A few things we’ll detail more below. NIO found a 2^nd swapping partner. Cruise has lost its Sugar Momma. Let’s get after it.

CHINA EVs & MORE (CEM)

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QUOTED

That’s in addition to the partnerships they have with Changan, Seres, BAIC and JAC. I caught up with Evelyn Cheng from CNBC for her piece about Huawei and where they think they’re going. Huawei sees the same opportunity that Apple and Google see. Owning that third space. If you’re wondering what that ‘third space’ is, click this.

-   Technode: NIO is onto its 2^nd battery swapping partner in as many weeks. With rumors of a 3^rd right around the corner. First, they are ALL Chinese with close ties to their provincial governments. This should make it more unattractive to foreign OEMs that were considering partnering with NIO, especially if you are one particular premium European automaker.

Jill Shen from Technode asked for my thoughts on the latest coming out of NIO re: swap. I told her that these transactions although they may help turn their recharging business from a money loser into a (small) money maker, it ultimately doesn’t help them sell cars. That’s something they’ll still need to figure out on their own.

Also, with a combined sales of ~4M cars last year, Changan and Geely, both known to be fairly opinionated are going to want their say on the development of any standards. Is NIO biting off more than it can chew? Perhaps.

BIGGEST NEWS OF THE WEEK

I was a lot more bullish on GM at the beginning of this year than I am now. Lots of sliding, Cruise blowing up and a HUGE loss of conviction in their recent statements. They seem a bit rudderless right now. And they still haven’t told us where they plan to source their LFP batteries from for 2024 and beyond. We know where Ford plans to.

I’ve not written about this much before, but this is something I have been watching closely for the last couple of years. Let us not mistake this for being electric since we can have autonomous without being electric or clean energy.

GET SMARTER

From my perch in Beijing, even before the EV squeeze they’re currently in, I could’ve told you that there were way too many employees. If you’re reading in between the lines, the move to EVs & digital means things should get much simple. Simpler for engineering and manufacturing for sure. Unless you don’t know how to do either, of course.

Case in point, current factories that many of the legacy automakers have in the US are massive. But with less parts on cars, it should eliminate ‘jobs’ on the line which should shorten the line. What do I mean by ‘jobs?’ Typically, each major part or component that needs to be assembled onto the vehicle is called a ‘job’ and each job takes up ~15’ of assembly line space. So every 15’ there’s a new job. If I take out a part, I should be able to eliminate that ‘job’ as well. If the line is shorter because I have less jobs, that’ll leave a lot of open space on the shop floor to do other things with, right?

Further, it will eliminate deliveries which means we may not need as many docks. There will be no heavy engines delivered so the heavy equipment used to handle those should be eliminated as well and so on and so on. Now attached to each of those jobs, there’s a person, if you’re running two shifts, there will be two.

If nothing changes, meaning sales stay the same but we eliminate 10 parts off a 100-part car, then the jobs associated with the 10 jobs should be able to be eliminated as well, right? Well, that’s where it’s complicated because those jobs are guaranteed by the UAW, at least here in the US.

Automakers are inherently inefficient, but the crazy thing is, in my opinion they are much more inefficient at the office than they are at the factories. Use that same logic now for the administrative and operational roles. The company would get much smaller as jobs are eliminated. There will be new roles and skills that are needed so there will also be new employees but the net net of it all is that each automaker should get much smaller all else being equal.

Now, what if you’ve lost 1.5M units of sales? And the plan you’d come up with just ain’t getting it done? So you likely won’t get much of the lost sales back. That’s what VW brand is grappling with in China. And that’s a lot of overhead they’re still paying for for a denominator that has gotten much smaller. Panic is starting to set in at Wolfsburg. It should’ve set in 4-5 years ago, even before COVID. There are people right now, from rank and file to management at ALL the legacy automakers that are scrambling to justify their roles and positions. Which means they aren’t focused on turning around their company’s fortunes.

The shedding has only just begun. As we can see from the endless revised strategies at global Legacy Auto, it’s kinda a shitshow with a bunch of people that don’t seem to know what they are doing but refuse to get out of the way in order to get the ‘right’ people in place.

Some of you may think that I am oversimplifying this and I am, but not by a lot.

BY THE NUMBERS

Combine that with Tata’s announced investment of £4B earlier this year in a battery factory to support local production of Land Rover and Jaguar, ‘Why the UK?’ sales pitch seems to be working! We spoke about this at length during my discussion with Sam and Steven for their Britain to Beijing podcast that you can find here. There’s also recently been a concerted effort announced by the UK to attract even more FDI = foreign direct investment.

Some of the challenges: Of course, the uncertainty with trade caused by Brexit. The UK also has very high wages relative to its counterparts in southern and eastern Europe. Finally, being a right-hand drive country complicates homologation for automakers not already building there.

Here’s a snippet of what was written in the letter: “Dealers will sell whatever is manufactured,” he said. “But we’ve never seen a situation where government has intervened in such a draconian way.”

They are referring to besides how the dealer lobby pushed the US govt to make selling cars so anti-competition, right?

Let’s also be clear here. There are challenges. Not enough charging infrastructure, EVs priced way too high being and not enough of them to choose from to name the most relevant.

But the US is going to go from 800K sold in 2022 to about 1.1-1.2M in 2023 (if I am not mistaken) so this idea that there isn’t any demand is totally fake news.

There are likely a few factors here at play – ONE, who have hired quite a number of ex-US govt folks, may have heard the Inflation Reduction Act language that should be finalized and announced in December re: EV subsidies and battery component credits is more favorable to Chinese battery imports than previously believed? Lithium pricing is off 80% from its high a year ago and will likely stay low for some time, some time being >1 year. Nickel is way off its high too. That makes batteries using current technology cheaper.

Also, with the US Three reconciling their EV sales forecasts downward and the now sudden popularity of hybrids, it could cut deep into EV sales for the foreseeable future. I haven’t spoken with ONE so this is completely speculative except for the lithium thing.

INTRODUCING

   Picture courtesy of Car and Driver

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

The Sino Auto Insights team