Photo courtesy of Car News China
Big news this week was Tesla’s (un)surprisingly low sales numbers for Q1. I get it. Elon has made a lot of people a lot of money. But there is a clear western bias to the coverage by the analysts that many people follow who really have no clue what’s happening to Tesla or even who they really compete with in China. That’s a HUGE blindspot for investors and all the STANs that make their living off defending anything and everything that is Elon and Tesla.
There are a number of factors that are and aren’t in Tesla’s control with regard to China that needs to be taken into consideration. Some static, some very dynamic. The fact that the Chinese economy isn’t doing that well (not their control). Next, the Chinese EV sector is in the midst of an all-out fist fight of a price war that isn’t for the faint of heart, one that was started by Tesla last January BTW (their control). Be careful what you wish for.
On top, top of that the Model 3 is 4 years old and the Model Y is 3 years old (their control). Finally. The price cutting playbook isn’t what it used to be, especially considering the Xiaomi SU7 just launched last week at an aggressively priced $30K which undercuts the Model 3 pricing (not their control).
Tesla isn’t the only one jealous about the SU7 though. It’s now received >100K orders according to Lei Jun. He couldn’t have planned a better launch for his debut EV. Another quick ampersand, Tesla’s global high runner is the Model Y so Tesla lucked out that Lei Jun decided he wanted to launch Xiaomi EV with a sedan and NOT a midsized crossover / SUV. But it’s coming.
Jumping on my soapbox now for a second. When does Legacy Auto really start to get jealous about the attention that’s starting to accumulate for China EV Inc? On social, not seeing a lot of camo shots of foreign EV products, but tons of Chinese EV products out there. Are they starting to get pissed about all this attention the Chinese brands & products are now getting by global media? And what are they gonna do about it?
Also, mainstream media - the NYTimes / WSJ / Bloomberg / Economist / Financial Times / BBC / Asia Nikkei / Handelsblatt / Le Monde / Channel News Asia / Business Insider and many others (forgive me for those that I didn’t mention) have all reached out to me to talk about China EV Inc, China Battery Inc and particular companies, but they normally pick this up through the economic or diplomatic lens. This theme is now being picked up by specialist media outlets like InsideEVs / Motortrend / Top Gear and others which pick it up through the product lens which means that the EVs themselves are starting to be dissected and taken seriously.
It's sucking the air out of the room and not giving Legacy Auto much air for their products. If I am the product guys at these Legacy OEMs, it’s just another reason I want to design / engineer / build something that forces western media to pay attention to what I am doing. Is that happening behind the scenes? I’ve heard that it is, but it’s got to start showing itself sooner rather than later. Like at the Auto Beijing 2024 in April. I heard that we’ll see a few unveils by Legacy Auto so let’s see how wow’d I am. Because it’s gonna take a lot to wow me and everybody else. And who wants to go after Lei Jun at this point?
CHINA EVs & MORE (CEM)
Join us tomorrow, 9am ET for the live show. We will talk Tesla woes, March sales, BJ Auto show and more.
If you can can’t join the live show, I invite you to listen to our recorded China EVs & More episodes at this site. And as always, we appreciate any feedback that will make the show better.
INTERVIEWED / QUOTED
- Bloomberg. Had a chance to speak with Linda Lew for her piece that highlights Geely. Not really an origin story, more about how Geely became a leader in the China automotive space but having recently being overtaken by BYD and how they plan to compete with BYD and other automakers in the future. For those wondering about hybrids, this details a bit about the technology at the heart of BYD and Geely hybrid vehicles. Definitely worth the click.
- South China Morning Post. Talked to my friend Che Pan for his piece about the Xiaomi SU7 and the impact it’s having on the China EV market and competitors’ reactions. Che also spends time discussing the livestream and the marketing savvy of building up to the event last Thursday.
BIGGEST NEWS OF THE WEEK
- China isn’t dumping EVs on the world, not yet at least. What I’ve highlighted in previous newsletters and spoken about on the pod is that China doesn’t have an EV overcapacity issue currently and it isn’t dumping inventories onto foreign markets. Far from it. The likelier scenario is that the ICE overcapacity means that Russia will continue to be a hot export market and that emerging markets could see rises in ICE exports from China. 
Is there potential for overcapacity in the future in both EV & battery production, absolutely. I’d say battery overcapacity is a closer threat (see chart below). Especially as the EU & US invest heavily into building out its own manufacturing domestically. Protectionism will exacerbate overcapacity. And a quick reminder of the non-Chinese OEMs that have said or are exporting from China, the list is long and likely to get longer: GM, Ford, Nissan, Stellantis, Polestar, Toyota.
Since I’ve spoken about this before, I won’t dwell on it here. I’ll let the slides below do the talking. And if one slide says anything, it’s that maybe Germany is dumping its inventory on us.
- Tavares and Stellantis still ALL IN on EVs. Most of you know that I believe that the Legacy Automakers should ALL move faster into clean energy vehicles despite the recent slow down in demand. That’s because I know that Tesla, BYD and the rest of China EV Inc isn’t slowing down, not one bit. Knowing that Stellantis has no intentions of slowing their pace makes me believe Tavares sees what I see.
It also means Stellantis will have to deal with the challenges of transitioning sooner than later. Challenges like software development, battery manufacturing, marketing and then servicing these vehicles once they’re sold. They will all deal with these issues, but those that deal with them first will have a distinct advantage.
One HUGE ace up Tavares’ sleeve that wasn’t mentioned at all in the article, their investment in LeapMotor. And their likely heavy reliance on LeapMotor’s IP to push their small cars toward profitability up front. How that’s not even a paragraph in the article reminds me of how much of a western bias there is, see above Tesla post, that completely ignores that China factor.
Stated goals. US sales 50% all electric by 2030. I take that as a distinct probability that LeapMotor IP will be part of the EVs sold here in the US. More from the article:
The company is executing an aggressive plan to capture a chunk of the electric-vehicle market: Sell 48 EV models globally by the end of 2024, including eight in the U.S.
What seems to be key is that Stellantis has a lot of confidence in its flexible platform that can support ICE / hybrid and EV propulsion systems. Another unique characteristic is the platform’s ability to accommodate front, rear and all-wheel drive systems.
Do I believe it to be as easy and simple as they describe it, no I don’t we can just look back at the Ultium platform as a frame of reference.
I’ve not dived too deeply into this but another nugget of information from the article that hits hard – the clean energy vehicles they already make are profitable. Now, is this accounting profitable or do they actually make money on these cars that they can plow back into the business and / or hand out as a dividend, I will need to figure that out.
One thing I do agree with Tavares about. Within the next 15 years, there will be a lot of brands going out of business and just a few new ones replacing them. We will have a global shift in where the power lies in the automotive space, at least in Europe it looks like. Especially if Tavares can execute his plan for Stellantis.
- NXP wants some of the Nvidia action. I didn’t realize that NXP is the current ‘largest maker’ of chips for cars. I am not sure if they mean by volume or by revenue though so something to look into. NXP launched a platform that integrates customers software with its highest performing silicon.
Seems NXP is trying to build an Nvidia-like moat by providing the platform for partners who use their silicon to play on. I don’t know much about it but one of the ways Nvidia’s silicon is so powerful is because when combined with its Cuda-X AI software stack, it makes life much easier for its customers to build apps that get the most out of the Nvidia silicon.
BYD
- Ford, GM, Ram you’re about to have some company. BYD is building a clean energy truck, because of course it is. It’s for the international markets so it’s smaller than an F150 or Silverado, which I’d argue are way too large to begin with.
For those of you that have been to the Middle East or Southeast Asia, it’s to the Toyota Hilux Trucks that you see in those regions. And my bet is it could see its way to the US before the end of the decade or sooner.
TESLA
- Tesla is giving away free money for 5 years. As long as you buy a Tesla in China. With a small down payment ¥79,900 ($11K), and depending on whether you trade in a vehicle or not you can have a 3 or 5 year interest free loan from Tesla.
BY THE NUMBERS
- -15%. That’s how much Stellantis pickup sales fell in the US market in Q1. Stellantis gets about 50% of its profits from North America. They weren’t alone, Ford’s F150 sales fell 10% as well. Blame it on the high interest rates and the climbing prices for the Detroit Three’s profit machines.
If this lasts through summer, this will cause some concern for how they are paying for development & rollout of their new, clean energy products. Among the key, misguided assumptions about the Detroit Three’s (D3) eventual successful move to clean energy wasn’t that they could get the software right and manufacture them without issue (both wrong so far), but that they’d pay for the transition off the backs their ICE truck and SUV sales.
If that goes away, their ambitions will need to be dialed down, the drastic measures they’ll need to take, think more layoffs and closures, will have to be more drastic. With interest rates NEVER getting down to 1-2% anymore, prices will need to be reconciled or sales will.
Either way, that means a smaller profit pie is in the future for this most profitable segment for the D3.
_________________
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
|