800 given the current environment.
It's not going to be the starting price that that's going to work. It has to be, I think it has to be below 200,000.
Tu Le
which is aggressive.
Lei Xing
There's no other way.
Tu Le
And you know, I'm not, I like it. It's okay. I think the rear end looks a little bit like a Kia EV6.
Lei Xing
Well, it's basically the SUV version of the P7 Plus. We can look at it that way.
Tu Le
like
a crossover version.
Can't wait to drive it.
Lei Xing
Yeah, but that's one of the, because it's preceding the Xiaomi U7.
which was...
Tu Le
which everyone's
speculating on pricing. And I saw you had thrown a number out there, or at least kind of ⁓ put a ceiling on what it should start at.
Lei Xing
Guestimated.
Yeah. So it's.
Tu Le
That's
the biggest launch this year.
Lei Xing
Yeah, yeah, we talked about that also in the Max episode.
Tu Le
And I think it's smart that they are launching it in July. So there's less pressure to deliver a lot of units right away.
China is like the West, summertime, people are traveling, many of them are traveling internationally. And so it's really the only time children get to relax a little bit because they're in school a lot in China for a long time.
Lei Xing
Remember
Yeah, and we had this record at the Nürburgring of the Su-7 Ultra. And remember the Su-7, there's still tons of orders in the books. Remember that. So, and it looks like they're...
Tu Le
Yes.
So despite all of the poo-pooing, yes.
Lei Xing
Negativity,
I think it's largely behind them. can kind of focus on, mean, later in the cycle, we're focusing on the use of launch.
Tu Le
And remember, the Su7 is generally a $35,000 car. So the value that it communicates to the consumer is just off the charts. And we both know that China is not a sedan country. The one thing, again, I didn't tweet that much, but I think my tweets this week were pretty notable.
So Felix had posted that it beat the Taycan it beat the Rimac and then I quote tweeted him and I wrote something about the dinosaurs will not give this the credit it's due because if you're a racing enthusiast, this is a holy grail moment because everyone talks about, because
There's straight line speed and then there's speed and a curvy racetrack. I think Europeans really lean into the American muscle is like straight line speed, but we have all this handling and stuff like that. And so I just said that. You know, the dinosaurs will always have a butt because it happens to be an electric vehicle. And I wanted to emphasize those people don't like speed. They like nostalgia. They just won't admit it.
Lei Xing
Yeah.
Yeah.
Tu Le
And so if you like ICE vehicles, cool, man. But don't poo poo an achievement that happened with an electric vehicle from a company that's three years old.
So, and Europeans are, I think they're just, what's the right way to say this? ⁓ No, I think they are, yeah, just upset because they used to have this positioning to themselves, Mercedes, BMW, Porsche, but now, I mean, the Americans couldn't,
Lei Xing
Stubborn? Not stubborn. Traditional?
Tu Le
You know, with the Chevy's and the Corvettes, I mean, the Corvette is also world class, but you know, everybody wanted an M5, everybody wants a 911, and they've held that for so long, ever since I was a kid and you were a kid. But now there's this upstart that's like, you know what, dude? Hold my beer. And the U7 is going to perform really well too, I bet. The challenge that I see, Lei, is that I don't know if you saw the
So on social media or a media article where someone was driving a 001 FR and it completely like disintegrated and he was still in the seat. So he was safe, but.
Lei Xing
Yes, it's still in half, yeah.
So.
That turned into a positive PR instead of a negative PR?
Tu Le
Well, but here's
the thing. I don't care if you buy a Ferrari, Lei. But if you don't know how to drive it, and these people now probably don't know how handle two seconds, 0 to 62 seconds. And that's kind of concerning.
Lei Xing
Hence.
Hence the training camps that Xiaomi and others are putting out.
Tu Le
because traditionally those types of vehicles have been rich people. And so it's not unusual for BMW and Porsche to have sports training like you're talking about. But when you can get it for $75,000 and it goes zero to 60 in less than three seconds, I don't know if a normal 30 year old man or woman can handle that kind of power.
Lei Xing
I have a training
Tu Le
I mean, maybe they are accidentally pressing the accelerator like that. Maybe they do want to test it, that's why professionals race at that speed. Because mere mortals don't know how to handle it.
Man, so that's really all I had. I think it was important that you updated and we updated everyone about the involution, about the payment terms. So checkbox on that. A couple of personal things, Lei, this week. I had a good, I had a good conversation with Bill Bishop who writes the newsletter, Sinocism. We had a live stream on Substack. And so.
I will link to that in this week's newsletter, which I will press send on in about two hours. My son went to the Michigan State basketball camp, summer camp. And so I was in East Lansing for three and a half days, my old university. And so was really nice. And unfortunately, you tell me about mass, but.
Lei Xing
Alright.
Tu Le
It is freaking June and it's cold.
Lei Xing
It is, it was cold. It's starting
to get into the 80s. Finally.
Tu Le
⁓ so
it's not just the Michigan thing. OK. It's unbelievable. And I mean, it's good because the kids are playing sports, or at least my youngest. My oldest, unfortunately, broke his collarbone. But the cool thing, let's just, you know, this is our show. We can talk about whatever we want. Is it was there almost every day. And so I'd said.
sent my kids or taking my kids to another camp. And the head coach was there on day one and day four, but he wasn't there in between. Izzo had each of his players coach a team. So my son's team had a player. And so the player gave his team his phone number.
Lei Xing
Wow. That's cool.
Tu Le
And so like my son's 11 and you know, he talked every morning almost about, you know, why he does the things he does, how he was like, there are type A's or there are like not shy people, shy people and like dead people. That's what he said. And he said, and one of the things he said yesterday was,
Lei Xing
That's great.
Tu Le
You know, I went into the cafeteria. So he walks around all the gyms and he, he checks to make sure the coaches are coaching and stuff like that. Yeah. I got a picture with him. My wife got a picture with him. Harry got a picture with him. So I'll send them to you because you know, it's just like, he's a legend here locally, obviously. And if you're an NCAA basketball fan, I think you appreciate him. But you know, one of the things that I thought was really cool, cause you know, as a parent,
Lei Xing
is all.
Tu Le
Your kid is like one in one ear out the other. But is it was like, look, I saw some kids sitting by themselves looking at their phone and we play a team sport. No one should be sitting by themselves. And, know, just kind of talking like I'm a people person. This is a people business. Cause I was a cruel, a kid, you know, we would not be nice to some kids. I think.
Lei Xing
That's, yeah.
Tu Le
A few of them deserved it, but some of them didn't. But it's important because it's different now, because we didn't have an iPhone. So we had to interact. And those quiet kids, wasn't as obvious maybe. But now it's like, because one of my sons is my youngest. You know him.
Harry's a little quiet guy and it's hard to communicate with him. Not hard, but more challenging to communicate with him. And then my oldest is much more outgoing like my wife. anyways, great experience. then last night there was that event that I moderated. But go ahead.
Lei Xing
Mm-hmm. Mm-hmm.
So.
No, no, so speaking of sport, I'll be on the road again. Orlando, Phoenix, basically the next couple of weeks. Yeah, for the tournament. So it won't affect us doing this show, but still I'll be on the road. then hopefully I try out the Waymo from the airport to Phoenix. operate that.
Tu Le
Nice.
⁓ for the tournament? Nice, dude.
nice.
Are you
going to take your daughter to Universal? Did you decide that you're going to do that or no? man.
Lei Xing
Yeah, just one day.
Tu Le
Great dad, what a great dad.
Lei Xing
and then we'll come.
All right.
Tu Le
So anyways, let's do this.
There's a few comments. So SPX, always, always ⁓ logging on. Thanks, SPX. He says, good morning, good evening, or good afternoon, good evening. And let me read this to myself real quick.
Lei Xing
Thank you. Thank you, thank you, thank you.
Tu Le
As tight restrictions on China and high-end chip design and manufacturing capabilities, including but not limited to banning ASML from selling EUV machines and NVIDIA's top AI chips, now, how are NIO and XPeng able to not only design but also successfully produce 5-nanometer chip in volume?
So I don't know, SPX, if 5 nanometer EUV machines are banned. I should look that up, and I will let you know next week. But also remember that these machines are sold on the gray market as used machines. So where there's a will, there's a way.
And five nanometers is not the most cutting edge anymore. Since you brought up Nvidia and ASML, you saw probably that the CEO of ASML and Jensen Huang, the CEO of Nvidia are lobbying to not restrict sales into China for their products. That's because they also see
money being taken out of their pocket because everyone and their mother is trying to design their own silicon. Now, was that an inevitability? Yes. Has it been pushed forward because of the US restrictions? Perhaps. But I don't think that Nvidia was going to have this
Lei Xing
It
Tu Le
dominant share in perpetuity forever.
Lei Xing
It doesn't appear that their path, NIO, XPeng and LiAuto are affected as of this moment because we do know that XPeng still uses, they still have the Max, which uses the ORNX. And then they have the Ultra, which uses the TORI AI chips. And it looks like NIO is expanding it into
I mean, they've been said it right. They do have plans to expand it into the onboard vehicles. Maybe not so much on the Firefly, but at least the NIO and onboard vehicles. So the volumes are going to be there. And it looks like it can be supported.
Tu Le
So SPX's follow-up question, I think, kind of alludes to what you were just saying, Lei. Follow-up question with the know-how of 5-nanometer process, will it be a feasible new business area for NIO and Xpeng to turn around and compete with NVIDIA? So again, plug for Ed White's article, his interview with He Xiaopeng said, he effectively said, we're going to sell them to Volkswagen. So definitely commercialization opportunities, because SPX, since you're asking about
Lei Xing
Volkswagen, yeah, that's what, yeah.
Tu Le
Silicon design and fabrication, you likely know that it is very, very, very capital intensive. And so for XPeng to only sell a few hundred thousand vehicles and put that type of investment into chip design, it would take a lot of cars to recruit, a lot of cars and profitability to recruit that. And so they're trying to amortize that over
Lei Xing
He, yeah.
Tu Le
non-X-Pung vehicles and you had said this earlier, Lei, into RoboTaxis, into eVTOL so I...
Lei Xing
flying cars, robots. And Hussain Abdel-Malik,
yeah. I mean, he shared this was a five-year development for the Turing airship. And then in 2022, they had to abandon the architecture and start over. So it's hundreds of millions of renminbi that were kind of spent, right? And now billions, billions of renminbi, so.
Tu Le
that's easy. Easy. I I'm thinking it's billions of renminbi
Lei Xing
It's a huge thing.
Tu Le
So
Diane says hello. She's also a loyal viewer. I'm not holding my breath on RoboTaxi. She said that. think it was nice that GM is number two in US EVs. I also think it's very nice, Diane. I also think that GM should build on that momentum as opposed to double down on ICE vehicles.
Lei Xing
Well, we now have President Trump signing the resolution, three resolutions, basically getting rid of the ban on the 2035, which involves 11 or 10 other states. So that's out of the way, right? That's gone.
Tu Le
So, Mike?
He asks, how concerned are we with the allegations against BYD's debt? Zero kilometer, we talked about this last week, yeah.
Lei Xing
don't know that. It's also an FT article, think. Talked about it.
like a hundred some 20 billion over or something and then be I don't know I'm I'm not a financial expert but I'm not that worried at this point I think
Tu Le
I think it's something that's important to flag that should be monitored. And Stella Li, Wang Chuang Fu, especially in China, if they have off the books debt that isn't on their balance sheet, then media by all means should investigate. But where BYD is different than everyone else is that they're growing by 20 % every year.
I think a certain amount of that debt is justified just because they're in growth mode and are investing heavily back into the company. You know, I don't know, like, like Lei, I'm not on financial shows talking about buy sell and that's not what we do. So please don't take this as investment advice.
Lei Xing
But I do think if we talk about the concerns of sacrificing, possibly sacrificing quality, that also has to deal with the kind of the payment terms, your pressure on the suppliers.
What comes out of this upcoming random inspection?
Tu Le
The- the-
Lei Xing
That's something.
Tu Le
Can
you get into more detail on that random inspection? What do you mean they're gonna inspect?
Lei Xing
Well,
the MIIT came out with a notice saying in order to ensure, this is again from the fallout of the war of words and about quality, about fuel tank, that they plan to conduct random inspections, quality inspections, products. Random, mean, it could be anybody. And then based on that, they could
if they find out there's quality issues, they will revoke the product catalogs, which means you can no longer produce the vehicles if they were found to be defective. That's what's happening. so that's the, know, could be BYD, it could be anybody. And that would be huge if, let's say, someone was found liable.
Tu Le
And here's the difference that I feel we should communicate. You know, I'd said it earlier, and the calls are coming from inside the house, the great walls, the Geelys, they're pointing fingers. They're effectively calling BYD a bully and they should be closely monitored or more closely monitored because they're distorting the market. Stella, you know, she came out, you know.
And she's a great spokesperson for BYD, by the way. So we can imagine that the Chinese government is really going to have more scrutiny on BYD because it's not coming from foreign investors. It's coming from domestic competitors, which creates and gives much more depth and meaning to potential wrongdoing or the accusations of wrongdoing.
I can't point to anything that BYD has done that would be this scandalous thing. But the debt thing that has been pointed out by the FT, you know.
Lei Xing
Well, I mean, asking
your suppliers to reduce prices by 10 % is that scandalous? Right. You said from your perspective, that's kind of normal, right? From a supply chain, supply relationships.
But then you have this executive from the supplier put out a of a label and saying, know, it's too much. It's...
Tu Le
Yeah, cause...
Yeah, and that's completely fine.
But remember what I had said about my old colleague. He was like, I want healthy suppliers and I want them to make money. I just don't want them to make money on me. So I promise you, he said that. And that's how we're taught in sourcing to be like, you know what? We're fighting for pennies here. Because when you're shipping 10 million units, a savings of a penny is
Lei Xing
It's not me, it's not us.
Tu Le
really meaningful and add that up to all the different components. this is sourcing and negotiations. This is part and parcel of any big company.
Lei Xing
And then just seeing the videos of the chairman of Neta or Hozon. You saw that, right? The videos of him at his office and then the boys protesting and blocking him and the way he was portrayed. I mean, that was such a departure from...
Tu Le
Yeah.
Lei Xing
from a CEO, right? How a CEO is usually presented when he speaks publicly. That was such a, dude, like.
Tu Le
And that is
absolutely not what the Chinese government wants.
Lei Xing
Ugh.
Tu Le
But
this goes back to what I said last week. We're starting to see cracks in the foundation because we're in year four of the price war and it is really starting to stress the system. And that's real because we are in year four, which is unprecedented. I never thought it was gonna last this long.
Lei Xing
Yeah, unprecedented.
Tu Le
So anyways, one more question on LinkedIn from Adam Boruswicz. Which Chinese company will have problem, the biggest problem because of low sales of ICEs in China? Well, Adam.
GM wrote down five billion dollars. Volkswagen. Yeah.
Lei Xing
Chevrolet is wrong, right? We know that Chevrolet is pretty much...
Tu Le
Volkswagen is struggling mightily. I think he was probably looking for a Chinese player, but there are some state-owned enterprises that are going to struggle, brands that you probably have never heard of.
Lei Xing
what?
So I'll tell you a few on any of these I think that come to mind. Great Wall Motors, Ora and SAIC Motors, IM, I think are under immense pressure because they were not selling well. Just a couple of brands, right?
Tu Le
So this is important. You and I went to Beijing and Shanghai. Ora is kind of a Beijing company. Didn't see many Oras in Beijing. IM Motors saw a handful in Shanghai. Yeah. So when your home city or home province doesn't have many of those vehicles driving around, you know that's a challenge.
Lei Xing
babe.
I think the benchmarks 10k a month. Anybody that's not doing 10k a month.
Tu Le
That's bare minimum, bare minimum. It should be at this point in time, should be bare minimum 25, 30.
Lei Xing
I think they're done.
Just a year ago, remember the Beijing Honor Show when Chevrolet launched the new plugins? You were actually kind of positive on those. But that's the confidence.
Tu Le
Well, so the brand
deterioration, the features and the pricing just didn't compute in the China market.
So Diane's, here, I'll just do this.
So, that's all I have, man. Anything else for you?
Lei Xing
No, mean, yeah speaking of Rivian I'm really looking forward to because they've been putting a lot about R2 development I'm actually looking forward to you know, getting I mean I have one on order so I'm seriously considering It will be my next vehicle Come this time next year
Tu Le
Well, I gotta see a baby gravity, man. I need to see a baby gravity, because I'm a huge fan of both cars. I'm a huge fan of the R1T. I'm a huge fan of the air. I'll hopefully get to see the gravity in person very soon. But I'm rooting for both of those companies, because number one, I think you and I have friends at both companies. Number two, the products are great. The products are great.
Lei Xing
Yeah, maybe gravity is okay.
Tu Le
Unfortunately...
They just, they're slow. These companies are slow. There's no other way to put it.
Lei Xing
So, yeah,
so speaking of Volkswagen, right? At least Volkswagen in China, they just had a few executive shuffles for the Volkswagen brand, some PR people. We don't know until next year, really. I think this year, we already talked about it that it hasn't bottomed, but everything's on next year, I think.
Tu Le
for every
Volkswagen brand, not just Volkswagen, not just a Volkswagen brand, sorry, but Porsche, yeah, so there is a lot of hope for the E5.
Lei Xing
All the portion.
more back. Yeah. ⁓
Tu Le
I just
don't know. Cause I like the interior. The exterior is awkward. The exterior is awkward.
Lei Xing
⁓ I'll tell
you which of the foreign automakers I'm quite bullish on is Toyota. Because Toyota have really, said, right, the GAC Toyota, they put in Huawei Momenta Xiaomi ecosystem into their latest vehicle. Right.
Tu Le
Mm.
Yep.
And they simplified the name of the vehicle.
Lei Xing
Yeah, and they're launching the extended range versions of the Sienna, I think the Highlander.
And their BZ3X or the yeah, the BZ3X actually is selling quite well. So with Huawei, right, with Momenta, I think they're on the right track. Others, I don't know. mean, others are trying as well.
Tu Le
Yeah, I heard it's doing well, so good for them.
Well, with the Japanese companies, it seems less political because I think if a German or American company would go whole-hog on Chinese hardware software in China, would unfortunately be politicized quite significantly, I believe.
But thanks to you for the questions and thank you for being part of this live stream. We will talk with you all next week, same time, same place. Good morning, good afternoon, and good evening.
Lei Xing
Yes, sir.
Likewise, bye bye.