I really enjoyed moderating the EV panel last night as part of the US China Series half-day conference. I think overall the conference was a great success and appreciate those of you who were able to make all or part of the (depending on where you were) morning / afternoon / evening. For those who weren’t able to join, I will send out links to the recordings once they’re posted. I personally learned a great deal about a lot of different areas I thought I had a good understanding of which is the entire point of these events.
The big news this week was Tesla’s earnings and the continued debate on social media about how they’re NOT really close to Level 5 Autonomy regardless of what Elon says. As for Q2’20 earnings, Tesla crushed estimates with a big ‘ol asterisk. They pulled in ~$400M via revenue from credits sold to automakers that aren’t making enough EVs themselves. This means that they’ve reported positive earnings for 4 straight quarters qualifying Tesla for the S&P 500. The asterisk is because, without that $400M from the credits, Tesla wouldn’t have gotten that 4th consecutive quarter of earnings.
Analysts are ALL over the place, both bulls, and bears when it comes to Tesla coverage. The stock doesn’t follow neatly with many of the ‘fundamentals’ they track and bottom line they just have no idea what to think of the share prices’ rise since the company’s story doesn’t fit very well into any of the current narratives as much as they’d like it to.
One thing for sure is that the credits contributing to their earnings is a feature of Tesla’s biz model, not a bug. Also, Elon is NOT in the business to sell cars per se. He’s in the business of building out his install base. Take the Model S for instance, there hasn’t been a major update on that vehicle since ..ever! Sure there have been some cosmetic changes here and there, what those in the auto biz would call ‘minor’ refreshes, BUT there have been plenty of OTA service updates that provide his ‘users’ with new features that keep them hooked.
In a couple of years when the connected services are a bit more robust, we’re likely going to see growth on their income statement from ‘services’ ala Apple, who’ve grown their services revenue from 0 to >17% of total revenues in less than 10 years. Many of these services will be subscriptions as well which makes that revenue recurring.
Traditional car companies would see vehicle sales fall off a cliff if they didn’t spend the $200-400M every 3-5 years to ‘refresh’ their cars. That’s how you square that circle.
Apologies if you’ve already read about some of this news below. I thought what I’ve posted is still important enough to highlight so once I catch up this week, we’ll be back on track.
IN THE NEWS:
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Rivian raises $2.5B in another investment round. A VERY impressive haul in this environment. This funding should allow Rivian to stay private for as long as they want and allow for them to have the proper runway to try and get the vehicle launch right in 2021. It also raises expectations for the company along with their ‘celebrity’ list of investors. Rivian also announced that they’ll move much of their MI operations to SoCal so this seems to be a HUGE loss for the state.
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Phil LeBeau calling Detroit out. His comments seem to echo the pleas that I’ve made in the past via this newsletter. Carmakers need to throw caution to the wind and go for it, step up their game in ALL phases. Incrementally improving only works when your competition is right in front of you. Not when they’re literally lapping you.
Phil is right about one thing, Tesla is way ahead in technology and they’re not going to be able to be caught unless a couple of the traditional OEMs can package all this great ‘technology’ they want you to believe they’ve developed into an attractive vehicle that also competes on performance and range.
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Navistar meet TuSimple. A big announcement that puts TuSimple squarely in the ranks of the ‘Ones to Look Out For’ bucket if they weren’t already. This also puts Navistar in a much better position to compete against the likes of Tesla, Aurora, and Starsky.
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AutoX is granted its California license to test its robotaxis. They’re ONLY the third company to receive this – the other two being Waymo and Nuro.
TRENDING ON SOCIAL MEDIA:
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We all make bad decisions sometimes right? For those that feel better to know that others also make bad decisions sometimes, here’s a shortlist of EPIC-ly bad decisions made in Silicon Valley (and one or two just outside the Valley).
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An autonomous Indianapolis 500? That’s right! Can’t wait, it’s currently scheduled for October 2021 so hopefully, we’ll have that global pandemic thing sorted out by then. If that’s the case, there’s a decent likelihood you’ll be seeing me there! BUT and this is a big BUT, there seem to be a couple of would-be front-runners that aren’t participating…
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Sri Lankan Tuk Tuk racing. I wonder if they have their own GOAT in this sport?
PRODUCT & SERVICE INTRODUCTIONS:
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Check out the ET5 from Jiangsu Skywell Automobile Co. Judging from the specs and pricing, it’s aiming straight for XPeng and WM Motor’s market. I don’t know much about the company but they have to be decently funded if they’ve reached this point. Will find out more and report back so stay tuned.
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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 automotive and mobility sectors here and in the US, we also provide a point of view that we hope educates and sparks debate.
The Sino Auto Insights team