China EVs & More

Episode #148 - 2024 Predictions from Tu & Lei

January 10, 2024 Tu Le & Lei Xing
Episode #148 - 2024 Predictions from Tu & Lei
China EVs & More
More Info
China EVs & More
Episode #148 - 2024 Predictions from Tu & Lei
Jan 10, 2024
Tu Le & Lei Xing

Each year this episode is HIGHLY anticipated and is ALWAYS one of the most downloaded epsiodes of the year. If you want to hear what they think of 2024 in China and around the world for the EV, battery and mobility space, you have to listen to this episode. 


Climate Confident
With a new episode every Wed morning, the Climate Confident podcast is weekly podcast...

Listen on: Apple Podcasts   Spotify

Show Notes Transcript Chapter Markers

Each year this episode is HIGHLY anticipated and is ALWAYS one of the most downloaded epsiodes of the year. If you want to hear what they think of 2024 in China and around the world for the EV, battery and mobility space, you have to listen to this episode. 


Climate Confident
With a new episode every Wed morning, the Climate Confident podcast is weekly podcast...

Listen on: Apple Podcasts   Spotify

CEM #148 Transcript
Recorded 1/5/24

Tu Le:
Hi everyone and welcome to China EVs & More. Happy New Year, everyone, to the first episode of 2024. My co-host Lei Xing and I will go over the week's most important and interesting news coming out of the global EV, AV and mobility sectors. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. For those that are new to the show, welcome. And to our loyal listeners, welcome back. We ask that you please help us get the word out about this podcast to other enthusiasts and tune in again next week.

My name is Tu Le and I'm the managing director at Sino Auto Insights, a global management consultancy that helps organizations bring innovative and tech-focused products and services to the transportation and mobility sectors. I write a free weekly newsletter that we pull many of our discussion topics from. You can sign up for it at sinoautoinsights.com, which I encourage you all to do. Happy New Year, Lei.

Lei Xing:
Happy New Year. 

Tu Le:
And I feel that you've cheated because I already posted my predictions for 2024. Since this is the first episode of ‘24, we are going to go over our predictions. Some of them bold, some of them not so much, but I'm anxious to hear what your predictions are because I have no idea. So can you please introduce yourself?

Lei Xing:
Yes, sir. Good morning. This is Lei Xing, your co-host, former chief editor of China Auto Review, and this is episode #148, right? It is 148, the first of 2024. And the year of the Dragon, not quite there yet. We're still in the Year of the Rabbit. 

Tu Le:
Not quite there yet, February 10 is Chinese New Year. So.

Lei Xing:
Yeah, I mean, that itself, the year of the Dragon is, if you know what Dragon. It's a huge difference than a rabbit, right? And 2023, even though in a year of rabbit, it wasn't a rabbit year.

Tu Le:
It was an aggressive rabbit year.

Lei Xing:
No, I mean the predictions I think and I've made a couple. I tweeted a couple, a lot of it has to do, I guess, with kind of the races to start off on the sale side of it, which has really been the news so far this year. 5, 4, 5 days into it.

Tu Le:
Every single media outlet has posted about BYD beating Tesla, and the fine print needs to be clear that they beat them on BEV sales alone in Q4 of ’23. Tesla beat them for the full year, beat them for the full year. So.

Lei Xing:
Yeah so I don't look at it as a BYD vs. Tesla. I look at it as a BYD AND Tesla vs. everyone else. I think you probably would agree with that kind of really the 30,000-foot level grand scheme of things, because when you look at the U.S. market, maybe I don't know, globally, the Chinese market. There's only one company in each of those markets that stand out which are BYD and Tesla. And then the rest combined, you know I don’t, I tweeted that I don't know what's the global EV sales this year, but together they are about 5 million units. And I think Tesla did, just saw this 1.6, was it 1.6, no, that's wrong. 

Tu Le:
1.81 you mean?

Lei Xing:
No, 1.81 globally, but I think in China, I forgot the number from top of my head.

Lei Xing:
Think of it this way. So, 52% of the 1.81 were produced in China, and let's say…

Lei Xing:
Shipped out of China.

Tu Le:
Yeah and 90% of that were domestically consumed, let's just say, around 90 or 70, 80% of that. So at 1.81, that means over 900,000 units were built in China. Let's say 75% of that. So 600,000, 700,000 units were sold in China by Tesla in 2023.

Lei Xing:
Yeah, and BYD roughly, let's just make it simple 10% of their sales were overseas. So 3 million, 300,000 were overseas, not quite 300,000, but to make it easy, right?

Tu Le:
If we want to do the versus there's pros and cons for both Tesla and BYD. BYD, the monster share was sold in China, although they have entered over 60 markets, the international sales is a very small portion and for Tesla.

Lei Xing:
70. The official number is 70 countries and regions and 400 cities. Yeah, so 

Tu Le:
That's bananas by the way, it's a bananas number. But if we wanted to skew or put our thumb on the scale for a Tesla or BYD, we could do that. But to your point, I think it is more accurate to say in the clean energy space, it's a BYD Tesla world, everyone else just lives in it, for now.

Lei Xing:
And one prediction I made was for the full year 2024, BYD tops Tesla in BEV sales globally. We're looking at over 2 million units.

Tu Le:
I don't think, I think that’s like an easy prediction for you.

Lei Xing:
Yeah, I think BYD will try every way it can to do it. And another caveat is we put both Tesla stan and BYD stan hat on. The selling points of the majority of BYD vehicles are lower. But profitability wise, gross margin wise, BYD is not that much behind or maybe they're ahead depending on the…

Tu Le:
Ahead in the most recent quarter, they're ahead.

Lei Xing:
Right. Depending on the final year, annual numbers. But and, I think also kudos to Tesla because Tesla is doing this with 3 and the Y only, majority of it, whereas BYD is doing this with, I don't know…

Tu Le:
Dozens, a dozen?

Lei Xing:
Yeah a dozen or more. Right, there's so many ways you can compare and debate who's ahead, who's behind. But then at the end of the day, both are just far ahead of everybody else, scale wise, efficiency wise.

Tu Le:
What can't be disputed is that scale wins out. Because if you're shipping 20,000 units a month, your costs are still amortized over a small denominator, whereas for BYD it's over 300,000 units. For Tesla, it's between 50 and 70,000 units, and that's just China, ok, so in order to get margins, any positive profits, you likely have to be shipping 60, 70,000 units a month, full stop. That's probably break even for, and we can get a bit more accurate. But let's just say 75,000 units, if you're not shipping 75,000 units, either into China or globally, you're probably not going to be profitable.

Lei Xing:
That's the thing. For many of these newbees still operating a loss. And to get to that kind of scale is, I mean the only thing we can think of, which is will be the next prediction is, Li Auto is trying to get 100,000 a month less than 5 years after it delivered its first vehicle.

Tu Le:
What's not really appreciated in that forecast or goal is that they can, number one, their products will track that demand. And then number two, they can build to that demand. Because we've seen Rivian and Lucid, all kinds of EV companies not able to get mass production ramp, sort it out in 12 months, 14 months, 18 months. So getting that demand is the one challenge, and then being able to build to that demand is the other part, because we already know that Tesla has gone through manufacturing hell so let's assume that if you're not building and selling at least 40, 50, 60,000 units a month, you're going to go through that, too. And with Li Auto, we've already seen that they're delaying the MEGA. I guarantee you one of those reasons is because it's a BEV and not an EREV.

Lei Xing:
New platform, new architecture.

Tu Le:
And that's to Xpeng’s benefit, because they're shipping in January the X9.

Lei Xing:
That's exactly, yeah, I think, Brian Gu talked about it, I don't know, on CNBC, or one of the. It was a 7% price drop compared to the, what, the initial, I guess pre-order.

Tu Le:
And that's what we had talked about Lei, right, all year last year that they cut price before they even shipped the product.

Lei Xing:
Price on launch, similar with the E8 today. It's a pre-sale, but I mean it’s in the high RMB100,000s and low RMB200,000s and…

Tu Le:
So let’s, you want to start with your predictions besides some of these forecast numbers?

Lei Xing:
Yeah, prediction on Li Auto beating the ABBs this year. I don't know what the final numbers will be. Li Auto says 800,000, but let’s just say they beat ABB this year. So I think that, in fact, is more significant.

Tu Le:
All three of them. 

Lei Xing:
Yes.

Tu Le:
Ok, so for the folks that are new, ABB in China is a common term for Audi, beamer, and Benz, and historically, you could set your watch with the exception of the last few years, because of the EV disruption, you could set your watch to Audi, beamer, Benz selling between 600,000 units annually in the China market. And most of them have now onshore production so that they're building the A4s, A5s, the C-Class, the E-Class, X3s and X5s, and the 3 Series and the 5 Series locally in China with a partner. And for Li Auto who started in 2014 or 2015 to be able to get close to Audi beamer Benz is amazing in and of itself and to think that you could outsell them. Now, he, Li Auto is talking individually, they're not saying we're going to sell more than Audi plus BMW plus Mercedes. They're saying we're going to outsell those three brands individually. 

Lei Xing:
Each of them. 

Tu Le:
Yes, each of them. And Lei, that is a mighty fall.

Lei Xing:
That's why I said it's more significant than BYD topping Tesla even because BYD, they've been doing this for, I say it's a 30-year in the making that they did 3 million. It's not a 1 year, it's not a 2-year, it’s not a 3-year, it’s not a 5-year, 30 year making, Tesla 20 years, right? They are…

Tu Le:
So CNBC just dropped an article that Evelyn and Arjn had wrote, I think, Taylor and I are both quoted in it for those that are looking to learn more about BYD's history, all you need to know is Wang Chuanfu is a freaking ninja, gangster. He's as ambitious as anybody in the west. And from a vertical integration standpoint, and Sandy Munro had brought this up when I was on that panel with him and John McElroy show, he said the Harvard Business cases, and the Harvard Business-educated folks wanted to tell you to outsource everything. And BYD did the opposite. And there's no way that Wang Chuanfu knew that COVID was going to happen, EV adoption was going to happen so quickly in China. But guess what? All of those long-term decisions that they made acquiring that Chinese brand, automotive brand in 2003 that blew up basically, doubling down on battery, technology, fabbing their own chips. When you combine all of that, that's what gives them this huge advantage. Let me add something like because there was this article in Barons, and it was quoting an analyst. Because now there's also a lot of articles that said Elon messed up. He made bad decisions. He should have instead of developed their Cybertruck, he should have developed the Model 2, one of the analysts were like that's idiotic or he said something stupid. He was like because the technology is not available yesterday. It's available tomorrow. And my first thought was, well, then why is BYD profitable? So this analyst doesn't know what the hell he's talking about. Anyways, because if Tesla wants to build that Model 2, they need to buy batteries from somebody else, but don't tell me that they can't build them up. They, the Model 2 couldn't be profitable if it was built today, it could be so full stop. Anyways, I'm jumping off myself.

Lei Xing:
But, looking ahead, so I did say BYD will pass this year in BEV, full-year BEV sales over Tesla. But looking ahead, I think it gets a lot harder. Tesla is going to be very difficult for them to get to another 50%. And from 1.88 million, adding 900,000 units. I don't know. I don't think so. I don't think that's going to happen, right? And then BYD where does BYD go? Do you want to make a prediction? I mean 3 million units? Can they get to four? That's a 33% growth, right? 30%, I guess.

Tu Le:
In order for me to decide on whether Tesla and BYD can get to. And I'm, give me a second to think about who's going to sell more in 2024. What's important is that the countries that they sell in, the United States and China, those are the two most important countries. And we need to look at in 2024, how much is EV sales going to grow in the United States? And then in China? How much is the overall market going to grow? Because we went from 22 and change in 2022 to, I think, now around 25 million units. And so I think the big part of them still being able to get high double digits and growth, is because strong growth in United States, continuous strong growth in China, and I think that's where you are pointing to. It's more challenging in 2024, because there might not be that strong growth that we're looking at in the United States and China that we've seen in the past.

Lei Xing:
So because, if I extrapolate a little bit, so in order to get to above 2 million and based on half and half, BYD indeed would probably have to get to around 4 million. Because half of it will be BEVs based on the 2023 numbers.

Tu Le:
We're assuming no friction, because if we look at capacity, if Tesla is able to increase capacity of Shanghai Giga creates a lot more flexibility for them, a lot more pressure for them to sell, but also a lot more flexibility. For BYD we need to not only look at finished goods capacity, meaning the actual automotive capacity that they have, but we need to look up the supply chain to see how much battery capacity they have. Because if they run short of battery capacity, they are supplying Ford, they are supplying Tesla, they are supplying Toyota. Guess who's not going to get it? It's not going to be BYD vehicles, it's going to be their customers vehicles. It's a bit more complicated, and we haven't even talked about the tariffs, the political aspects, because…

Lei Xing:
We’ll get there. 

Tu Le:
Yeah, but I'm saying that for BYD it's a little bit cleaner if they can continue to sell well into China. For Tesla to sell well, they need Europe, they need China, they need the United States, but they need most of those batteries to come from China.

Lei Xing:
Yeah, and if BYD spread its cost well, then I mean the Yang Wangs, right? Yang Wang, I think they did 1,600 units in December and that's over RMB1,000,000 a pop, $150,000. And they sold 1,600 units, you do the math. I mean if they can sell tens of thousands of the Yang Wang in 2024 I mean profitability wise, that's a huge boost. Same with the Fang Cheng Bao, right? Fang Cheng Bao. That's something to watch.

Tu Le:
And this is where BYD I feel it's easier to go, start down market and go up market as opposed to up market to down market. And if you look at the U.S. 3, Stellantis, a disproportionate share of their profits comes from the Americas because of the RAM trucks that are sold. So 15% of total sales in the United States goes to SUVs and trucks, but it drives most of the U.S. 3's profits. So my point is that BYD doesn't actually need to grow Yang Wang from a volume standpoint that much. Sales, if sales gets to a few thousand a month, they're winning. Fang Cheng Bao a little bit more because their price point is a little bit lower, but again, still premium, not a million RMB premium. And for those that are wondering a million RMB is around $150,000. One of the, things that you did, I didn't call out sales volumes, but I should have, anyways, but please continue.

Lei Xing:
Yeah, but then you and I complement each other, right? And we'll talk about your others. And again, the overall market, my current model is just under 13 million, now that includes, 13 million NEVs, that include exports. And the reason I'm saying that is if we look at the overall market, being 30 million, including exports this year, I mean in 2023, with a third take rate expected to grow to 40%, you just do the math, right? 3 × 4 is 12 million, and China always, at the end of the year always gets stronger. So my model is looking at just below 13 million, 13 million NEVs including exports in 2024

Tu Le:
So basically you are, effective, you are saying effectively matches the U.S. market, the entire size of the U.S. market.

Lei Xing:
Add another 3 million units to whatever 9.3, 9.4 in 2023.

Tu Le:
I, the one thing that gives me pause on that number Lei, has nothing to do with cars, has everything to do with China's overall economy. If it is 13 million, but the Chinese economy is still struggling. There's going to be a disproportionate, the growth in exports is going to be huge, this is what I'm saying,

Lei Xing:
Yes, which is a kind of caveat because that's part of the driver of that volume. And also the price war, you predict that, right? This is I mean, we said this a long time ago that it's going to be a big theme in 2024 again. And I'm sure Xiaomi is right now, the way you would put it is sharpening their pencils and trying to decide on a price point of the SU7. Because like the Galaxy E8, all these priced right around the RMB200,000 range makes it very difficult for a brand like a Xiaomi to launch it above RMB300,000. That's all you have to.

Tu Le:
Because they know they will be dead in the water before they actually even launched the vehicle. I mean what they're ultimately hoping for Lei is that the Chinese economy by June, July starts to really grow again. That's what they're hoping for.

Lei Xing:
Yeah, but I mean the RMB200,000 range again, this is, with NIO launching alps.

Tu Le:
Where BYD lives.

Lei Xing:
With Xpeng, by the way, launching MONA, right around the, I guess unveiling or launching right on the Beijing Auto Show time, that's a RMB150,000 with advanced their XNGP features. So these are drivers.

Tu Le:
So what you're saying is that for a vehicle that's cheaper than the Chevy Bolt, you're going to get almost Level 2 or Level 2+ or Level 3 ADAS.

Lei Xing: 
Well, let's just say Level 2+++.

Tu Le:
Yeah, cause technically it's not Level, or legally, it's not Level 3. Agreed. So, for 20, less than $25,000, you're going to get Level, you're going to get the Chinese domestic brand’s version of
FSD.

Lei Xing:
Something like that.

Tu Le:
That's bananas. That's bonkers.

Lei Xing:
And then we can talk about some of yours. Maybe some of yours I read your newsletter. We can be a little bit more specific.

Tu Le:
Ok, very good. I was talking to Russell Flannery from Forbes, so I'd given some of my predictions already. Let me see, so the newsletter yesterday highlighted some of my bolder predictions, right? And I think some of these are more far-fetched, but I'm just throwing them out there. I think NIO finds a partner in 2024.

Lei Xing:
You said something about cabbage? I'm going to say something else. I'm going to say sushi is pretty good.

Tu Le:
Yes, I thought about that too. I thought about that too, but I feel Kia Hyundai have so much to offer, but they are continuing to struggle in the China market. Maybe they feel that the only way to really get past the single digit share is to partner with a Chinese brand. And so does this make sense with NIO and Korean? I'm not sure, but to me on the European side, there's just not many attractive players, right? Because Mercedes is…

Lei Xing:
So no, I think from a point of view of a being, what's the word I'm looking for? The opposite of conservative, what’s the word,

Tu Le:
Aggressive?

Lei Xing:
From the aggressive point of view, I would probably rank the Koreans, Hyundai Kia at the very back, and the Germans at the very top in terms of ChinaEVfication. So that's the reason I said sushi is pretty good, because I mean the Japanese relatively, I mean they're working with BYD right? So I think the Koreans they're still trying to figure out themselves, because they don't have really the, I mean they have EVs, but right, like I said, it's not resonating.

Tu Le:
One thing Lei, I will pat myself on the back for is that I had written up massive layoffs at the legacies and not what 2 hours into having the newsletter out in the wild, I get a link from a friend and the article title is Volkswagen and Works Council agreed on staff cost reduction.

Lei Xing:
Yeah, I think it was like announced right at the end of last year. Some kind of an agreement. I mean that was…

Tu Le:
I didn't know about this. So let me reassure you folks that I did not see this article. But what else did I write? Did you have any like, oh man this guy's, this guy's crazy. Did you have any reaction with any of my predictions like that, where it's like, that's not going to happen? Or do you see them? So let me just say this. Let me summarize the ones that I had said in Forbes, because one or two of them, I'm kind of regretting that I said, price wars will last. I think you agree with that too. 

Lei Xing:
Yes. Entering in America, yes. I think I’ll add.

Tu Le:
Okay, so that they will enter the Americas through Mexico and not just EV, so traditional automotive as well for Chinese domestic brands.

Lei Xing:
Good point. And I'll add to that is regardless and I think I’ve said this before, the announcement will be made from a brand entering America, announcement, not actually entering, but an announcement.

Tu Le:
Yeah, I think there's going to be a couple.

Lei Xing:
So I think it's just to piggy back on your prediction.

Tu Le:
But the one thing that I think you would also agree with is that it's going to put the United States and Mexico relationship diplomatically at a crossroads, because Mexico is going to see record foreign direct investment likely from Chinese companies. And the reason I don't say brands is because battery companies will also be investing in Mexico.

Lei Xing:
Yeah, and 2024 is an election year. So I mean that's a huge factor in itself.

Tu Le:
Yeah. And it's not only that the U.S. and Mexico might start to have some debate about this, but the federal government and the state governments in the United States might also have some heartburn, because I know for a fact that the U.S. governors all want to increase jobs, that's part of their scorecard. If all those jobs are going to Mexico, there's going to be some heartburn with that, too. So I think in 2024 that takes more of a front row seat with regards to reactions, politicization, things like that. The one thing that I wrote that I was kind of like, man, I’ve read it again, I was like, I don't know if that's going to happen. I wrote foreign brands will selectively succeed in China. So I think.

Lei Xing:
What do you mean by selectively succeed?

Tu Le:
So I didn't, I don't think I wrote selectively. I picked out one or two brands. I picked out GM because they're going to have many more EVs in the China market in 2024. When I say succeed, what I meant to say is we've kind of seen them bottom out now. I don't think they'll lose as much share in 2024 as they have over the last 3 years. I think we'll actually see some good news from a GM, maybe from a Volkswagen, if they can get their shit together on the ID. side. And then Toyota with the hybrids, right? Toyota with the hybrids. Less so, less so Volkswagen.

Lei Xing:
Wow. I've never seen you this positive, dunking on the VWs.

Tu Le:
Well, so but VW and GM I think, have different reasons for not succeeding. I think VW the EVs that they all have on offer in China are terrible. I think with GM they just don't have that many.

Lei Xing:
Let's just say this. It's fair to say, I think on the ICE side, they will continue to lose share and NEVs, Chinese brands will dominate. Besides tesla, I think Volkswagen, GM their sales rankings in NEVs are improving.

Tu Le:
Dude, don't call me out, man. I told you I wasn't confident in that bullet.

Lei Xing:
But that's why we debate, right? That's, no?

Tu Le:
I'm just joking, but I do think that Toyota is going to do really well with hybrids in China in 2024. 

Lei Xing:
I think for the foreign legacies, flat growth will be a win in 2024.

Tu Le:
Yes! Yes! That's what I mean.

Lei Xing:
I think, to be specific because Volkswagen, there's some numbers. Their official numbers of 2022 was 3.18 million, Group in China. In 2023, the final numbers are not out yet, but probably right around that. If they do 3.18, 17, 16, that's a win.

Tu Le:
Yeah, I mean so that's where I wanted to really articulate in more detail what I meant by selectively succeed. I didn't actually think they're gonna take 10%, 20% share. I actually meant that they're going to bottom out in 2023. And then we'll start to see some life from these foreign brands, particularly GM and Toyota. So that's what I meant. Real quickly. Two gentlemen, two folks have posted questions Lei and I are going to riff for a few more minutes, and then we will get to your questions. So appreciate your patience. The other thing that I think is worth talking about…

Lei Xing:
The U.S. capital markets will attract Chinese EV maker. You are talk about IPO, the EV, AV, chip..

Tu Le:
WeRide, Lotus, ZEEKR.

Lei Xing:
WeRide all these type of…

Tu Le:
You think Horizon’s, Horizon’s not, they do Hong Kong I think.

Lei Xing:
WeRide. 

Tu Le:
Yeah, WeRide they’ve already I think applied.

Lei Xing:
So RoboSense I think just IPOed in Hong Kong, Hesai is here.

Tu Le:
The last thing that I wanted to get your take on is so I wrote two things, the EV price war moves west. We saw that GM is going to offer rebates on the EVs that aren't being subsidized by the Inflation Reduction Act, so that when I wrote the price war moves west, that hadn't happened yet. So that looks like it's going to happen. And the reasons for the price war moving west, slow demand, hybrids taking share, excess capacity, because Ford GM have flipped some capacity over to EVs. And we saw last year, I think GM sold 80 something thousand, and of that only 20% were off the or less than 20% of those were off the Ultium platform. It is not great. And that tells me that there's excess capacity sitting around doing nothing in the United States. And that always equals price cuts. The last thing Lei is that I'm predicting that the United States government is going to increase the tariff. Ddo you, what's your take on that?

Lei Xing:
That's where it's going.

Tu Le:
Yeah, this is dangerous, dangerous, probably not. It is risky. Because it pushes the Chinese EV, the Chinese automakers even more so to Mexico, okay?

Lei Xing:
So we'll probably hear, so in the U.S. and so France has already done it. So the EU Commission’s investigation on BYD, Geely and SAIC Motor we’ll know more about it maybe later this year and see what happens, right? These are all ongoing that we expect these kind of protectionism or whatever you want to call it? But I think China EV marches on no matter what if not in the U.S. somewhere else.

Tu Le:
And I'm looking forward, hopefully our listeners are feeling a bit fired up, frisky, whatever we get some feedbacks push back on my or your predictions. Go ahead.

Lei Xing:
No, just our last episode that I said last year, we were able to test Chinese EVs on three different continents that in itself is the sign of things to come, right?

Tu Le:
I think that says and I'm going to pat ourselves on the back. I think that says a lot about us, but also about the market in general.

Lei Xing:
Who the heck are you referring to when you're saying CEO of a global automaker steps down?

Tu Le:
Man, I'll tell you offline. I'll tell you offline. Because think about it, right?

Lei Xing:
I think I know which one you're referring to.

Tu Le:
But then it's like, you look at the 2023, and there's a couple of legacies that really stand out for how poor they've done in 2023. So anyways.

Lei Xing:
Speaking of so, there will be some exits, also made in…

Tu Le:
Forced?

Lei Xing:
Yeah, no, not positions, not executives, but companies. We're already hearing some chatter, right?

Tu Le:
You're talking about going out of business, right? I'm telling you, man. We thought they were going to go out. We thought at least two or three businesses were going to go out of business. We thought FF, we thought Qiantu, but they're always sticking around. I think the companies you're referring to and please add to them if I'm not saying all of them.

Lei Xing:
Well HiPhi is the one that.

Tu Le:
And WM right? Well WM is out, right?

Lei Xing:
WM I mean they've been out. 

Tu Le:
The question is, does HiPhi have any IP that's worth acquiring?

Lei Xing:
I don't know.

Tu Le:
And so let me see here. Those are all of the, one thing that I did want to recommend. If you haven't read it yet, Lei, is Kevin Williams article.

Lei Xing:
Yeah, I saw that on the Blazer, right? Is that what you are referring to.

Tu Le:
Yeah, oh my god. For those of you that think that the legacy automakers are just going to just all of a sudden flip a switch and become software experts, you have to read this article on the newly launched Chevy Blazer in the United States. It became a brick after 28 hours of driving it. And it's…

Lei Xing:
Is that the one that no longer has a CarPlay or not?

Tu Le:
Yeah I think they took, well, I think CarPlay is leaving this year, in the ‘25 models. I want to say? But, it is in the back of my mind, cause I'm an ex-GM employee. I have two, three family members that have retired from GM. So I feel a little bit loyalty to them. I was excited about the Blazer EV especially when they launched it and said it was going to start at $40,000. It's a $57,000 car right now. But if I was to get a discount, in addition to the $7,500, it would be something I would consider.

Lei Xing:
And the other company I may bring up is NETA. If you look at the charts, NETA was at the very, very bottom in December and the CEO basically like cleaned, what’s the word, cleaned house almost, of their sales and marketing and he's now in charge of I think sales and marketing, Zhang Yong, the CEO of NETA.

Tu Le:
There's only, there's only one, really one strategy, right? Just cut prices.

Lei Xing:
So they had some issues with launching some new products and capacity tweak on one of their models and he made an explanation on Weibo, but right, when you have a company that sells like 15,000 a month all the way to 5,000 all of a sudden, right, these things, no one's immune.

Tu Le:
And the opposite end of the spectrum Lei is that LeapMotor announced sales of 145,000, so that's growth, best year ever, and the driver of a lot of that growth was the EREVs that they shipped in 2023.

Lei Xing:
More EREVs from AVATR, who else?

Tu Le:
EREVs for those that are wondering are extended range electric vehicles. There's an engine that is powered by petrol that doesn't drive the wheels. It drives, recharging the battery. But that's what Li Auto exclusively manufacturers right now with the MEGA the minivan being the first BEV for them, as Lei had mentioned earlier in the show. Now, so it's important to remember that again, because software glitches are not the exclusive domain of legacy auto because IM Motors…

Lei Xing:
Had something going on.

Tu Le:
Launching a patch for some software issues because the screen goes blank. So it's not.

Lei Xing:
I think HiPhi had issues as well.

Tu Le:
Unfortunately, in China, you don't get a second chance if you're an EV maker and you have major software issues, right? You're just going to get bashed on Weixin, Weibo. You'll get black balled real quick. In the United States, I mean case in point is Volkswagen with the ID. series, right? I think so the other thing, too, that I wanted to highlight, but I didn't put in the newsletter was that I think data, I think the data security, the privacy is going to come into focus in Europe, the United States when with regards to foreign brands entering their markets. Okay, I think that 2023 was the eye opening. Oh my god, there are so many Chinese brands and they're starting to enter our markets. Now, I would say, and I pointed to a chart about German registrations for EVs. So growth rates extremely high. We were talking 50, 60, 70% year over year growth. The denominator, the base is still very small.  So if we're looking at December registrations for Germany, MG was 2,600 units, right? So not a ton from a number standpoint, but I mean if you look at it, there's MG, smart, BYD, Great Wall, Polestar, NIO, LYNK & CO, MAXUS, Lotus, AIWAYS, there's a ton of brands. Okay. The crazy thing is MG, smart, Polestar, Lotus, LEVC, European brands, not Chinese brands. So I want to also emphasize that as the export, it's going to be U.S. brands, it's going to be German brands, it's going to be European brands, Japanese brands think Nissan. It's not just going to be Chinese brands exporting from China.

Lei Xing:
So that's something else to look into 2024 and be beyond is the China increasingly become, I guess, an export base.

Tu Le:
An export hub.

Lei Xing:
An export hub for foreign brands, not only for Chinese brands.

Tu Le:
Because who's driving most of the EV exports from China currently? Tesla. So remember that.

Lei Xing:
Tesla. Yeah. MG, I think MG, the MG4 EV did like 100,000 units, total global last year. So…

Tu Le:
 What will likely shift is Tesla’s numbers for export will go down as they ramp Berlin and Austin. Okay. I'm feeling pretty good about everything we've talked about. And unless you have anything, any news this week that we missed or you want to bring up, if not, we can open the room up. 

Lei Xing:
Not that I can think of.

Tu Le:
Ok, so let's, let me read the question, okay? Any insight on new China VTG, so vehicle to grid registration? Could this give BYD a huge advantage specifically because of its LFP chemistry?

Lei Xing:
I think this is probably, so the policy wise is this news came out of the, what do you call it, the energy storage facilities, right? Yeah, the four, MIIT, NDRC came out with this basically requiring the pilot cities hoping to use off peak grid to charge like 60% the EVs. So it's like an encouragement of utilizing, better utilizing grid. So it's too early to say, but I mean it's definitely positive for companies such as NIO, for that, they have this power storage play.

Tu Le:
It's definitely an advantage to NIO. And it's definitely an advantage to BYD because they build their own batteries.

Lei Xing:
Yeah, so I guess that will be the way to put it.

Tu Le:
What we're seeing. This is a global phenomenon. It's not unique to China companies, like Our Next Energy. Their first product they're shipping is actually storage for cities and companies for facilities. And it's simple LFP batteries that they're using. It's basically a big building with a bunch of LFP battery modules in it that it utilizes as a big battery pack for a building, a city municipality. We're going to see more of that as they try to be smarter. And this way, this is also where clean energy comes in. Solar, wind to capture that energy during peak hours and or capture that energy. So that during peak hours, you can use the stored capacity for battery or for electricity, as opposed to pulling from the grid. So let me see here. NIO’s ADAS chips supposed to be better than NVIDIA Drive Orin, do you think they will keep it exclusively for their own use as a part of the moat or license the tech, sell chips, goose their revenues? Let me start with that one. Supposed to be, and to me is a huge distance. I mean there's a huge gap between supposed to be and is and think of it this way. NVIDIA is pretty much the only game in town. Their margins are off the charts. So if NVIDIA was even close, or if NIO’s silicon was even close, NVIDIA would just dump price in order to maintain share, because the silicon, the capital cost for getting that silicon initially made is going to be extremely expensive for NIO. And they got to think about how they're going to be investing in their future, whether it's new products, whether it's silicon design, whether it's swapping. I mean those are going to be huge decisions that need to be made from a capital expenditure standpoint. So I don't, first of all, I don't know. I don't know of any silicon design company that’s close to NVIDIA. We saw Mobileye get trashed in the markets this week.

Lei Xing:
Yesterday. So my few cents is that, first of all, this is going to materialize, needs a few years to materialize. So this is play beyond 2025, first of all. Second of all, there are many things. I think that NIO could be a kind of a supplier role starting with the power swap being one example, there are e-motors being one example. So don't count it out. But at this point, I think it's too early to say for sure that, bye bye NVIDIA, right? Bye bye, Qualcomm. No.

Tu Le:
Yeah, they are, none of these guys are clearly out of the woods with the exception of BYD and Tesla. I think things can go really well for these companies next year and I would be more positive on that comment if I knew the price war was going to end just around the corner. And it makes NIO, it makes BYD and makes Xpeng all the players that survive that makes them stronger. But until it's over, they're not in positions of strength. Here's one question for you on the space. When do you expect to start seeing Mexico made EVs enter the U.S. market in volume? Or potentially earlier? What do you think, Lei?

Lei Xing:
Let's say, we'll know maybe for sure, after the election is over, I don't see any reason pointed not being earlier, but at least not anything meaningful until post-2025, I would say.

Tu Le:
If we're looking at timing, 2026, probably again, I think you said this Lei, the earliest because I don't know of any Chinese EV brands that have actually announced or have broken ground in factories in Mexico.

Lei Xing:
So one company is to look out for is Chery. I think they hinted that they had America in their sights. So.

Tu Le:
And what's important is are we all in building 150,000 unit, 200,000 unit capacity factory, because remember, it's not just an EV finished good challenge. It is also going to be, where am I going to get my batteries from? And so if that capacity is not built out in anywhere in the Americas or North America, specifically from other Chinese brands up the food chain, then that's going to be constrained. The one thing to keep an eye out for is the business model that BYD has with India, where they ship kits for final assembly in India. So they ship kits for the vehicles from China to India, and they do final assembly or CKD, right? Knocked down kits. I could see that possibly happening for one or two brands that want to quickly enter North America through Mexico. But I've been told that labor is an issued labor shortage. Skilled labor is an issue in Mexico. So I don't necessarily believe that we're going to see this mad dash. I think it's a bit more complicated than that. And so it'll take some time. There will be some more ambitious companies, the ones that I think are cash rich. And because let's assume that they all have global ambitions, but the companies that can actually pay for it or pay for the portion that's not subsidized by the Mexican government, I think that's going to really tell you who the potential players are from the pretenders. And you don't have to make a comment. You can raise your hand, too. I'm trying to look here. I don't see any other questions. So unless anyone has any questions, maybe we.

Lei Xing:
I think we're good. And so next week I’ll be at CES, and certainly going to be a lot of news coming out of the China EV, AV companies that will be there.

Tu Le:
ZEEKR is going to be there. 

Lei Xing:
ZEEKR 007. I mean ZEEKR is trying to be here, just, period. IPO wise and market wise, that’s just stay that. 

Tu Le:
ZEEKR Ai Mei Guo (ZEEKR loves the U.S.).

Lei Xing:
We'll probably hear some LiDAR announcements. Really, Chinese LiDARs getting onto international OEMs.

Tu Le:
Dude that’s super competitive. LiDAR is super competitive right now. I unfortunately have decided that I will not make it. I have too many things going on, personally and professionally. So.

Lei Xing:
Well this year on the auto show circuit, so CES and then the Geneva Motor Show at the end of February. Beijing Auto Show are probably the, at least in the first half the year that are worthy of.

Tu Le:
Shanghai F1.

Lei Xing:
Yeah I think we are good.

Tu Le:
Cool. Hey, everyone. Happy New Year. Thanks for joining us and to those that are new, hopefully this was pretty interesting because we'd love to have you back next week. For the loyal listeners, there's quite a few of them that I see in the room right now. Thanks for continuing to listen. Hopefully, we're not only informative, we're a bit entertaining as well.

Lei Xing:
Yes, but very very much appreciated.

Tu Le:
But I see 2024 continuing to be a super interesting time for the automotive mobility, transportation, EV space. So hang with us. We'll keep you informed.

Lei Xing:
And just more, I guess there's more opportunity and chance to experience the latest offerings wherever you are, we are in the world, not only in China.

Tu Le:
Yeah, you guys, obviously, they're in this room, so they're all curious. Everyone, good morning, good afternoon, good evening, have a good weekend. We will talk with you all next week.

Lei Xing:
Same here. Thank you very much. Happy New Year. Bye bye. Talk to you next week.

Tu Le:
That brings us to the end of this week show. Lei and I thank you for tuning in. My name is Tu Le and you can find me on twitter @sinoautoinsight. You can find Lei on twitter @leixing77. If you wouldn't mind rating and or reviewing us on Apple Podcast, Spotify or wherever you grab your podcast from, we'd appreciate that as well. Even better if you enjoy this show, please tell your friends about it. Please join this again next week as we track down all the latest news on China EVs & More.

(Cont.) Episode #148 - 2024 Predictions from Tu & Lei