Episode 129 - XPeng earnings, Lei's trip to NEO Park, Our Next Energy Tech update

The podcast starts with Lei being a bit nostalgic about leaving Beijing after visiting for the last 2 months. 

It quickly moves to a discussion about XPeng earnings with Lei summarizing the earnings call and Tu giving his readout on what it all means. 

This discussion evolves into a broader discussion about the price war and overalll economy that continues to struggle in China with both Tu and Lei having spoken recently with friends living in China and how they feel everything that’s going on there. 

Lei starts his discussion about his trip to NEO Park with a brief history lesson of how it came about and what all the acronyms and codenames mean when talking about the park. Lei also talks about the largest NIO House being open inside NEO Park. 

Tu and Lei then move onto a story about how BYD had shared a supply of chips to NIO during the chip crisis to keep them from shutting down their factory. Tu summarizes that in the tech sector things like that happening aren’t that unusual. 

Tu and Lei pivot to a brief conversation about the Fang Cheng Bao brand from BYD and who its likely competitors are. 

Tu closes out the pod with details about his visit to Our Next Energy for a technology update. 

Transcript

CEM #129 Transcrtipt
Recorded 8/18/23

Tu Le:
Hi everyone and welcome to China EVs & More where my co-host Lei Xing and I will go over the week's most important and interesting news coming out of the China EV, AV and mobility sectors. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. To 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 to other enthusiasts and of course tune in again next week. 

My name is Tu Le. I am 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 of course I encourage you all to do. Lei, in the final days of his visit back to Beijing and China. Can you please introduce yourself?

Lei Xing:
Don't mention it, don't mention it. Good evening from Beijing, perhaps for the last time this year, live from Beijing. This is your co-host Lei Xing, former chief editor of China Auto Review. This is episode #129. Yes so my roughly 2-month trip to Beijing is winding down and, man don't want to leave man, because it's been so much fun experiencing the EV, AV, mobility ecosystem.

Tu Le:
Yeah but you know, there's things coming on in Europe and the U.S. so I think we'll have a good end of the year. So.

Lei Xing:
Yeah and I was driving back this evening and I still have the AVATR 11 which I shall return next week before I leave and I was listening in on the Xpeng earnings. It's, yeah I mean that vibe, right? In the Friday evening Beijing traffic, I’m going to miss it.

Tu Le:
I never miss Beijing traffic, dude. So.

Lei Xing:
Yeah I mean EVs, make it all worthwhile, right? So it was good, by the way, it was good to meet Annie and the boys last weekend.

Tu Le:
Right. And you'd been to Jing A before or no.

Lei Xing:
Yeah, it's the Phoenix, the Feng Huang Hui. It's a particular area that my family would frequent. But it's new over there. And I think it opened in the pandemic and…

Tu Le:
That place got built out so much.

Lei Xing:
Yeah. So earlier in the evening I went back to the apartment where we had stayed for many years and just looking out the window and it's now being occupied by a family that their kids went to the same kindergarten as my daughter. So this whole evening was really making me choke up because it's really nostalgic. All the good times back in the days, but anyways, back to quickly on Xpeng. Did you listen in a little bit?

Tu Le:
I did not. I relied on Edison and Phate to update me. 

Lei Xing:
So, obviously it was a pretty bad quarter in terms of the margins, negative margins, deliveries. It was, we expected that, but let me just run off some numbers I thought that was interesting. So 70% of the G6 so far are the MAX version. And they are, He Xiaopeng said they're expecting 10,000 G6 monthly deliveries in Q4, 20,000 monthly total in Q4 and 15,000 in September, and a much better Q3 around 40,000 units. One thing I thought was interesting was the mentioning of RMB150,000, so $25,000.

Tu Le:
Less than $25,000

Lei Xing:
Yeah $25,000 autonomous driving vehicle, let's say 2025, I have no idea what that is, but he mentioned that. So something interesting to look forward to because they are expanding the…

Tu Le:
Do you think he was talking about a robotaxi or like a private…

Lei Xing:
 No no, I think the ultimate is the XNGP point to point XNGP, which He Xiaopeng mentioned that they are, this year, at least they're expanding into 50 cities by the end of the year, just a quick update on Xpeng. I think the earnings call is still going on right now.

Tu Le:
A couple of things about Xpeng. No surprises. A couple of things. The margins were a little bit worse. But I’d also read that the MAX had a pretty high take rate that's going to do wonders for that margin for Q3 and Q4. And because I wasn't expecting much out of Xpeng for Q2 numbers, I was more focused on what the outlook was going to be. Like you said, 40,000 units in Q3, pretty positive in Q4. Now, he says this with the Mdoel 3 refresh looming. So G6 is an SUV crossover, Model 3 is not. But I do know that there are a number of Chinese consumers that are sitting on the sidelines waiting for the 3 to see whether or not it's worth buying. And so the Model 3 is just going to wreck things for a lot of companies in the space right now. The price war is still pretty intense. So despite the price war, having He Xiaopeng say that outlook for Q3 and 4 looks positive. I think that's awesome. And we're not looking for anyone to go out of business, right? I'm not really rooting for any of that. So I'm glad when companies are able to have positive notes from their earnings calls. So.

Lei Xing:
Yeah, and Brian, he mentioned that and he says there's no impact on the sales of the G6 with the recent price cuts, which we’ll probably talk about in a minute. But and he also mentioned maintaining the view that by 2024, they'll achieve quarterly free cash flow positive and overall break even sometime in 2025 for the whole company. And then, that's what I heard right before we got on. So…

Tu Le:
And to piggy back off that Lei, 2025, the price war should be over. And the survivors, because a lot of companies, what they're really trying to do right now is with the exception of a Tesla and BYD, are trying to survive in the China market. And once they do, the weaker players will probably fall off, umber one. Then number two, their positioning will be strengthened. It'll bring a lot of confidence. It'll leave a lot of scars, but scar equals experience. And so this will battle harden them for future hiccups in the market, I think. So I think you and I both said that we expected the NIOs, the Xpengs to survive this price war. They would be scared, but they would be stronger for it. So no surprises there. And there are a handful of others that you and I track that most of our listeners would know about that aren’t likely going to survive. So.

Lei Xing:
Yeah, I guess no one is immune from the fact that you just have to participate it whether actively or not. And case in point, we've heard about the ET5 inventory having some discounts, we had Tesla “S3XY” models all reduce prices earlier this week, right? Pretty significant following the ZEEKR, right, last week. Today is actually a sales holiday, believe it or not. It's the 818, which is August 18. And because the number 8 is auspicious. So there's some discounts going on. I saw some posters…

Tu Le:
Like these guys need a reason to cut price, right? Like they need an occasion, they just freaking do it, right?

Lei Xing:
And then pretty soon it will be Singles Day, right? Who knows what's going to happen?

Tu Le:
And the economic turmoil for the Chinese economy, if we zoom out to a 75,000-foot level, it's serious. The youth unemployment is, the youth unemployment is not great.

Lei Xing:
They're no longer publishing it, right? And then the benchmark I think, rate was lowered, I believe. And then the RMB exchange rate was like close to 7.4

Tu Le:
The lowest it's been in 3 years, so at the lowest in 3 years that rate. But let me ask you with your friends that you’ve re-connected with, are they concerned? Do you talk to them? And what are they telling you about that stuff?

Lei Xing:
As a matter of fact, this family that is staying, that are staying when they kind of took over our lease right, the apartment, the wife works at Tencent Fund, and the husband works at a Japanese company and both of them saying they're under a lot of pressure. Business is not as positive, but they are more than busier than ever.

Tu Le:
One of the things that we should mention is the tier-one cities are kind of the canary in the coal mine. And so if there's pressure in Beijing and Shanghai, on the average middle class or upper middle class worker, you can bet the lower tier cities, there is a lot of unemployment, a lot of turmoil, a lot of craziness going on from that standpoint. That was my experience. So I don't know if you agree with that or not, but I think the tier-three, tier-four cities there is probably a lot of scrambling going on. So.

Lei Xing:
Yeah, and this price war there's no, I guess there's no other way given the sentiment and given the market economic conditions. And this is going to drive many companies to death, I believe, eventually. And so I mean whether you play it or not, you get sucked into it, right?

Tu Le:
And it's two things, right? It's not just the price war Lei, but it's also that they're not able to borrow cheap money anymore. Okay? 

Lei Xing:
Exactly.

Tu Le:
You better believe that the EU regulators and the EU is really looking at the Chinese economy very closely. Because from an automotive standpoint.

Lei Xing:
Speaking of EU, so there was this big shuffle, at Volvo Car China. This is not EV related, but there's this new guy from Volvo Japan now are being shifted over to China to be in charge of sales. Now I think he's Swedish. So that's a strange move I think having, so I figure there's something going on because Volvo has not been doing that well, right? They have their products being delayed. Sales are not as great in China. So there's been some interesting executive shuffle that just happened today, headquarters and this guy. He's reporting directly to the I guess the Chief Marketing Officer instead of Yuan Xaolin, who is the kind of the CEO of the Asia Pacific region. So interesting move there. That's a side note but so back on topic, both you and I had interesting visits this week.

Tu Le:
Yes. Let's talk about yours because I know that one person at least wanted to see or hear about an update. So let's start with your visits first.

Lei Xing:
So I’ve crossed off many items on the bucket list. And one, the latest one was having visited NIO in Hefei. And it was eye opening. I visited Neo Park. Just to give you an idea…

Tu Le:
Hold on Lei, Neo Park as in NEO, not NIO.

Lei Xing:
NEO. Exactly. Neo Park in the Xinjqiao region.

Tu Le:
Can you give people a history lesson on Neo Park?

Lei Xing:
Oh my goodness. So I’ll do this, instead of a historical lesson, I'll give you a nomenclature lesson. So they internally, NIO has these lettering, so the F1, F0, E0, E1 and the BF1. Let me go through them. The XPT plant in Nanjing, where they produced the original e-motors, electric drive system, is known as both the E0 and the F0. E meaning the electric drive system and F0 meaning factory. So actually I just learned this, the first prototype of the ES8 was produced in Nanjing, shizhiche, which means kind of the protoyping. They actually have a vehicle prototyping shop in the Nanjing plant. So it's E0 and F0. And the JAC NIO.

Tu Le:
Let me be clear. E0 is their internal name for the electric motor. F0 is the internal name, just to be clear. That's what Lei is referring to, what the engineering teams internally at NIO referred to the e-motor as.

Lei Xing:
The F1 is the JAC NIO plant, which I visited. And there was a NIO House inside that plant. So that plant is what's known as F1. So that's actually the first plant of mass produced NIOs.

Tu Le:
Maybe it's like a factory one or something.

Lei Xing:
Yeah factory one. And E1 and F2 are the electric drive system production and the vehicle production inside the Neo Park, which was, I don't remember the exact time and date, but it was, I guess, 20, it was during the pandemic, right? The deal was signed and production began a year ago. So in the F2 inside the Neo Park produces ET5, ET5T and the new ES8. The other vehicles are produced at the F1. And the E1 in the Neo Park produces the current 150-kW and 210-kW motors now in the all of the NIO models. And get this. So E1 has a production capacity of  600,000 e-motors right now (per year) and the E0 has 340,000 per year. And E1, E1 is expanding, they have two lines right now. So 600,000, will be adding the third line next year. So it will be a 400,000. It's going to be one million by next year. And inside the Neo Park, they're building E2, which has a production capacity of 1.3 million electric drive systems. And that's going to be the 4th and 5th generations, which are under development. So if you combine everything, NIO is going to have a combined 3.3 million e-motors by 2027. And those will be good for 1.5 million vehicles. Huge bet, huge plan.

Tu Le:
Well, and we know for a fact that those 1.5 million vehicles will not be all badged NIO, because,  we know that there's two other brands.

Lei Xing:
Right. We’ve already seen some spy shots, I guess.

Tu Le:
If NIO is doing well, maybe 500, or 600,000 of those will be for NIOs. The rest would be for the other two brands. I would imagine, at least. So.

Lei Xing:
I’m going to take a guess that the commitment and the investment of, on R&D in the e-motors, I wouldn't be surprised if NIO becomes a supplier of e-motors based on what they're doing. I can't really share too much more, because I mean it's right, I heard a lot from the contact that I had, but it's a huge bet on the e-motor side as much as it's a huge bet on the battery swapping station.

Tu Le:
And this is not unprecedented, because if we look at BYD they're shipping batteries to other companies. And so this is not highly unusual. And we know that NIO is trying to shop their swapping system as well. So just additional revenue streams that complement selling vehicles.

Lei Xing:
And I had tweeted that inside the Neo Park, the world's largest NIO House is opening next month on the occasion of their global partner conference. This thing, the NIO House inside the JAC NIO  factory, which is F1, is about 1,500 square meters to 2,000 square meters. The one inside Neo Park is going to be 4X as big.

Tu Le:
So for our listeners, in the U.S., 1,500 square meters is…

Lei Xing:
You help me with the conversion.

Tu Le:
5,000 square feet. So. I want to say it's about 5,000 square feet. Chabuduo (almost). And so 4X that.

Lei Xing:
So 4X would be 20,000.

Tu Le:
It's not going to be a NIO House. It's going to be a NIO Mansion basically. So.

Lei Xing:
Based on what I've seen, here's another conversion that we need help with. The current whatever has been opened in Neo Park is about 1,600 mu. Now, one mu is 666.666 square meters. So that comes out to be about 1.1nish million square meters. And that's only 10%. It's already huge. That's 10% of what it's going to become, because it's a 16,000 mu space they are allocating. So it's pretty big.

Tu Le:
I'm terrible because I said 1,500 square meters about 5,000 square feet. It is 16,000 square feet. 1,500 is already a mansion. But so it's big.

Lei Xing:
So that's the Neo Park visit. And then I went on my own to the NIO House in the JAC NIO factory, which is just down the road from Volkswagen Anhui, literally down the road. The NIO House was very interesting because I had this dude, he was, just graduated last year, and it was very nice. This post-00 guy giving me a tour and I was talking to him, I was like, he was showing me the NIO Formula E vehicle. And I was like, I was at the first ever Formula E in 2015 in Beijing. He was like, I was in middle school.

Tu Le:
Laoren (old man).

Lei Xing:
I don't know if it was me showing him or him showing me or me telling him about history of NIO.

Tu Le:
Dage. Dage (Big brother).

Lei Xing:
Yeah, so that was awesome experience. And then just seeing the delivery. There was this little delivery booth where all the pageantry and all the flowers, and seeing some activities, having that nice drink, just sitting there, observe, and they had this wall of the countdown of all the, not the countdown, but all the battery swaps, real time battery swaps. And it just…

Tu Le:
Yeah that’s cool. That stuff's cool to me.

Lei Xing:
Just great to understand being in the factory.

Tu Le:
Sounds like you're drinking the kool aid. Are you drinking the kool aid now? 

Lei Xing:
I am.

Tu Le:
So a couple of things that we should mention. The third-gen, first third-gen swapping station was launched in Sweden for Europe. So that's pretty cool, awesome. And a mole, I have a mole. I was told that someone, a journalist for one of the very reputable media outlets in the UK is going to be driving a NIO from his home in the UK to Munich. I don't know if he's going to document this in an article, but I told him, so we're going to meet for a pint. We're going to meet for a pint, and he's going to tell me all about his trip. So.

Lei Xing:
You know maybe I should ask NIO, because I need a step away from Munich for a couple of days, and I need to go from Frankfurt and Munich. Maybe they can lend me a vehicle or something. What do you think?

Tu Le:
You can ask, right? As I was asking, I was thinking about getting, borrowing a car, but I don't know where would I go like…

Lei Xing:
Well, Xpeng is organizing test drives of the P7i and G9 during the IAA, so.

Tu Le:
so I'd be interested in driving the G9, I’ve driven the P7, so. But we should let everyone know Lei, that you and I will both be in Munich for IAA so for those that plan on attending, DM us, we'll figure out how we're going to do the podcast. We have a couple of guests that will be dropping. One in particular that is going to be super relevant for IAA that we're excited to post in the next week or so, but for those that are planning on being in Munich, let us know, we'll meet up for.

Lei Xing:
We'll be there the first week of September.

Tu Le:
And then we'll be in Detroit for the auto show the next week.

Lei Xing:
I think NIO, after this visit, what can I say? I mean they have a lot on their plate, but some of the things they are doing, I think, are underappreciated, and it doesn't reflect in the share price, right? I know there's a lot of NIO…

Tu Le:
That's what happens when you are publicly traded in the United States. It's a month to month, quarter to quarter thing, right?

Lei Xing:
Yeah. I think NIO is making a lot of bets on multiple fronts. Some I don't really like that much. For example, the phone. I've already, I think we've seen some spy shots of the phone already. It's launching any time now. But some of the other things that, especially the electric drive system, it's pretty, I was pretty impressed by what they're doing on that side.

Tu Le:
Yeah. And we should point back to Wang Chuanfu’s speech, how he kind of doubled down on the reasons for investing so much on R&D right? So.

Lei Xing:
Speaking of Wang Chuanfu, the anecdote I wanted to share because during the chip crisis, now he mentioned this during the 5 millionth NEV roll off event that BYD had lend many of its competitors chips. And NIO was one of the beneficiaries during the pandemic. And I heard that literally, they carried this, I don't know, luggage of chips, and somehow was given to NIO and Li Bin thanked Chuanfu, Wang Chuanfu personally. So these are some of the stories that were interesting on what happened during the chip crisis. So.

Tu Le:
They're very cool because you see on the surface, they are fierce competitors, but when in a time of need, I think they all feel that they're in the same boat. So to help each other out is good karma, is going to pay forward. And so, in my experience, having worked in operations, specifically commodity management for silicon, for chips, it was the same thing whether it was memory chips, whether it was transistors, resistors, mother boards, resins. Whenever there's huge huge issues, supply chain issues, there are back channels that companies will use in a HP, a Dell, even an Apple. They'll help each other at times. And if you might be using the same memory, but from different vendors, and if you have a software bug, you could switch memory in order to keep the factories going. And specifically, when in my experience, specifically when new silicon was start of production, what would happen was some companies would buy a first-class ticket and have a suitcase full of the new silicon right off the factory floor. They would have someone fly that silicon over to the factory in Shenzhen. So I think that's what you're referring to.

Lei Xing:
That was roughly what happened, literally stepping off the plane and giving the suitcase of chips. This, I believe, was for the Bosch iBooster.

Tu Le:
So that's when operations people or supply chain people are talking about being fed hand to mouth. That's what they mean. It means that the factory might have 90 minutes left of a part. And the trip from, or they might have 2.5 hours left on a part. And the trip from Taiwan to Shenzhen might take 2 hours. And so they're flying and getting it over and right as the last par is put on the following, the next product, this new supply of parts comes into the factory in order to keep the line going. Because one of the most expensive things for a manufacturer is shutting the line down. It's appropriate that we talk a lot about it a little bit, because the UAW is in negotiation currently with the Big 3 in the United States. And there was a consulting company that said, if the factories,144,000 workers would be affected, if the factories were closed for 10 days, it would cost $5.9 billion worth of economic damage. And so that's what we're talking about. When factories go down, everyone loses. So anyways, back to EVs.

Lei Xing:
Or batteries specifically.

Tu Le:
The thing is, man, I’m a nerd, right? Because it's nice seeing their offices and headquarters and like all the cool stuff. But when I had been invited to a few of these places years ago, and I equated it to, who was I talking to, I was talking to Paul Leinert from Reuters, and we can talk about my trip because I saw him during my visit, but I love going to the factory. I love seeing how they build things, my first job, working in memories, seeing how the sausage is made is really important to me. So.

Lei Xing:
Yes. Yes.

Tu Le:
Because, even just how clean the factory is, how happy the workers are, how fast the line is moving and seeing how many trucks are in the yard that need to get unloaded. That will give you an indication of morale. It'll give you an indication of demand. It'll give you an indication of a lot of different things. And so I was lucky enough back in the day to go visit WM and I had been invited to go visit like a few EV makers factories. But I told Paul, I was like when you live in San Francisco, you never go to Alcatraz. You only go when people come and visit you. Because if you live there, you're like, man, I’ll have any time to go. And so when I was in China, I was like, I'll go at some point. Now it's like now that we don't live there. We have to make the most of our trips back, right Lei? So anyways.

Lei Xing:
Yeah and I visited the assembly, the final assembly and the body shop in the F2. So.

Tu Le:
The body shop is really automated, right? 

Lei Xing:
Yeah. One piece of trivia. So I was asking, if I were to order, if I live in Anhui Province, and if I were to order a NIO, when do I get it? It said it's within 24 hours. And the rest of China, it depends, right?

Tu Le:
That doesn't seem fair, but okay, I don't know if you better tell, I don't know if you announced that to people.

Lei Xing:
No I mean it's pretty interesting. And every, I also tweeted that every single customer gets, in Anhui Province gets their NIO delivered at the NIO House in the JAC NIO factory. So.

Tu Le:
And for the new folks that are just really starting to follow NIO. I know that there's a ton of loyalists. So god bless you, because they have a really compelling story. But I think it's important to remember that when NIO started, they completely contract manufactured the vehicle to JAC so when the ES8, ES6 came out, JAC built it, and now they have a few of their own factories, like you had mentioned, Lei. And so they're learning really to also become a manufacturer now. So.

Lei Xing:
Their PR will probably correct you and say it's not contract manufacturing, its manufacturing partner.

Tu Le:
Sure, sure, sure. So anyways, but it's just, it's a distinction that doesn't make a difference, but so cool, man, anything else?

Lei Xing:
So we're at the 40-minute mark, and we haven't touched upon the topic listed in the title.

Tu Le:
Oh jeez. The Fang Cheng Bao Bao 5. If we look at it, it's got the Defender, Jeep square, Bronco vibes going on. The interior looks great. And RMB400,000. I looked at the dimensions. It's a little bit bigger than a Jeep, little bit bigger than a Bronco. I think you would call it a bit more premium, but so my first take would be it's going to take a lot of sales from Great Wall, from Jeep and the Bronco’s going to get imported into China. I don't know how many sales are going to get from that. 

Lei Xing:
I heard the Bronco, the locally produced Bronco’s starting price will be around RMB300,000.

Tu Le:
Yeah so.

Lei Xing:
I don't know about that.

Tu Le:
And then I was reading South China Morning Post. They said Wang Chuanfu thinks that it's going to take sales from Porsche and Land Rover. So can it straddle the ultra-premium and the premium space? What do you think about that? Do you think it's more of a Great Wall competitor? Or do you think it's more of a Macan, Cayenne competitor?

Lei Xing:
I think the latter. And my impression wasn’t the 5, my impression was, whenever BYD or some others, when they do this event, they always have this one more thing or two more things or three more things. And they splash out the Super 8 and the 3. And I tell you, more are coming. It's like the Denza, right? You launched the N7 before, one month before you announce the N8, they just keep coming, right? And this wave of vehicles that are just.

Tu Le:
I think the other thing that's really important Lei, is that not 3 years out, it's like, we're going to announce…

Lei Xing:
It’s launching in Q4. Soon.

Tu Le:
So they show it and they sell it. There's no huge lag time. So like the Cybertruck, for instance, but the rich keep getting richer, but BYD is not letting up on the gas, right?

Lei Xing:
And now we're kind of clear about pretty much the positioning, at least price wise of BYD, Denza, Fang Cheng Bao and Yang Wang. All of them have a booth at the Chengdu Motor Show. I think our good friend Taylor said they are taking over like half of one hall or something or all BYD.

Tu Le:
For those BYD followers, it's BYD, Denza, Fang Cheng Bao, and then Yang Wang from a brand portfolio standpoint, with Yang Wang being the ultra-premium, million RMB price points for the SUV and the sports coupe.

Lei Xing:
And then there's that Song L launching pretty soon as well, right?

Tu Le:
That thing's going to sell, I think, man, I think that thing is going to do well. It looks great. And I actually think it will sell well abroad, too. So.

Lei Xing:
One piece of negative news is this, what's going to come out of this beef between BYD and Great Wall Motor? Because there's been a lot of accusations going on and investigation is ongoing. 

Tu Le:
It's getting nasty 

Lei Xing:
Of that yeah, that fuel tank gate, so.

Tu Le:
BYD knows they're not the underdog, they're the target. So expect more these types of accusations as companies try to knock it down a notch, or and I’m not discounting any of these accusations, they could be true, but BYD has quickly moved from the hunter to the hunted so this is kind of expected. Let's do this Lei. Let's open the room up. It's 9:45, so we can open the room up for any questions or any comments. You and I can continue talking. I can talk about quickly talk about the visit to Our Next Energy.

Lei Xing:
Yeah so battery is a big topic this week because CATL announced I mean there wasn't too much…

Tu Le:
Shen Xing.

Lei Xing:
CATL does. Yeah, every time CATL does these events. It's over quick. And they throw out these numbers like 10 minutes, 400 km. But I guess the most interesting thing was this 4C using LFP because now all of these fast charging 4C, 5C, whatever, are all NCM-based on the market. And there wasn't too much details shared, but I take it with a grain of salt. AVATR is supposedly one of the first batch of companies using this. And Our Next Energy I think you had mentioned in your newsletter was also going with the LFP route with the Aries, is that what it is? 

Tu Le:
That's right. 

Lei Xing:
You can maybe share more, shed more light on your visit.

Tu Le:
They had an event Tuesday, Our Next Energy for those that are listening, is a U.S. battery startup. Founder, his name is Mujeeb Ijaz. He's old school, A123. He was Apple and went off on his own in 2021. They've quickly become the darling of the U.S. and I think the U.S. government is leaning on them to become our CATL and so Mujeeb, they came into, Our Next Energy came into our consciousness when they post a video of a Model S on a single charge going 752 miles. And so they've broken ground on a factory in Van Buren, just outside of Detroit. So they had an update on their technology and Aries which is LFP battery. So they are optimizing the pack in order to get more cells into the pack, they're also going to move into grid storage. I think they're using that to be a POC or proof of concept of the Aries Their second product is called Gemini and that's where we get into more of the innovation. What they're going to be doing is using hybrid LFP battery. And then a small portion is going to be anode free. That's going to be the long range battery. So dual chemistry or hybrid is what they call it. The LFP, he rattled out some statistics and said the average American goes farther than 150 miles 1% of the time. In order to accommodate that 1% of the time and the Gemini and I'm sorry for jumping around, but the Gemini battery will have a range of, a target range of 600 miles. So that means that real world miles, if you're towing something, if it's cold outside should be 300 to 350 miles. And how that's going to work is that the LFP battery might be 80 kWh, 100 kWh. And that'll take care of your daily commute range. But if you decide on the weekend, you need to go travel with your camper. The range on the LFP side gets low, the anode-free side recharges the LFP side to get you over the top. And so it's a great concept. They are, that'll be launching, the Gemini will be launching in 2027. And so I got to say they're using existing technology, creating efficiencies, using that existing technology, as opposed to like different chemistries, right? Because this week I also spoke with a silicon sulfur, sulfide battery startup, and we talked about solid state. But I think that Mujeeb and the ONE team has gotten a lot of support. I'm looking for good things to come out of them. And I just don't know of too many other battery startups in Europe or the United States, not just the U.S. but Europe or the United States that are really making a lot of progress.

Lei Xing:
So there was a GM investment in this company called Mitra Chem. But you saw that, right? 

Tu Le:
$60 million, right? 

Lei Xing:
Silicon valley. I thought that was interesting. I think also LFP.

Tu Le:
It's a metal, I forget.

Lei Xing:
Metal, right.

Tu Le:
So we're starting to see the OEMs really care about the supply chains. And I think that's a good thing. I still think that up through 2030, the market is going to be owned by CATL, BYD, Gotion. And so there's a TechCrunch article that I sent out to a couple of people this morning that documents, the capacities, the factories in the United States, of course, one of the people that is well versed in battery, he works at one of these battery companies. He writes back and says, hey, they're saying AESC is a Japanese company. Lei how many times do we have to correct people? It was a Japanese company, but the technology was acquired by a Chinese company. And so AESC is actually a Chinese company.

Lei Xing:
And they have a plant in South Carolina, right, supporting BMW.

Tu Le:
Yeah that was my visit. It was good, getting an update and looking forward to seeing you in two weeks. So hey, man, I have to roll Lei. So this was a great pod, lot of participation, lot of listeners. So what do you think anything else? 

Lei Xing:
No I mean there's too much to talk about, but I guess this will be the last episode that I'm in Beijing and I’ll join you stateside next Friday a day after I arrive. Supposed to arrive on Thursday afternoon.

Tu Le:
Then we’ll see each other in two weeks, right?

Lei Xing:
Yeah well, we’ll see each other in two weeks on the other side of the world.

Tu Le:
Cool, so, hey, everyone, thanks for joining. Please join us again next week. Good morning, good afternoon, good evening. We will talk with you all next week. 

Lei Xing:
Likewise. Bye bye from Beijing.

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.