OEMs

DO NOT sleep on Geely. They may just surprise you.

Few folks outside of China know the name & Geely CEO Li Shufu (李书福) but let me assure you that he’s got grand ambitions, not unlike a Steve Jobs or an Elon Musk, for the company he leads. Li wants to make Geely a global player, China’s first, true global player. Let’s quickly list some Geely moves that illustrate that ambition:

-   Acquired Volvo in 2010 for $1.8B

-   Acquired a 9.7% stake in Daimler AG

-   Launched new brand Lynk & Co in 2016 to sit between the budget Geely and premium Volvo brands

-   Became a (51%) Majority owner of Lotus purchased for $65M in 2017

Geely is about as close as you’re going to get to a Chinese automotive success story. Part of that success is because Li Shufu had the sense, after acquiring Volvo, to throw some money at them, leave them alone, and let them do what they do over in Sweden.

That’s when they came up with hits like the XC60/90 & S60/90, products that have led to their resurgence. Being China-owned now essentially guarantees Volvo a certain volume in sales every year but that wasn’t enough for them. Volvo then went on to introduce their own EV brand Polestar which will be built in both Sweden and China eventually. Polestar’s first product, the Polestar 2 was recently launched and initial reports is that it should be a worthy opponent to Tesla’s Model 3 & S. We’ll have to wait to see about that one though.

There’s a lot of ink used to talk about the EVStartups and their global ambitions but Geely is likely currently the best positioned to be a player outside of China but you may not ever know that since Western media don’t cover them that closely. Things are all coming together for Geely and we should continue to see success and further growth. What they’ll need to be careful about is managing their growth and adapting as their reach extends and their operations grow in size and complexity.

Specifically, Geely will need to manage their costs. Most automakers do that by sharing parts across brands and products. This is where things will get complicated for them. Volvo parts are likely too expensive to be put on Geely vehicles and vice versa. Depending on which regions their sales grow the most, they’ll also have to reconcile their manufacturing footprint. Does it make sense to make cars in Sweden in the future? Probably not.

Geely also plans selling into Malaysia and other parts of SEA with another low-end brand Proton they’d invested in but if we’re talking global players, what everyone wants to see is how successful automakers can be in the EU, US, and China. Volvo, up till now, has been a global brand but very niche and low volume (when compared to other global brands) which contributed to their downfall. That’s not going to be enough for Li Shufu and that’s why Lynk & Co. was also created.  

The sheer weight of those types of expectations and ambitions would cause many companies to make mistakes, the type that costs automakers billions of dollars. The keys for Geely will be creating a plan for success, executing that plan flawlessly, and likely most important, adjusting that plan when unforeseen occurrences like COVID-19 pop up in the future.

Oh and btw, if we leave out the China EVStartups for now, Geely has done this even though they’re one of a few (BYD, Great Wall the others) privately owned Chinese car companies. The rest of them are state-owned. Pretty impressive.

#Geely #Volvo #Daimler #Lynk&Co #Polestar #Lotus #LiShufu #worlddomination

EVs

Hengchi aka China Evergrande, one of China’s largest real estate development cos. decided in 2018 that it wanted to get into EVs.

Many China watchers thought Evergrande’s entry into the EV sector in 2018 was a naked land grab. After a couple of billion dollars of investment, a few acquisitions, and a slew of product launches last week, I am not so sure anymore. It could be both. Their initial move, acquiring a stake in Faraday Future was a pretty laughable initial step to entering the EV sector that ended in disaster. Credit them with sticking with it and eventually finding (or acquiring) willing partners.

On their 2^nd try, they decided to do it on their own creating a new EV brand – Hengchi. Here is a brief summary of Evergrande’s shopping spree within the last 2+ years:

-          Acquired NEVS, a Swedish company that bought the assets of bankrupt Saab

-          Acquired UK motor maker, Protean

-          Acquired Dutch electric motor maker, e-Traction

-          Acquired Shanghai-based EV battery supplier CENAT New Energy Co.

-          Partnered with 5 global automotive engineering companies FEV Group, EDAG Engineering Group, IAV Group, AVL Group, and Magna to develop 15 EV models

One thing is for sure if Evergrande is successful, something we won’t know for another 10-12 years, the strategy of acquiring assets and expertise and then frankensteining them together into one cohesive company will be copied by others, the people with a boatload of cash, a ton of ambition, but no patience to build out their own team.

They’ve taken the important first step, building one-off prototypes, 6 of them to be exact, and showing them off during a heavily covered ‘reveal.’ Now, as the folks at ALL of the other EVStartups will attest, is when the heavy lifting begins. Getting these cars built, will be a financial, manufacturing, and management challenge that the Evergrande mgt. team has never likely had to deal with. That they had the hubris to intro 6 cars, tells you that they’re pretty confident in their plan. As Mike Tyson once said though, ‘Everybody has a plan until they get punched in the mouth!’

#EvergrandeHealth #Hengchi @Saab @6newmodels #ChinaEvergrandeNewEnergyVehicleGroup      

MOBILITY

MAAS still waiting for its moment.

It’s pretty common knowledge now that ridehailing isn’t a sustainable, moneymaking standalone business. Not at the current economics anyway. And it could get worse with California’s new ruling that Uber & Lyft will need to categorize all their drivers as employees (see earlier post). The Uber’s, Lyfts, and Didi’s have now decided to widen their net by including delivery and last-mile options as part of their apps.

That has transformed their singly focused ridehailing apps into what most that follow the sector would now consider Mobility As A Service (MAAS) platforms. Some of these platforms have even started to include the ability to buy public transit (train, subway) tickets. Anything to accommodate users' diverse needs, consolidate them onto their platform (increasing the install base), and wring an agency fee out of their partners.

As a platform though, there needs to be a lot more cooperation & coordination across many public and private enterprises and a willingness for them to acknowledge that you’re adding value to their service, enough that they’re willing to pay for it. This can create a situation where your partner can also become your competitor if they end up creating their own platform, which many cities are considering. Then there’s finding that critical mass of folks that will either pay you as ‘they go’ or subscribe to a fixed number of uses for a flat fee, enough so that there can be a realistic number of users and pricing that the platform eventually becomes profitable.

How I see it, being profitable could take some time if it happens at all. Time that most of these platforms won’t have the money to wait out. If we look at this a bit differently though, this is a tremendous opportunity for the OEMs. They can pick up one of these platforms while their valuations are down, run and manage them with the hope of being profitable but even if not, it shouldn’t cost that much to run, not when compared with their other business operations.

Further, they’d likely have a bit more influence with local municipal leaders that would make influencing new transportation policy easier, and ultimately more favorable. If the trend of cities limiting access of private vehicles into city centers continues which I am predicting it will, these platform’s usefulness & usage could increase substantially increasing the chances of being profitable.  

Most importantly, the OEMs could keep the platform running even if it was losing a bit of money to harvest all that valuable user transit data that they could build future services around. Then when robotaxis eventually do make it on the roads assuming that they’d invested in the technology themselves, the OEM could use the platform, the one that they’ve owned for several years and developed a loyal, and large install base as the tool to introduce their own robotaxi service.

#MAAS #itwillwork #righttimerightplace #lookingfortherightoperators