China's ICE Market Just Collapsed | Can Volkswagen, BMW & Mercedes Survive? | China EVs & More #253

China's automotive market may have just crossed one of the most important milestones in modern automotive history.

In Episode 253 of China EVs & More, Tu Le and Lei Xing analyze the latest Chinese auto sales—and the numbers are staggering.

China's domestic ICE vehicle sales plunged 50% year-over-year, while Chinese automakers continue expanding globally at an unprecedented pace. Foreign automakers—including Volkswagen Group, Porsche, Mercedes-Benz and BMW—are facing mounting pressure as Chinese brands continue taking market share.

This episode also covers:

✅ China's domestic ICE collapse and what it means for global automakers

✅ Why BYD, Geely, Chery and Leapmotor continue gaining momentum

✅ China's vehicle exports surpassing one million vehicles in a single month

✅ Volkswagen's latest board meeting and the difficult decisions ahead

✅ Why Porsche's China strategy continues to deteriorate

✅ NIO's product cadence, ES8 momentum and upcoming NIO Day

✅ Li Auto's launch strategy and how Chinese OEMs are changing product rollouts

✅ Reuters' recent reporting on China's auto industry and why the government is trying to slow the "involution" and price war

✅ How new safety regulations and payment reforms could reshape China's automotive market

✅ Why Western automakers still underestimate China's competitive advantages

Whether you're an automotive executive, investor, supplier or simply passionate about the future of mobility, this episode explains why the world's largest automotive market is entering an entirely new phase—and why its effects will be felt across Europe, North America and beyond.

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Chapters

00:00 Introduction

01:20 China's shocking June sales numbers

03:45 China's exports hit another milestone

05:45 Why German automakers are under unprecedented pressure

09:30 NIO's improving product strategy

12:30 Reuters' report on China's auto industry

17:30 China's price war and government intervention

24:00 Automotive News Congress recap

29:00 Are Western automakers still underestimating China?

34:30 Why China's competitive advantage continues to grow

37:30 Closing thoughts

Transcript

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Tu Le (00:00)
 Welcome to the China EVs and More Podcast, where my co-host Lei Xing and I will in the next hour or so bring you the latest 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. We are broadcasting live for those interested in making some comments or asking us any questions.
 
 My name is Tu Le. I'm the managing director at sinoautoinsights.substack.com, 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.
 
 Can you please introduce yourself?
 
 Lei Xing (00:46)
 Good evening from Beijing, yes. this is your co-host Lei Xing, former chief editor of China Auto Review. Episode
 
 Tu Le (00:53)
 Wan Shanghao!
 
 Lei Xing (00:54)
 253. Zao Shanghao
 
 We've passed midpoint of 2026 The sales number are coming in.
 
 Tu Le (01:05)
 Let's let's let's focus on overall
 
 sales numbers, what we think a couple of companies to highlight and low light. One of them in Germany just had a board meeting yesterday. Let's talk about that. And let's talk about that first week in Beijing. what you've been able to do and what you're going to be doing.
 
 Lei Xing (01:26)
 Yeah. Well, I mean, we can talk about the NEV sales. the numbers that stood out for me are the steep, steep, steep drop in internal combustion engine vehicle sales. Not only the foreign the German automakers, but the entire industry. 50% drop.
 
 In domestic internal combustion engine sales. This number stood out to me for the reason that I couldn't remember of all of my years covering the Chinese auto industry and yours as well. In a month, the internal combustion engine vehicle sales dropped by half. Hence, we saw.
 
 The numbers reported by Porsche, Mercedes, BMW Group, Volkswagen Group.
 
 So that's where we begin with. it's more serious than what many expected at the beginning of the year.
 
 Tu Le (02:32)
 And who does this advantage? number one, the top of mind comes to BYD. you know, they don't build any ICE vehicles as you and I know. Chery, Geely, they have some recalculating to do on their mix because a drop of 50% in ICE sales.
 
 Is still gonna be a significant absolute number of ICE sales for China. not for China, but it's still gonna be entire markets for other countries. So we're still talking sales of ICE vehicles in the millions, but from its peak to now, the drop is enormous.
 
 Lei Xing (03:14)
 And I I also seen a trend of these German automakers who are reporting numbers in the title of their press releases. They're reporting sales are up outside of China. It's also the first time I've seen that's the way that they are now reporting and the common phrase that are used intense competition.
 
 given in the press releases.
 
 Tu Le (03:41)
 Lei, if they would have just listened to me like six or seven years ago, but anyway.
 
 Lei Xing (03:47)
 And the exports, right? Export important to point out is over five million autos exported in the first half.
 
 Tu Le (03:56)
 We're at a million unit a month run rate.
 
 Lei Xing (03:59)
 First time in June ever that monthly auto export from China went above a million units. Four or five years ago, it was a million units a year. That's how drastic the structure has changed just in the last few years.
 
 And I was looking at some numbers. So out of all the auto export, NEV export accounts for roughly half. And out of the auto sales, the auto export accounts for roughly 30% to a third.
 
 Tu Le (04:34)
 ICE sales are being exported to Russia, to Mexico or Latin America, to likely like Africa and some parts of Europe, but I think we're going to start to see that mix go further into NEV space.
 
 I wanna see what the the knock-on effects of BYD capacity outside of China coming online, Great Wall capacity coming online, Chery capacity, LeapMotor capacity all coming online outside of China, because it doesn't help the Chinese domestic market with their overcapacity. one of the big reasons exports is growing is because number one
 
 The competition in China is fierce. Number two, the growth number is flattening out. And so continuous pressure. And the Chinese government is actually pulling away incentives and are trying to normalize the market. it seems like they see these numbers that are bonkers where ICE vehicles aren't really a thing anymore. And there's price parity amongst new energy vehicles and ICEs. And so
 
 Most Chinese consumers just practically are buying NEVs.
 
 Lei Xing (05:47)
 and
 
 more pain Stuttgart pain and Wolfsburg Pain,
 
 Tu Le (05:51)
 Wolfsburg pain.
 
 Lei Xing (05:53)
 Munich pain, the Chinese brands share of the passenger vehicle market in June, guess how high that was?
 
 Tu Le (06:02)
 It was over 70, wasn't it?
 
 Lei Xing (06:04)
 75.5%
 
 So only a quarter of the passenger vehicle sales are foreign brands.
 
 Tu Le (06:11)
 here's a green chute or a silver lining for one of those foreign brands. Buick launched the ELECTRA E7 in April. First full month of sales in May, they shipped over 10,000 units. The E7 is a Model Y size PHEV. So applaud GM, it's the GM SAIC joint venture, but it's a plug-in hybrid using Momenta for intelligent driving.
 
 And you know, 10,000 units. That's a win. I'll take that as a win for GM.
 
 Lei Xing (06:42)
 one of the few good points is Buick ELECTRA They have the ELECTRA sub brand of their NEVs are actually number one among joint ventures. Except SAIC-GM-Wuling which they have the Wuling
 
 Tu Le (06:56)
 They're in a different price bracket.
 
 Lei Xing (06:58)
 But interestingly enough, they're number one among the joint venture brands.
 
 I'm just looking at some of these numbers reported by CAAM yesterday. thinking back to what the German automakers reported I don't think it's even a panic button anymore. It's a survival button. It's a what do you call it? a close to a death certificate button.
 
 Tu Le (07:20)
 I completely agree, Lei. I think we're closer to does VW continue to be a viable brand in China than we are finding a bottom trying to right-size. it's like how do we maintain a presence in the China market? I think those
 
 Lei Xing (07:37)
 Well
 
 Tu Le (07:37)
 are the questions the board are answering. They're not trying to say
 
 how fast can we get a new product out? It's does our brand even resonate anymore in the China market? those are principally different questions that need to be answered.
 
 Lei Xing (07:49)
 if you look at the last few days of launches, We had the Mercedes GLC launch the day after the ES8 five seater launched. and then there's the ZEEKR 9X five seater. To be honest, the Mercedes GLC Yeah
 
 Tu Le (08:02)
 And in the ES8 five seater, I think you said that?
 
 Lei Xing (08:06)
 the
 
 the Mercedes electric GLC they're starting under RMB300,000 took some guts for that brand and that type of vehicle. Whereas if it was in the ICE age, it's unthinkable that they will price it under RMB300,000 Yet they're stacked up against these ES8s 9Xs, 8Xs.
 
 Tu Le (08:33)
 You say that Lei, but even
 
 Lei Xing (08:34)
 Okay.
 
 Tu Le (08:35)
 RMB300,000 is still too much for that vehicle in that market.
 
 Lei Xing (08:39)
 But remember
 
 it's Mercedes. How low can you go? That's the problem. For the CEOs.
 
 Tu Le (08:43)
 but I agree, but think you and I agree
 
 Lei Xing (08:48)
 If you price it in the mid RMB200,000 that's just
 
 Tu Le (08:51)
 right now the FX is a dollar buys me 7 RMB chabuduo (roughly)
 
 Lei Xing (08:55)
 Yeah.
 
 Something like that.
 
 Tu Le (08:57)
 So a RMB300,000 is less than US$50,000
 
 Lei Xing (09:03)
 and then you look at these I look at the the Volkswagen group numbers reported, their
 
 Q2 sales in China down 36.6% The last time the downfall was this high was in the pandemic year of 2020.
 
 Tu Le (09:20)
 It's effectively never been because if we take
 
 Lei Xing (09:23)
 No.
 
 Tu Le (09:24)
 out the pandemic, it's never been this drastic.
 
 Lei Xing (09:28)
 Porsche, less than 10,000 units sold in a quarter in China.
 
 Tu Le (09:34)
 Wow, that just hearing you say that, I knew I read that Porsche sales were down, but just to hear you say that is a bit unfathomable.
 
 Lei Xing (09:44)
 Mercedes Q2 in China less than 100,000 units, which is less than many of the smart EV startups sold in the same quarter.
 
 again, how low do you go? Where is the bottom?
 
 We're not at the bottom yet.
 
 And yet
 
 Tu Le (10:03)
 and immediately feels pressure to perform and right the ship.
 
 has he been to China yet since he's been CEO?
 
 Lei Xing (10:11)
 I
 
 don't think so.
 
 Tu Le (10:13)
 I don't think so either.
 
 Lei Xing (10:14)
 'Cause the transition was
 
 Tu Le (10:15)
 If he doesn't
 
 Lei Xing (10:15)
 after the Beijing Auto Show when Oliver Blume was still the CEO, I believe.
 
 Tu Le (10:20)
 Well, if he doesn't make his way to China at least a couple of times a year, a couple three times a year, I don't know how long he's gonna be Porsche's CEO.
 
 Lei Xing (10:27)
 just disastrous numbers that we're seeing, especially from the German automakers. And we already know they pointed to this, BMW Group adjusted the guidance in early June because of China. So we knew these were gonna be bad, bad, bad numbers.
 
 And then I posted
 
 that some of the Japanese automakers the way that their numbers have fallen over this decade.
 
 Tu Le (10:55)
 Volkswagen had a board meeting yesterday. Rumor was they were talking about 100,000 job cuts
 
 Lei Xing (11:03)
 never
 
 mentioned in the press release, by the way.
 
 Tu Le (11:05)
 The board is at a weird crossroads because the board is made up of union and Lower Saxony, so municipal and government folks, they obviously don't want to see job cuts, but
 
 As I've continually said, you've continually said, they still haven't found a bottom. There's no solution to the US market as long as there's 15 and 25% tariffs on the Audis and the Porsches that they ship over. Scout brand is in no man's land right now because when it launches, it's going to compete head to head with Rivian, who
 
 They've also written a $5 billion check too. So Blume's strategy of try everything all at once is not working. And the other thing, and it's this New York Times article I just finished reading. They're going to reduce the number of products. And here's the thing, Lei. they're gonna reduce their
 
 Capacity by three million units. We'd mentioned this last week or two weeks ago. Three million units. And let's assume there's 250,000 units per plant. And then think about all the tier ones, tier twos, and all the supply chain that comes along with it.
 
 Three million units, that's what, twelve plants. So, let's say there's 2,500-3,000 people per factory, and then if you talk about up and down the supply chain, that's tens of thousands of workers potentially being laid off. So this is a significant issue in Europe as well.
 
 Mercedes,
 
 BMW, and Volkswagen Group, I feel it's bad management, but primarily due to such high exposure and reliance on the China market.
 
 Lei Xing (12:54)
 So
 
 the Volkswagen Group press release said from twelve to nine million and two million is already confirmed. That one more million, the press release said in China and Europe upcoming. So we talk about the sales side and we talk about the capacity side. At least from the capacity side, you can do things by shutting down or
 
 closing plants. But how much of those are gonna be in China? Because what was reported from Volkswagen, less than a million group sales in China in the first half.
 
 Which means
 
 They're gonna be most likely under 2 million for the year when it used to be over 4 million. And imagine the 9 million total group sales in the first half globally was 4.13 million, which means 8 million roughly. And then we go back to the BYD discussion that we said that BYD could.
 
 surpass Volkswagen without having to sell nine or ten million units. So there's one indication.
 
 Tu Le (14:03)
 when does Hyundai overtake Volkswagen Group?
 
 Lei Xing (14:05)
 Right.
 
 Tu Le (14:05)
 they're firing on all cylinders, their reliance on the US market is not perfect for them in their lack of or their inability to grow the China market for all the challenges that
 
 Lei Xing (14:15)
 Yeah.
 
 Tu Le (14:17)
 they have there. Despite that,
 
 Lei Xing (14:18)
 I leave
 
 Tu Le (14:20)
 they're doing gangbusters,
 
 Lei Xing (14:21)
 At least Hyundai relatively, they don't have as much exposure to the Chinese environment because their sales volumes are already low to begin with. they're relying more on other markets, but not the same for the German automakers, which means more than other foreign automakers in China, they have to face the double whammy of significant reduction in ICEV sales.
 
 At the same time, their NEV product line ramp and volume are not nearly where they should be to compete.
 
 Tu Le (14:55)
 And let me say this and be very clear.
 
 Lei Xing (14:57)
 That's the problem.
 
 Tu Le (14:59)
 Let me say this and be very clear. This is the saving grace for Ford. This is the saving grace for General Motors because they have less exposure to the China market. But if you look at Ford GM, Hyundai, whoever else, Renault, Stellantis, Stellantis doesn't have a lot of sales coming into the China market. They need to look at two things. They need to look at the fact that you had just mentioned
 
 50% sales drop on ICE sales in China.
 
 Number two, this competition, this 75% domestic Chinese automaker share in China, that competition is coming for them in Europe, in North America, ex United States. You and I believe within the next three, four years, the Chinese are likely going to be in the United States. I hope they're preparing. I hope they are.
 
 Having war rooms that say we already see a million units of exports coming from China, a good portion of those into the EU. We're already seeing BYD, SAIC, Chery have success in the UK. But we still have 12, 14, 18 months to really, really make drastic changes. are we doing it?
 
 Are we talking to our board to make these drastic changes? The reason I bring up the whole 50% drop in ICE sales is because we talk here in the United States, Lei, that ICE sales are going to be high for a very, very long time. The more we sell ICE in the United States, the less competitive every single automaker here is going to be globally. Full stop.
 
 Can they walk and chew gum at the same time? Because the NEVs that they launch into the market over the next 24, 36 months, they better be the best thing that they have ever produced. Cause they will not sell outside of the United States if not.
 
 one of the things that you and I have the distinct pleasure of of doing is we have a a great network of people, of friends, call them friends. And what they have to say officially, whether they work at OEMs or tier ones, what they have to say officially is what they say officially. But knowing them years and years and years
 
 They speak candidly. At least they speak fairly candidly to me. And most of them think the strategies
 
 Lei Xing (17:20)
 Yeah, I mean we have friends
 
 and contacts from both sides of the coin, if you will. I mean from the smart E V startups, from the Chinese brands, as well as the foreign brands. A lot of German brands. a lot of people that you and I know that I I probably will talk to in the coming weeks. and
 
 I've never seen this kind of bloodbath ever. Aside from the pandemic.
 
 And
 
 then the other thing that caught our attention is the 15th Five-Year Plan for carbon peaking wants to have the fleet of NEVs account for 30% by 2030. At the end of 2025, that was 12%. So if you do a little bit of extrapolation.
 
 The NEV share of sales is only gonna increase, probably faster than what many are expecting.
 
 And again, that's the backdrop that these foreign automakers have to face. The prospects of China is not has never announced any plans to stop selling ICEVs. But by 2030, right?
 
 When you only have 25% of the passenger vehicle market of the foreign automakers, and the prospects of ICEVs becoming minimal.
 
 this is staring at you, in front of you. That you must get the NEVs right because you already don't have the ICEVs left anyways.
 
 Tu Le (18:46)
 let me circle back on a scenario that you had mentioned earlier about the GLC being RMB299,000 RMB300,000 but I think symbolically they announced it as 299 or something like that. so that's $45,000 The conundrum that a Mercedes and the BMW and an Audi and a Porsche have is that their pricing is being pulled down in the China market.
 
 And if something that's supposed to be premium is much lower priced in the China market, it's gonna create an unevenness in Europe and the United States and anywhere else in a mature market that Mercedes sell at a premium and a GLC might be twice as much. I won't say it won't be 70,000, but it'll land
 
 in the United States at a much higher price point than 45. And and so this creates a challenge for the board as well because they're positioned as premium, but in order to compete in China, they need to be value. And so what's the choice here? We either right size like VW and say, look, we're only going to take this much share because we want to stay at this price point. Or
 
 Because you can't have it both. The history has told us that BMW, the premium brands have been able to double dip. They've been able to generate tons of sales volume and keep margins very high. They have to pick one now. Which one are they going to pick?
 
 Lei Xing (20:19)
 The ID.ERA 9X, which is supposedly the star product of this next generation, next wave of in China for China products for Volkswagen brand, has surpassed the 10,000 unit sales mark. But this is more than two months after it launched.
 
 How do you grade that?
 
 It's not an F, it's definitely not an A, but I would imagine that this thing has to do at least well, maybe it's a passing grade, because at least 5,000 units a month they've reached. But is that good enough?
 
 Tu Le (20:55)
 The one thing, and I'll emphasize this, and we've talked about it before, but the refresh rate for a NIO and Xpeng Li Auto is a little bit slower. Geely. the refresh rate on their products is off the charts. And that's one of the things for
 
 Lei Xing (21:09)
 Which is both good bad. Yeah.
 
 Tu Le (21:12)
 the Chinese for sure, but it's kind of the nature of the beast in China because
 
 If you're not refreshing every 8-14 months
 
 The fear is that your product becomes completely irrelevant, in the market. That's why the ES8, you've heard us talking about it, and some of the features are trim changes as opposed to like complete updates to the vehicle. But nonetheless, they're constantly refreshing something. And this time around it's a five seater.
 
 Lei Xing (21:45)
 Well, speaking of refreshing something, the Xiaomi Sky Nomad is definitely in that camp. it's not refreshing the seating. Well, it is refreshing the seating configuration.
 
 Tu Le (21:58)
 what do you
 
 think about that? What do you think about the nomad?
 
 Lei Xing (22:00)
 I don't like the name to be honest. It's a little bit too long.
 
 Tu Le (22:03)
 You're
 
 Lei Xing (22:04)
 like Xiaomi sounds fun, But Sky Nomad, it just sounds weird. I know they want what it portrays, Sky and Nomad means you want to go out there and
 
 Tu Le (22:14)
 Wanderer
 
 Lei Xing (22:15)
 wander, But the refreshing something to Xiaomi is really upping the ante in terms of what
 
 inside the car, the space can be. And when you post something like a floor map style, for a house, in marketing materials, that's classic Xiaomi, And what Li Auto tried to do inside their vehicles, I think the Sky Nomad just raised it up a notch,
 
 Tu Le (22:45)
 thought was the ZEEKR Mix because the seats rotate. I'm a little disappointed on the exterior design because it looks like every other large SUV. it's a little bit for our audience, Western audience, it's a little bit smaller than a Chevy Tahoe. and it's a PHEV. So Xiaomi has only
 
 built BEVs up until this point. So this is a PHEV. The floor is completely flat.
 
 Lei Xing (23:10)
 EREVs, yeah.
 
 Tu Le (23:12)
 Or EREV, sorry. the floor is completely flat. And they've created these configurations where the second row seats can turn around. You can put a table there. And so they're trying to make it like a lounger effectively.
 
 The exterior design looks a little bit like a Li Auto. It looks a little bit like a AITO M9. It has similar shapes if you squint. And that's one of the big biggest problems or challenges for the Chinese, is that the exterior design of vehicles, a lot of them are very similar.
 
 Lei Xing (23:46)
 But if you look at the way the Chinese, especially Xiaomi, how they brought this brand to life and the series of marketing that they've done on social media channels, it's carefully planned. I mean, within the last 48 hours, I'm bombarded with these stuff on WeChat, on X, on wherever.
 
 There's something that you don't see the foreign brands do. The Mercedes launches GLC that day, the hype is there a little bit and it dies. Nobody talks about it anymore. And then it's constantly about Xiaomi now, NIO, others.
 
 That's also different. just what you're seeing happening.
 
 Tu Le (24:30)
 Well, you tend to see a three headed monster. you see He Xiaopeng, you see Lei Jun, and you definitely see Li Bin.
 
 Lei Xing (24:36)
 Li Bin's
 
 Tu Le (24:39)
 Li Xiang is still behind the scenes a bit more, but you know, in Chinese social, it's He Xiaopong. for Western social and Western media, it's Brian. and so
 
 it was bound to be Lei
 
 Jun's time. Stella does both. She straddles Western and because she was at Goodwood. she
 
 in England at Goodwood.
 
 to launch the Denza Z.
 
 and so we've talked about the market a bit. So let's do this. First of all, I know you and I want to congratulate Momenta on their IPO in Hong Kong. raised a billion dollars or close to a billion dollars at a ten billion dollar valuation. So they now are one of the more valuable.
 
 Autonomous vehicle companies, Chinese autonomous vehicle companies and Mercedes GM are gonna be well compensated for their early investments into momenta.
 
 Lei Xing (25:32)
 Yeah. one of the aims of of me being here is actually try out a few Momenta equipped models. I'm looking around, asking around, possibly the ID.ERA 9X and also maybe the AUDI E7X and from what I'm hearing, at least from some of the media I know that they've tested this.
 
 It's still a bit a ways obviously from FSD from my point of view, as a Tesla stan, Now FSD is still kind of the crown jewel and that's something I plan to see how really how how it is. But it is in a million vehicles now.
 
 Tu Le (26:09)
 here's one thing I brought up, Lei. No, I didn't bring it up. I should have brought it up. But one thing that
 
 Lei Xing (26:14)
 Now you're praying
 
 Tu Le (26:15)
 well, I was gonna write something in my newsletter about it. You know, the Momenta IPO. One of the risks I feel that they have is they're so reliant on the foreign automakers in China. And you just said it's only
 
 Lei Xing (26:29)
 It is.
 
 Tu Le (26:29)
 25% of the market.
 
 So
 
 Lei Xing (26:31)
 It is.
 
 Tu Le (26:32)
 That that seems like a huge exposure, downside exposure for them.
 
 Lei Xing (26:38)
 It is a bet on both sides, right? It's a bet from the OEMs as well as a bet from Momenta on these OEMs that
 
 Tu Le (26:45)
 I think it's
 
 more risky for Momenta now because each of these foreign automakers let's just say with the exception of GM for now, every other foreign automaker that they partner with sales are this way. So
 
 Lei Xing (26:59)
 That's great point to bring up.
 
 Tu Le (27:01)
 'cause we know that every other Chinese automaker either has their own or are partnering with Huawei. So Momenta has nowhere to go if the foreign automakers that they partner with for the China market continue to go down.
 
 Lei Xing (27:17)
 Yeah, great risk.
 
 Tu Le (27:18)
 we should acknowledge that.
 
 You should ask them that when you talk to them.
 
 Lei Xing (27:21)
 right, you look at these sales, but there's other ones, there's these even the Chinese one, the IM that Momenta began with three or four years ago, is wouldn't say struggling, but it's never ramped to where they expect it. obviously there's other ones, there's BYD, there's Buick, there's Cadillac, Volkswagen, Mercedes.
 
 Tu Le (27:43)
 Toyota
 
 Lei Xing (27:44)
 BMW, they're all Momenta
 
 Tu Le (27:46)
 we
 
 thought that was I thought maybe both of us did maybe a year ago, year and a half ago during one of our shows. thought that was a virtue. I thought that was like a selling point. But now, a year later, seeing foreign automaker sales crater, I'm disappointed that there's not more fight.
 
 from the foreign army. I'm very disappointed that there's not more fight from them.
 
 Lei Xing (28:09)
 Well, but the point is that the foreign automakers are betting on momenta to get the mojo back. that's
 
 Tu Le (28:17)
 no. I don't think that at all. I think they're betting on Momenta because they have no other play. I think they're trying to
 
 Lei Xing (28:22)
 Yeah, they right. They have to have
 
 Tu Le (28:24)
 create relevance. Not because to me, Momenta is not a differentiator. It gets you in the same party. it doesn't make you a leader. it brings you to the table.
 
 Lei Xing (28:34)
 Yeah, it's just not looking positive any way you look at it.
 
 Tu Le (28:38)
 Yeah,
 
 really yeah, it's challenging.
 
 Lei Xing (28:40)
 of of really
 
 seeing that bottom where that bottom is. how it goes in the second half of the year. 'Cause second half of the year usually is better.
 
 than the first half.
 
 Tu Le (28:51)
 Well, the numbers are
 
 but that's also normally at least with the exception of middle of last year when involution the Chinese government was really focusing on avoiding price cuts or eliminating severe price cuts.
 
 And did write this in the newsletter this week that I'm curious to see how many more free charging, non-price cut price cuts for the second half of the year are gonna come into play. What creative ways are they gonna incentivize Lei Xing to buy their vehicle in the second half of 2026? If I can't reduce the price Lei, how else am I gonna incentivize you?
 
 Lei Xing (29:31)
 think in recent weeks, a month, I guess the pure price war, I think is probably dead, would you agree? But there's other forms of ways of incentivizing. One way is to launch these five seaters at a little bit lower prices, That's one way to pedal on the metal. and then continuing to just we're seeing some additional
 
 New models being reported by the MIT catalogue.
 
 The Sky Nomad being one of it one of there's other ones.
 
 But at the same time China just stopped the vehicle vessel tax incentive. It's not much,
 
 only
 
 a a few hundred RMB a year. but clearly by next year the purchase tax savings is completely gone at the end of next year. So it's just a market based competition. There's no more subsidies, at least.
 
 incentivizing. Other ways is just to add on these features saying, you these features cost RMB70,000, but they're all standard or we're gonna have these you can buy these at a discounted price.
 
 Tu Le (30:40)
 gonna move towards a Li Auto Motto. You know, we have one price that gives you everything kitchen sink.
 
 Lei Xing (30:46)
 Li Auto, I can't believe they also revealed the i9, because but
 
 Tu Le (30:52)
 Ha ha ha.
 
 Lei Xing (30:54)
 I also heard, I know you've heard of this as well, that the L series could launch BEVs, Which I find perplexing because the i series is the BEVs of the L series. there's some rumors going on, but I think the Russian doll.
 
 for Li Auto is probably not sustainable going forward.
 
 Tu Le (31:17)
 No. They should eliminate two of the four L6,
 
 Lei Xing (31:21)
 Well
 
 Tu Le (31:22)
 L7, L8, L9. They need to eliminate two of them. And then they need to at least on the I6. if we look at the ES8, that needs to be the standard now for most automakers in China for the the middle size SUV. ES8 is a
 
 Tremendous vehicle at the price point it's at in China.
 
 can you think of another car right now in China? the ES8's what forty something thousand without a battery.
 
 Lei Xing (31:54)
 starts at under RMB300,000 and then BaaS mode. Six, seven seater. For the five seater it's RMB270,000
 
 Tu Le (31:58)
 So it's a
 
 Lei Xing (32:03)
 So $30,000 yeah,
 
 Tu Le (32:03)
 so it's a forty grand car.
 
 Lei Xing (32:06)
 $40,000
 
 Tu Le (32:07)
 For amazing premium. Amazing premium. and that's just really, really hard to compete. I guess you could go with the Tang.
 
 Lei Xing (32:17)
 Well the Big Tang, the Datang got a 100,000
 
 Tu Le (32:17)
 Tang is bigger than an ES8, right?
 
 Lei Xing (32:19)
 orders. I don't even know anymore. 'Cause 'cause
 
 Tu Le (32:27)
 you and I, we live and breathe this stuff. I think you and I have encyclopedic knowledge of the China market. No one can beat us. But even you and I are like, Man, I get confused, man. There's so many, so much news, pricing changes, and then there's the Tang, there's the Da Tang
 
 And the 26 version versus the 27 version. There's mega charging. CATL has it, BYD has it. It's just like, whoa. god. And we can close it out. Stellanits is bringing the Topolino to the United States, $14,000 car. well, so
 
 Lei Xing (33:02)
 You gonna get one?
 
 Tu Le (33:06)
 it made me think of the microlino guys in Switzerland.
 
 Lei Xing (33:10)
 Yeah.
 
 Tu Le (33:10)
 You know
 
 where the door opens from the front? You know, they've been wanting to sell that in the United States. And then shout out to Stella who's in England to show off the Denza Z. What do you think of that car?
 
 Lei Xing (33:21)
 I I'm not sure if I'm a fan of the design, but the way that it's been reported as a 911 fighter, and it costing a 150,000 pounds over one and
 
 Tu Le (33:35)
 it's starting at around 190,000 USD. it should begin
 
 Lei Xing (33:38)
 Yeah. So er
 
 Tu Le (33:40)
 delivery end of this year. Obviously they launched it in the UK, so it's gonna be right hand drive.
 
 Lei Xing (33:46)
 what I'm saying is the BYD has the guts to price that vehicle at that much of a price, whereas the Mercedes don't have the guts anymore.
 
 Tu Le (33:56)
 Well, but they have data that backs up if they premium
 
 Lei Xing (33:59)
 Yeah.
 
 Tu Le (34:00)
 price, it's gonna not work. I think for BYD, they're just feeling their way out. You know, what does the market think? And and I don't think that
 
 Lei Xing (34:09)
 I think it's just the confidence
 
 of BYD a little bit that we can do this, we're going to do this.
 
 whereas the traditional foreign, the premiums, they're kind of forced. They don't want to do this. Price it under, but we have to do this.
 
 Tu Le (34:27)
 At
 
 Lei Xing (34:27)
 that's the feeling.
 
 Tu Le (34:29)
 So how's being back?
 
 Lei Xing (34:32)
 xiang it's great. I haven't done much except the first week is just settling down because I don't have that apartment anymore and then just visiting my daughters friends and relatives and family. I did go to the Nan Luoguxiang it
 
 Tu Le (34:45)
 okay.
 
 Lei Xing (34:45)
 was daddy duty a couple of days ago and we went, I took my daughter and her friends and we went full Jensen.
 
 We got the bean
 
 Tu Le (34:55)
 Mm. Cho
 
 Lei Xing (34:56)
 the jia jang mian and then we got the fermented bean juice. it's a Lao Beijing drink. The same place. The same place.
 
 Tu Le (35:00)
 You went to the same place? You went to the same places? Okay.
 
 Lei Xing (35:04)
 And now they have the Jensen menu. The Jensen Huang menu. The power of Jensen Huang. I couldn't, you know.
 
 Tu Le (35:12)
 So for those wondering, Nanlua
 
 Guxiang in Beijing is like a tourist area and it's known for selling instruments as well, musical instruments. And what else? How else would you describe Nanlu Guxiang?
 
 Lei Xing (35:28)
 the Mixue Bing Cheng the the drinks place.
 
 Tu Le (35:33)
 Yeah,
 
 there's it's like hutongs and there's cool little bars. There's cool little bars.
 
 Lei Xing (35:41)
 and then went to Sanlitun the other day, a lot of people in Nike Adidas stores buying World Cup stuff.
 
 Tu Le (35:50)
 Hm.
 
 Lei Xing (35:52)
 'Cause World Cup is still going on, right? So
 
 Tu Le (35:54)
 Even
 
 though China is not in the world.
 
 So let let's end it on let's end it
 
 Lei Xing (35:59)
 But that doesn't mean that
 
 Tu Le (36:01)
 on this. I don't I I haven't looked at the bracket, so I don't know. So if I'm wrong, please forgive me. I see France Argentina in the final. What do you think?
 
 Lei Xing (36:11)
 Same here, same here. But I guess people want Norway or England in the final 'cause 'cause a
 
 Tu Le (36:16)
 Well Haaland is
 
 Lei Xing (36:18)
 lot of a lot of fans, Chinese fans of Haaland
 
 Tu Le (36:21)
 His for some reason on my X his stuff is really, jumped onto my feed. I like him,
 
 Lei Xing (36:25)
 Yeah. Yes. that's yeah. It's crazy.
 
 Tu Le (36:28)
 man. He's six five fast is
 
 Lei Xing (36:31)
 Yeah. Yeah.
 
 Tu Le (36:31)
 fast and you know anyways, the the one cool thing, Lei, about the
 
 Lei Xing (36:35)
 Worth aggressive.
 
 Tu Le (36:38)
 World Cup in the United States is all these other videos of Germans, of Italians, of Scottish.
 
 like loving American culture, loving American food, you know, it makes me kind you know, for all the challenges the United States has, it's a great place. It's still a great place. Obviously I'm American, so I'm biased
 
 Lei Xing (37:02)
 to the economy, I haven't seen that much. But the numbers tell a story, right? At least we saw the numbers from CAAM, CPCA we saw the numbers from National Bureau of Statistics, but going to the shopping places, food, eating. it's still I don't see I mean that maybe it's
 
 Just what people consume matters, but
 
 Tu Le (37:27)
 still hear it's pretty challenging there. but maybe you see it more in the lower tier cities, in some of the manufacturing hubs and stuff. But I don't think there's a short term fix for reigniting the Chinese economy. I think the base is too too large now in trying to get to 5% growth.
 
 is gonna be pretty challenging for the Chinese government, but you know, who knows? cool man.
 
 Lei Xing (37:53)
 And we know the the
 
 yeah, we know the auto industry is a huge part of it. So
 
 Tu Le (37:57)
 it's just less than twelve or t thirteen percent or something like that. so yeah, man. I I know that you're gonna have some fun in Munich next week. Unfortunately I cannot go. have too much going on here. So you'll report from Munich next week for Xpeng's event.
 
 Lei Xing (38:15)
 Xpeng is launching well they've already showed the L03 the day I arrived, but they're doing a global launch of the they're calling it Mona L03 in China, but just the Xpeng L03 outside of China.
 
 Tu Le (38:29)
 Right.
 
 Lei Xing (38:30)
 They're having a global launch event and it's their biggest event this year, even bigger than the Beijing Auto Show. So that tells you something.
 
 Tu Le (38:39)
 The other thing too is that Li Auto is launching a vehicle on the same day.
 
 Lei Xing (38:43)
 The L6 the updated L6. Yeah. Yes. Yes.
 
 Tu Le (38:46)
 Yes, yes, yes. So
 
 cool man. All right, dude. Enjoy the weekend. Is is it pretty hot there?
 
 Lei Xing (38:55)
 It's very rainy, because of the typhoon Bavi. So it's been raining every day almost since I've arrived.
 
 Tu Le (39:01)
 Ugh God.
 
 Lei Xing (39:03)
 So hot, yes. Much hotter.
 
 Tu Le (39:05)
 Okay,
 
 cool. Everyone, thanks for joining us. we will talk with you all in a week. Good morning, good afternoon, good evening.
 
 Lei Xing (39:13)
 Good evening. Bye bye.