Elons-Great-Week--France-EV-Juggernaut-----Polestar-Wants-Their-Shot---SAI-Newsletter--21-

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Elon's Great Week, France EV Juggernaut(?), Polestar Wants Their Shot - SAI Newsletter #21

by Sino Auto Insights on Jun 08, 2020

What a week.

It’s been tough to focus due to the tragic death (murder) of George Floyd which has ignited protests all across the US. I saw a stat today that there are protests in EVERY state and now even people in foreign countries, as a sign of their support, are beginning to protest as well. The US isn’t in a very good place right now but for one short period of time Saturday afternoon, many of us were reminded of how the US can also be so inspirational. I watched the SpaceX Falcon 9 launch with my sons trying to impress upon them the significance of what they were witnessing. I don’t think it worked but for those few moments of awe and pride I was able to push to the back of my mind all the difficulties simultaneously facing other parts of the country.

Having many of the cities I’ve visited, some of my favorite places on the planet, unrecognizable to me – with some resembling war zones – has been difficult to watch but I am hopeful that what comes out of all this is the acknowledgement that WE as Americans can do better, WE MUST do better and most importantly WE WILL do better.

IN THE NEWS:

- Ford and VW Group are now officially partners in crime. VW Group’s previously announced and HUGE, $2.6B vote of confidence in Argo and indirectly Ford Motor, since both now own large chunks of Argo, has now closed. The deal breaks down as $1B in capital and the transfer of VW Group’s internal AV team based in Munich and currently valued at $1.6B to Argo. This gives Argo an additional 300 employees and pushes the company to ~1K.

Congrats to the Argo team, since quite a few of the team are Carnegie Mellon (CMU) alums and / or had past relationships with CMU, always good to see. It just makes sense that Ford and VW Group should lean on each other even more in addition to this partnership so we will have to wait and see what other ways they’ll explore leveraging their relationship, if at all.

China auto sector sees two consecutive months of growth. Two consecutive months gives further optimism to industry watchers that we may have reached our bottom here in China. The automotive sector plays a large role in the growth of the Chinese economy. This seems like great news but remember that there was 21 consecutive months of a shrinking auto sector previously so next month should give the best indication of whether the auto sector is firmly back in growth mode or if it’s still fragile and needs a push. EVs may be the collateral damage here, enough so that some tier 1 cities are considering allocating license plates as an incentive for their purchase. Stay tuned for numbers on NEVs in the next week or so.

- As some AV companies and programs retreat, Aurora decides it’s a great time to pick up talent. Aurora has been able to stay nimble and cost conscious which allows them to keep hiring even as uncertainty caused by Covid-19 lingers and will keep many companies conservative with their spending until the US is able to confidently contain the virus. Another AV company with strong CMU ties!

- BYD to supply batteries to the Ford Changan JV. I can’t imagine that my old colleagues at Ford would be that comfortable with this but maybe the final decision wasn’t theirs. This is the first supply contract that BYD has inked with a large OEM. If the batteries can consistently meet the range, quality and reliability requirements of the much more stringent foreign OEMs such as Ford, this could be a HUGE opportunity for BYD.

There will more battery cell manufacturing capacity coming online in the US, EU, and China over the next couple of years but a good showing by BYD will only make them more attractive to other potential customers having been ‘vetted’ already by Ford. I bet the OEMs trying to resolve battery cost issues, BYD would likely be a cheaper option for them, are watching closely to see how BYD performs now that the spotlight will be shining brightly on them.

- Didi raised $500M from Softbank to further their develop their robotaxis. I will try to confirm that the $500M is a real number since last time I mentioned Didi raised money, I failed to read the fine print and the actual committed capital that wasn’t their own was a much lower number than media had reported. The reality is that this just keeps Didi in the game since most of their competitors closed their fundraising rounds already.

- Can vehicles be semi-autonomous? Do you get confused by all the terms being used when describing mobility, electric / autonomous related topics, products and services? I know when I sit down to write each newsletter, I try to be consistent in my usage of some terms, descriptions and scenarios but I am sure I also fall down here and there.

The AP Stylebook decided that use of one of those confusing words, ‘semi-autonomous’ misleads the reader. Defined – semi-autonomous means that there is no backup driver, while in fact in each ‘semi-autonomous’ situation currently there is ALWAYS a backup driver. A more accurate term that should be used is ‘partially automated.’ I agree – and that’s why I will stop using semi-autonomous and replace it with ‘partially automated.’ Please ping me if you catch me using the semi-autonomous.

TRENDING ON SOCIAL MEDIA:

- Nike’s Don’t Do It video.

- Elon is having a good week. Not only did his rocket ship company SpaceX (and Falcon 9 rocket) become the first privately owned company to shuttle astronauts into outer space, Tesla’s high performing stock price qualified Elon to receive 1.69M options that at current share price is worth a net ~ $750M! Say what you will about Elon the person, with all that was happening this week that was bad and depressing, it was great to show my boys that launch – something very inspirational.

- GM running leaner post Covid-19 – CEO Mary Barra says. GM’s assembly plants are all mostly back up and running and GM is on its way to replenishing the inventory pipeline of its most profitable trucks and SUVs. GM has also implemented some cost savings opportunities along the way in order to improve cash flow and manufacturing mix in an effort to only build vehicles that customers want.

- Jay Leno’s two-for-one with Elon - He test drives the Cybertruck AND gets to check out the Boring Company’s test tunnel under LA. Looks pretty close to production spec although he said it’s about 5% too fat all the way around so maybe not as close upon closer inspection. It’s polarizing that’s for sure and it’s definitely a leader in apocalypse technology!

PRODUCT & SERVICE INTRODUCTIONS:

- Introducing the Ecotric 500W bike that just does the trick. I highlight this bike not because its particularly impressive although at the $850 price-point I think it’s one of the few below <$1K bikes that are ‘doable.’ That and the fact that as of this writing, I checked Amazon and they’re still in stock. If anyone decides they want to give it a go, please ping me to let me know what you think.

- Can’t find the right electric bike? Maybe you don’t need to with this conversion kit. Check out the Vekkit e-bike conversion kit. I’ve spoken with good friends in Paris and Lausanne and they tell me that bikes & e-bikes are just about all they’re seeing out and about their streets. Problem is if you’re just starting to look for a bike / e-bike you may be SOL for a few months. There’s a backlog for most of the low to medium end bicycles. That’s where Vekkit can work in a pinch. If you already have a bike, it’ll give your pedal bike turbo-boost! So for those who recently purchased bicycles but couldn’t afford an electric bike, maybe this is the inexpensive way to convert your pedal bike.

——

This weekly newsletter is a collection of articles I feel best reflect the happenings of the week or important trends that have effects on the automotive and mobility sectors here and in the US, I also provide a point of view that I hope educates and sparks debate.

The Sino Auto Insights team

OEMs

This was Elon’s plan for Tesla from the jump.

In the early days of this newsletter, I’d previously described Elon’s strategy for Tesla as similar to other technology companies and that growing revenue via car sales was not the ‘end all be all’ for Tesla but that the emphasis for the business was to sell more cars in order to increase Tesla’s ‘install base’ ala Apple, Google and the other tech companies strategies. I am surprised that more mainstream media didn’t pick up on that and write these types of articles more broadly.

As the tumultuous previous few years at VW Group due to diesel-gate led to a couple of different leadership changes and many still open lawsuits, we’ve seen that current VW Group CEO Deiss has really come around on this ‘install base’ business strategy as well. Combined with the VW Group’s need to get diesel-gate behind itself, that has led the company to dive head AND wallet first into building NEVs for the EU & China markets while digitally transforming their organizations, including selling their EVs online ONLY in some regions.

The largest OEMs in the world REALLY enjoy a tremendous advantage here due to their already enormous annual sales, I mean ‘install bases.’ Take a look:

	Approximate Global Sales in 2019
Toyota	10,700,000
VW Group	10,800,000
GM	7,700,000
Tesla	367,000

Now if you were a tech services company or startup that wanted to offer your service to drivers / riders / users of passenger vehicles wouldn’t it make sense to align yourself with the companies that could offer the largest ‘install base?’ As you can see, each of these OEMs dwarf Tesla yet it’s Tesla that’s leading the way when it comes to paid innovating via subscription services with their vehicles.

To put it bluntly, that’s because the OEMs can’t get out of their own way when it comes to the ‘digital transformation’ part and once they have ‘bought in’ to going digital they take way too long executing. There is plenty of blame to go around for this: Leadership, policy & process, bureaucracy, current relationships / partnerships, hubris, money, comfortability, and fear.

I’ve been asked this question MANY times so I’ll share at a high level what I’d do if I were in a leadership role at one of these OEMs.

Learn how to design a great user experience (get help if you have to – you’ll probably need it) > develop new products quickly > practice developing new products quickly > introduce new products to your install base > get their feedback > use their feedback to develop & test new products – lots of products > iterate > fail > iterate > fail again > gather data – ALWAYS gather data > learn how to learn > take that data aka ‘insights’ and make better products – REPEAT.

Old policies and procedures - and as someone who’s worked at BOTH GM and Ford, there’s a process & policy for everything at these companies – will NOT work. New challenges (& opportunities) need new ways of tackling them. That’s the ONLY way that the traditional OEMs are going to be able to run with Silicon Valley and the upstarts in Asia. The Silicon Valley and Asia companies have the advantage of not having to offload a TON of baggage but they don’t have the knowledge, experience and scale to tackle one of this century’s defining questions – What’s the best way to get people and things moved around in a safe, efficient, cost effective and green way?

#OEMs #failfast #installbase #subscriptionservices #alternaterevenuestreams

MICRO-MOBILITY

Headscratcher of the week. Uber sends older model Jump bikes and scooters prematurely to the scrap heap.

For those that didn’t know Uber, who a month ago sold Jump - its e-bike sharing business to Lime decided that rather than repurpose / reuse / donate / / sell / do something better / let others use the bikes, they were better off destroying them.

The destruction of thousands of these bikes was captured on video and made HUGE noise across the interwebs, simultaneously frustrating, upsetting, and pissing people off. I understand the liability concerns with these things and that the tech may be old, but it wouldn’t have cost that much to convert them over to standard pedal bikes and then donate them to homeless shelters or something a bit more altruistic. There is currently a shortage of bikes due to heightened demand so this could’ve been a PR win for them.

Since they did decide to destroy them, Uber’s PR team should’ve anticipated the backlash and implored the Ops team to discreetly dispose of the bikes. Again, their business, their property, their IP, but there was always going to be a better fate for those bikes as long as they could be used by others.

#recycle #redeploy #Uber #Jump #Liime #wearenotliable

Singaporean startup Beam tries its hand at electric scooters.

This will test my theory about e-scooters not having any business case where they could become a profitable, standalone business. $26M raise is pretty impressive so maybe they take the path of least resistance, learning from their western counterparts and actually try working with local municipalities to maximize their chances of success?

I will reach out to my friends in Singapore to see if these things are popular. As the micromobility sector matures and more choices are on offer, will e-scooters remain a preferred mode of transport? We will have to wait and see but mark me down as one of the skeptics.

#Singapore #Beam #anotherescooterstartup #wearedifferentthantheotherguys #seeingisbelieving

ECONOMY

France is looking to join the EV revolution in a big way.

France plans to kickstart their own EV sector by allocating €8 billion to help companies onshore and subsidize, develop, and manufacture EVs in France. The government will also provide subsidies to consumers of up to €7K for the purchase of electric vehicles as well as an incentive of up to €5K to replace their current vehicles with clean energy vehicles. This could provide a boost to some of the French domestic champions that were dealing with some challenging times even before Covid-19.

#VivaLaFrance #domesticgrowth #playingcatchup #homegrownchampions #welfare

20K infusion of license plates coming to Beijing in the 2^nd half of 2020.

File this under economic stimulus for the automotive sector. Only ‘car-free families’ will be eligible for these license plates. And there’s probably some sort of lottery for the chance to receive one, although that hasn’t been communicated yet.

In early January 2019, the average wait for a license plate, in Beijing where there’s a lottery system, was 8 years. 20K license plates may sound like a lot but to a city of ~24M with ~6M cars already on the roads, it’s not. Trust me, I’ve been waiting for a license plate for over 6 years. So two more years to go, WOOHOO!

#Beijing #licenseplategiveaway #carfreefamily #gettinginline #soyouresayingIhaveachance

EVSTARTUPs

The Swedes want a shot at the Champ!

Polestar, Volvo’s EV sub-brand will be starting their full-court press of the China market starting the back half of 2020 as they begin production of their Polestar 2 in China. I have not seen it in the wild but based on pictures, it’s not the best looker. The interior is VERY Scandinavian design (less is more) if that’s your thing. It’s a bit of a misnomer to call out its competition as the Tesla Model 3 since the Polestar 2, if US pricing holds here in China, will be almost 2x’s that of the Model 3.

Up till now though, Tesla has been to take on ALL COMERS and has still come out on top so this could be a mismatch. I have a feeling that should that happen, Volvo could lean on Geely’s connections or 关系 to helpthem ‘level’ the playing field. That seems to be what NIO did at least with their subsidy carve out a few weeks back.

Polestar plans on opening 20 showrooms initially in China which should be OK since they’re only scheduled to have one product, the aforementioned Polestar 2 through the end of this year. Fun fact: Number of dealers in China – Tesla – 50, NIO – 110, WM Motor – >100, and Xpeng – >150.

#Volvo #Geely #Polestar #wantashotatthetitle #wehavseseenthismoveiebefore #becarefulwhatyouaskfor

Global domination ALERT! – Established in 2018, VinFast is building an EV to launch into the US market. First thing, they found a great battery partner in LG Chem to enter the US market with. There were only likely one or two other battery manufacturers that VinFast would’ve been able to enter the US market using. Second, this plan to enter the US market isn’t as far-fetched an idea as it seems. There’s a number of ex-GM, Ford execs there helping run the show including the co-CEO Jim Deluca who spent almost 40 years with GM in roles all over the world.

That having been said, this is a HUGE ask since the US market hasn’t yet fully embraced EVs as mainstream, everyday vehicles. The wildcard is how will consumers feel about a Vietnamese built car? That’ll depend largely on pricepoint, design, reliability and who their sales & service partner will be assuming they don’t want to make those types of investments themselves.

I’ve seen and been inside one of the petrol vehicles VinFast currently produces in Vietnam and although I was surprised at build quality, it still wasn’t ready for primetime or western customers so VinFast will need to step up their game by an order or two of magnitude if their vehicles stand a chance of succeeding in the US.

I am rooting for you VinFast – Go get it!

#VinFast #Vietnam #USimport #LGChem #globalambitions #beatingChinatothepunch #willitsell

Sino Auto Insights is a Beijing, China-based market research and advisory firm that specializes in assisting companies analyze, strategize, and develop products and services that will shape the future of mobility and transportation.

Members of our team have experience working in Detroit, Silicon Valley as well as here in China across multiple sectors and functions as entrepreneurs as well as working at larger companies like Apple, Google, Amazon, GM and FCA, and many others.

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