Tesla Leaving China?! Xiaomi Targets Li Auto & the EV War Escalates | CEM #256

Could Tesla really leave China—the market and manufacturing base that helped transform it into the world's most valuable automaker?

In Episode #256 of China EVs & More, Tu Le and Lei Xing unpack reports that Tesla could potentially sell, spin off or close its China operations as Elon Musk considers a closer combination between Tesla and SpaceX.

The implications would be enormous.

Giga Shanghai accounts for roughly half of Tesla's global vehicle output, serves more than two million Tesla owners in China and remains a critical export hub supplying markets around the world.

Tu and Lei debate whether Tesla could realistically walk away, who could possibly acquire Giga Shanghai, what the move could mean for Tesla's FSD ambitions in China—and whether the report could be signaling something deeper about Tesla's expectations for its automotive business.

Then the conversation turns to another major disruption: Xiaomi's new SkyNomad EREV family SUVs.

After finding enormous success with the SU7 and YU7, Xiaomi is now targeting the large family-SUV segment dominated by companies such as Li Auto.

With the seven-seat N90 Max expected to start below RMB300,000 and offering a massive 76-kWh battery, 60-liter fuel tank and approximately 1,705 km of combined range, Xiaomi is once again using aggressive pricing to reset expectations.

In this episode:

• Could Tesla really sell or spin off its China business?
• Why Giga Shanghai remains critical to Tesla's global manufacturing strategy
• Tesla, SpaceX and the potential conflicts created by a merger
• What happens to Tesla if FSD never receives full approval in China?
• Who could realistically buy Tesla's Shanghai factory?
• Tesla's growing reliance on exports from China
• Xiaomi's new SkyNomad N90 and N70 family SUVs
• Why Xiaomi's pricing should worry Li Auto
• Xiaomi's highly automated Beijing factory
• Why Xiaomi's latest technology event disappointed some investors
• Audi's China-only EV strategy and Momenta-powered ADAS
• BMW, Porsche and the continuing challenges facing German automakers
• Why NIO is prioritizing profitability over global expansion
• Battery swapping vs. charging outside China
• How quickly ICE vehicles could disappear from China's domestic market
• Why China's unwanted ICE capacity could eventually flood emerging markets

If you want to understand the forces reshaping the world's largest automotive market—and what they mean for Tesla, Xiaomi, BYD, NIO, XPeng and the global automotive industry—subscribe to China EVs & More.

Hosted by Tu Le of Sino Auto Insights and Lei Xing, bringing decades of firsthand experience covering China's automotive, EV, AV and mobility industries.

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Chapters

00:00 Welcome to China EVs & More #256
00:55 Tesla's HUGE China question
02:00 Could Tesla really leave China?
04:30 Why Giga Shanghai is critical to Tesla
05:55 Without China, there's no Tesla of today
08:05 Who could buy Tesla's Shanghai factory?
09:50 Is Tesla FSD in China in trouble?
10:45 Could Tesla eventually exit the EV business?
12:40 Watch Tesla's China exports for the next clue
14:15 Xiaomi unveils its SkyNomad EREV family
15:25 Xiaomi N90 & N70 pricing shocks the market
16:45 Why Xiaomi's N90 should worry Li Auto
18:00 Xiaomi closes in on 750,000 EVs
19:05 Is Xiaomi late to the EREV party?
21:15 Inside Xiaomi's highly automated EV factory
22:45 Did Xiaomi's big tech reveal disappoint?
25:05 Xiaomi's wild tire blowout demonstration
27:20 Driving Audi's China-only E7X
28:45 Can Audi's China strategy actually work?
30:10 Why German automakers keep making things complicated
32:05 Porsche, BMW & Volkswagen face more China pressure
33:00 Can Ford & GM disrupt themselves?
33:50 Live Q&A: Why isn't NIO expanding faster globally?
36:00 Who could actually buy Giga Shanghai?
37:15 NIO's profitability vs. global expansion dilemma
40:05 How fast will ICE disappear in China?
42:55 Where will China's unwanted ICE capacity go?
44:50 Final thoughts

Transcript

Tu Le (00:00)
 Welcome to China EVs and more. I'm Tu Le. Every week, my co-host, Lei Xing, and I break down the most important development shaping the global EV, AV, and mobility sectors. We give you an unfiltered on the ground perspective, drawing on decades of industry experience, trusted relationships, and access across China and around the world. It's context you simply won't find anywhere else. Some of the topics we discussed come from my Sino Auto Insights newsletter.
 
 For even deeper analysis delivered directly to your inbox, subscribe at SinoAutoInsights.substack.com. As always, nothing discussed on this show should be considered investment advice. Please do your own research. And if you value what we do, please like, subscribe, and share the show with your network. It makes a real difference and helps us continue bringing you the insight that keeps you ahead of this fast moving industry. Lei, a late night Lei, please introduce yourself.
 
 Lei Xing (00:53)
 Hey
 
 good morning, Lei. It's midnight, but also good morning from Beijing. this is your co-host, former chief editor of China Auto Review. and this is episode 256, a special midnight edition, noon Eastern edition. Tesla is in the headlines.
 
 a major potential blockbuster move.
 
 Happening or not.
 
 Tu Le (01:15)
 Well, he denied it.
 
 Lei Xing (01:16)
 believe it or not, there's actually three things that happened for Tesla this week, very important things, So the 10 millionth Tesla was produced, and then Tesla just pushed out a major OTA in China to the customers now with Doubao large model voice kind of like Grok, but now available for the Chinese market. And then
 
 Tu Le (01:38)
 Dobao
 
 is Byte Dance's AI model.
 
 Lei Xing (01:40)
 Byte Dance's right. And then
 
 I think earlier last night, US time, this Wall Street Journal article article breaking out
 
 the potential possibility that Tesla has to either sell, spin off, or close down the China business?
 
 Tu Le (01:58)
 What do you think?
 
 Lei Xing (01:59)
 Take it away. I mean is that even possible? Well everything's on the table, Or not?
 
 Tu Le (02:03)
 Well, there are certain requirements that are likely part of
 
 Lei Xing (02:08)
 Well, first of all, w
 
 what what is behind this? And tell us, you know, why why is this even considered?
 
 Tu Le (02:14)
 Well, at the end of the day, you know, conceptually, it seems like Elon wants to get out of the car selling business, car manufacturing business, number one. Number two, SpaceX, from the Wall Street Journal article, he wants to roll Tesla into SpaceX. And that means that there are certain restrictions that SpaceX, if you're going to sell to the government, need to be adhered to. One of those restrictions is going to be not
 
 selling or not having business in China. And I think that is what could be driving some of this. but I also look at this as a smokescreen a little bit Lei, and and these are my initial thoughts, initial reactions. Cause I had actually heard that right after the SpaceX IPO that Tesla was
 
 not long for Shanghai Giga Factory. And I was like, I don't know how that would work. And so I just kind of left it at that. But we should look at the totality. Over the last few years, Tesla has done pretty well. There's about a million units of capacity, give or take. So let's say between one and one point two million units. And if we're looking at an 80% capacity utilization rate, that's 900,000, 800,000 units that need to be shipped every year.
 
 Which means that either they're going to be domestically consumed or they're going to be a combination of domestic consumption and export. So if we're not looking at 75, 80,000 units a month consistently, then they're underutilizing that factory. And we also know that the Shanghai government has qualifiers in order for Elon to have such a sweetheart deal, they have
 
 probably and this is all speculative. I don't know the details of of the contract, but I do know that there are employee requirements, hiring requirements, tax revenues, things like that. So these constraints make it very difficult for Elon to slow down production in Shanghai without severe penalties. And where I see the smokescreen is
 
 Maybe the internal forecast for Tesla in China and the export markets were softening significantly towards the end of this year. And this was leaked in order to create a trial balloon and have Elon and Tesla own that narrative as opposed to being flat footed with somebody leaking it. What do you think?
 
 Lei Xing (04:29)
 So at the bottom of this is basically the potential of the SpaceX and Tesla merger. that sets behind everything of all the reporting. And SpaceX, I believe, have about 20% of the business from the US government. and if the two entities merge, then there's conflict of of interest. So that's
 
 the sure.
 
 Tu Le (04:48)
 And let's be clear, SpaceX wants more. SpaceX wants a lot more from the US government.
 
 Lei Xing (04:52)
 And then
 
 Let's give some context of how China is so important for Tesla. Tesla is the first automaker to get 100% to invest in a manufacturing autos in China 100% owned. So a WOFE, in the first half of 2026, shipment out of
 
 Giga Shanghai was 468,000 out of the 830,000 global deliveries that Tesla reported. So it's roughly half. And then out of those half, the 468,000 I think like 200 so a little bit less than half were exported.
 
 And there's more than two million Tesla owners, customers in the Chinese market.
 
 the prospect of
 
 Tesla saying bye-bye at this point, to me, is if Tesla is willing to give all of this up, to me is impossible. I can't see that happening. especially they just push out this Doubao, right? To to add to the features of this vehicle. But on the other hand, this this potential
 
 Tu Le (05:56)
 I I I I'm gonna say this, Leigh.
 
 Lei Xing (05:59)
 merger.
 
 No, I was just gonna say, but this potential merger Tesla and SpaceX, I don't think it's out of the
 
 Tu Le (06:05)
 this is not good. There's a delay.
 
 Lei Xing (06:06)
 blue
 
 Tu Le (06:06)
 If we're looking at
 
 if this is real and they're considering getting out of the China market, that indicates to me as well that maybe they don't have a ton of confidence that full FSD is going to make it into China.
 
 Lei Xing (06:20)
 Well we're all yeah.
 
 Tu Le (06:20)
 Because if Tesla's one
 
 and a half trillion dollar valuation is based on AI, cybercabs and FSD being ubiquitous around the world, then China is a key component of that.
 
 Lei Xing (06:34)
 Well what I was saying is without China there's no Tesla of today.
 
 So that's why it makes it really jarring to think even the possibility that Tesla will sell this to a potential entity. Who would it be? Who would take over?
 
 Tu Le (06:47)
 Well that in and of itself is
 
 regardless of if it's Tesla, a million units in a market that already has a ton of overcapacity that many manufacturers are having challenges managing is really, really gonna be hard for them to find a suitor that will pay a premium for that.
 
 Because if you think about it, GM and Volkswagen, they're shedding capacity in China. They're not adding capacity, they're shedding it. SAIC happens to be both of their partners. Begrudgingly, SAIC has agreed to shedding some of that. But we know that the SOEs are likely over capacity.
 
 The FAWs, the Chang'ans, and things like that. Because if you look at SAIC in and of itself, the EV brands that they sell in China, IM Motors, there's one or two other ones. we only see them in Shanghai. We barely see them anywhere else. And so those vehicles and those products struggle to sell in China.
 
 You would think that there would be maybe one or two people that would be curious about buying a million units of capacity in China, but I don't know
 
 if you're able to sell at a premium and how much of a haircut are you willing to take on getting rid of that million units.
 
 Lei Xing (08:07)
 So far, Elon Musk has come out on X, basically denying the news. Grace Tao, their VP for China. she's on Twitter (correction: Weibo) denying the news. Even the Foreign Ministry spokeswoman, Mao Ning, she even kind of commented on this. so at this point, so there's this report and now there's been denial.
 
 That that's where we stand.
 
 Tu Le (08:29)
 one thing that I think is really important to also note, Lei, is that remember years ago I had said that without Tesla, the Chinese EV makers would not be able to support themselves. I actually still think that's the case. Tesla still brings a ton of excitement. Does BYD carry the China market? Does BYD plus Geely plus NIO plus Xpeng?
 
 do those combined brands carry the market? I don't know if they can like Tesla does. And we're talking 600,000 units a year of China sales, but the impact on the China market the Tesla brand has is much more than 600,000 units.
 
 Lei Xing (09:10)
 And the fact that they've been able to help the ship afloat relatively, no major ups and downs, there's a still the power of the brand continuing even to this day.
 
 Tu Le (09:21)
 Just think, three, four years ago, two, three years ago, maybe, there were rumors that they were trying to double capacity in Shanghai, remember that?
 
 Lei Xing (09:29)
 Yes. Yes. But I think they're right at the capacity, right? So 468,000 multiplied by two, it's close to 900,000 it's still pretty good, right? compared to other ones which are running at 30% capacity or less.
 
 Tu Le (09:44)
 Right,
 
 for sure.
 
 But they're trying to create a market.
 
 Lei Xing (09:46)
 I don't know.
 
 Tu Le (09:47)
 They're trying to create a market while they still have that demand, I believe.
 
 Lei Xing (09:52)
 the more immediate thing to look out for is whether the FSD will get some kind of approval in August, which is today is already August, by the way. my time. China in China. Yeah. So it Yeah.
 
 Tu Le (10:05)
 In China technically, yes. by twenty minutes
 
 Lei Xing (10:10)
 If that doesn't happen, then it certainly is gonna be delayed until whenever.
 
 Tu Le (10:14)
 Maybe do you think this was a way of prodding the agency?
 
 Lei Xing (10:18)
 C certainly it can be.
 
 Tu Le (10:19)
 So it's a risky game that Tesla is playing right now.
 
 Lei Xing (10:23)
 It is, but you look at from both sides, right? But the potential merger, what it causes, potential conflict of interest and issues. And the other side is whether you wanna give up in a market basically you've built and and so important to your at least on the E V part of it.
 
 Just to say that I'm gonna exit is tough.
 
 Tu Le (10:44)
 and here's the crazy thing, the cascading effect of
 
 Offloading Shanghai Giga, the next question would be do they close Berlin Giga?
 
 And that seems to me like it would be pretty tough to do because of the laws of the local German laws, but
 
 we we know that the flexibility is created for Tesla by Shanghai Giga and being able to export from
 
 Lei Xing (11:06)
 Or
 
 Tu Le (11:06)
 Shanghai to so many markets.
 
 Lei Xing (11:09)
 And the potential realization that we don't need the EV business at all. It's over. It's history. If we're AI, if we're they have ten million vehicles on the roads, well not yet, they just produce the ten. do they just
 
 Tu Le (11:20)
 Well well I I'm gonna qualify
 
 by saying saying this. We're not willing to invest in the EV market anymore because of all these other things that we have going on. Because Tesla just decided that they didn't want to build or launch new vehicles, new variants, new anything. So that was a
 
 Conscious decision that Tesla made, and they have not paid for it. Model Y is still the best selling EV in the world, kind of thing. And you know, the Model 3 still sells a decent amount for how old it is. And you wonder if they would have continued to invest in R&D and launch new products, how much more powerful and how much more.
 
 in sales they'd have globally, but then you get into Elon having such a polarizing effect on regions in the world where Tesla sells as well.
 
 Lei Xing (12:13)
 It's just a complicated matter, and the different stakeholders for this to even happen, the talks, the discussions, the arrangement that you talked about, Giga Shanghai being it with such a large capacity and some of the requirements. it's gonna take some time before we see the next major update, if you will, on this.
 
 the breaking news are breaking news, but when do they materialize, if at all?
 
 Tu Le (12:40)
 I
 
 think looking at September sales and seeing how much of that let's say eighty, ninety thousand units of production is going to be exported and seeing whether or not model Y sales soften even further and or continued free financing for sales is gonna be a very important indicator of
 
 how desperate they begin to get on wanting to offload Shanghai Giga. Because the Shanghai government, in my opinion, is not going to
 
 Release those requirements from whoever wants to acquire that facility in that capacity.
 
 Lei Xing (13:20)
 later today we'll hear more about the numbers for July that'll come out and see, how much of the domestic sales versus export. I would expect that export will continue to drive sales for many of these brands. Cherys, BYD.
 
 Tu Le (13:33)
 So
 
 when we talk about Tesla specifically, let's look at
 
 Export sales to Japan. Let's just look at Tesla sales in Japan, in South Korea, in Australia, in the UK, in parts of Europe to see who's taking those exports. How much Canada is continuing to take. Because 49,000 units, not a ton, but any little bit will help. And we know that they've aggressively priced the Model 3.
 
 in the Canadian market. So do they take a large percentage of that quota in July July and August? We'll see.
 
 Lei Xing (14:11)
 Yeah,
 
 will have an effect, yes.
 
 Tu Le (14:13)
 Let's
 
 Switch gears and move on to this little event that you went to in Beijing this week with our friend Le Jun. Can you tell us a little bit about it? Where it where was it at? How many people?
 
 Lei Xing (14:22)
 I like it it wasn't you know not yeah. Okay.
 
 Tu Le (14:29)
 International media? Like, what's going on?
 
 Lei Xing (14:33)
 So in retrospect, this is a supposedly a tech launch event, and you want to be able to announce some kind of breakthrough technology, But in retrospect, actually, compared to the first one which they they had in December 2023 revealing the SU7,
 
 Didn't think there was actually that much new tech, so-called new tech being launched, other than reconfigurable seating arrangement. I think that's the biggest selling point of this new SkyNomad series, which is their dedicated extended range platform
 
 Tu Le (15:10)
 Family.
 
 Lei Xing (15:11)
 and the larger SUVs,
 
 it was more of a stand up comedy for Lei Jin interacting with their fans, owners and the press. And more of that than a tech launch. it's typical
 
 Tu Le (15:22)
 Let me stop you there.
 
 Lei Xing (15:23)
 show.
 
 Tu Le (15:24)
 Cause normally these events he announces other things. Was this only the SkyNoma?
 
 Lei Xing (15:30)
 Only the SkyNomad, only the N90 Max and the N70 Max specs. And most importantly, at the very end, pricing.
 
 Which was like people were shouting and wowing and 'cause the N90 Max, a seven seater reconfigurable SUV, 5.285 meters long, three meter flat floor with a two-meter sliding rail. The pre-sale price is just under RMB300,000 And
 
 Tu Le (16:01)
 So less
 
 than fifty thousand US dollars.
 
 Lei Xing (16:03)
 Yeah, so the immediate comments I've heard from people around me, and including some of the employees, is now Li Auto can cry in the bathroom. It's a Chinese
 
 Tu Le (16:14)
 Ha ha ha.
 
 Lei Xing (16:15)
 way of saying that how much this potentially impacts because this is the same size as the Li Auto L9, which is
 
 RMB500,000 around there.
 
 Tu Le (16:26)
 Which is the same size as a Chevy Tahoe.
 
 Lei Xing (16:29)
 Roughly, right? 5.285 meter long. I don't know how long the Tahoe is, but it's big. and then the little brother, the N70, which is a large five seater, is RMB259,900.
 
 Tu Le (16:42)
 That's L6, L7.
 
 Lei Xing (16:43)
 Yeah, L6. Now the new L6 that just launched has just one price, which is RMB249,900.
 
 So these are pre-sale prices, by the way. the N90 will launch in early September and start deliveries. The launch price I expect it to be probably RMB10,000 to 20,000 lower than the pre sale price. So we're looking at RMB280,000 possibly for this thing.
 
 Tu Le (17:10)
 And when we're talking EREVs, everyone, we're talking battery packs that are still as big as normal electric vehicles or BEVs. talking
 
 seventy something kWh. So these are not small batteries.
 
 Lei Xing (17:20)
 Lei Jun put yeah.
 
 Lei Jun put a 76-kWh that's a NCM battery on the N90, coupled with a 60L fuel tank, gives a combined range of 1,705 km, the highest on the market. And he was joking about driving the Shanghai to Beijing or Beijing to Shanghai with plenty of room left.
 
 Because it's about a 1,300-km trip and
 
 Tu Le (17:48)
 We've done it.
 
 Lei Xing (17:49)
 then the name of the game is who has the highest, who has the best, who has the top. And and Lei Jun again delivers at the most affordable, lowest price possible.
 
 Tu Le (17:59)
 So
 
 the world is his oyster right now. He'd also announced that I think collectively YU7, SU7 has shipped half a million units now. is is that right?
 
 Lei Xing (18:09)
 it's
 
 the number is more close to three quarters of a million. Because at I think yeah, like around
 
 Tu Le (18:12)
 seven hundred, sorry, seven hundred thousand. That's right.
 
 Lei Xing (18:14)
 700 probably by the end of this month, you know, closest 750,000
 
 Tu Le (18:20)
 just so we're clear, you had mentioned earlier Tesla just celebrated ten million. They've been a company since
 
 Lei Xing (18:25)
 10 million BEVs. BEVs. Right.
 
 Tu Le (18:28)
 they've been a company since 2003.
 
 Lei Xing (18:32)
 Three.
 
 Tu Le (18:32)
 Xiaomi started delivering vehicles in 2023, BEVs only, or 2024, BEVs only,
 
 Lei Xing (18:37)
 2024. Mm-hmm. Mm-hmm.
 
 Tu Le (18:40)
 they're up to 700,000. So we're in a different place in a different time and different environment for BEVs and NEVs, but that 700,000 is probably at least twice as fast as a NIO or an Xpeng or a Li Auto. Okay.
 
 firing
 
 on all cylinders, except that Xiaomi share price tanked after the event.
 
 Lei Xing (19:05)
 Yeah. Well
 
 here's the thing that you just mentioned. I think the keyword you mentioned is different. Everything is different at this point in time compared maybe with six months ago, compared with a year ago, compared with two years ago. So the backdrop being Xiaomi is one of the last, to go into the EREVs, especially these large EREV SUVs, where the market is actually falling.
 
 So coming into this launch and the expected pricing, I've heard a lot of people say if they were to price this thing above RMB300,000 no chance. So I think they came into this with a lot of pressure on really pricing it to a point where you're in a market, a segment that's actually falling, growth is falling. So what do you do? Then you have to
 
 play with the pricing, I guess. And that's the pressure and maybe you
 
 Tu Le (19:55)
 It it what's really important to to to point out, Lei, is that
 
 Lei Xing (19:59)
 know
 
 Tu Le (20:00)
 What what's really important to point out is that the North American market, the US market, is just getting into EREVs or REEVs, what people will call them. And
 
 Lei Xing (20:10)
 I I think the EREVs
 
 will take off in the US soon.
 
 Tu Le (20:15)
 but it's kind of a bizarre world where the rest of the world is really, really focused on BEVs, and you're gonna start to see Europe also likely focused a little bit more on BEVs because before the EU had put tariffs on BEVs into Europe. Now they're going to also put
 
 Tariffs on EREVs and PHEVs. And so BYD had a small window to shove a bunch of PHEVs into the European market. And that's what they did. But I think you're gonna start to see more BEV sales in Europe as that tariff hits. And then in the United States, the Dodge Ram truck is going to be a REEV, the F 150 is going to be a REEV.
 
 Or a hybrid, a a REEV. So we have this bizarre world where it's not in vogue anywhere seemingly except the United States.
 
 Lei Xing (21:13)
 Yeah.
 
 But also Xiaomi had this program earlier this week. again checking out the factory. actually went into the Xiaomi customization lab, which they opened I think sometime late last year. kind of like the Mercedes Manufaktur or the Porsche individualization.
 
 Where you can, have your own colors, materials, trims, and then the factory visit. the factory visit is always interesting. It's my second time the jarring thing is it's the orderliness and the cleanliness of the body shop that we visited. And the golf cart carrying people have to navigate a sea of AGVs.
 
 I don't see it maybe at the NIO F2, but
 
 I haven't seen that much of automation elsewhere, basically. and this is a five year old EV business that Xiaomi has.
 
 Tu Le (22:04)
 I you raise a great point, Lei.
 
 Lei Xing (22:04)
 So I think yeah.
 
 Tu Le (22:06)
 because it's only five years old, they pulled the latest technology where a lot of other factories in China, there's existing technology that would need to be upgraded. So maybe that's where it's a slower burn. You know, F2 is newer, but NIO Factory is pretty old now relative to the Xiaomi factory.
 
 Lei Xing (22:24)
 if you look at the development time, the project started in early 2023. So they did go through two winters and two summers of testing. Three and a half years. they put in 566 vehicles into testing and a lot of people are feeling this time of entry is a bit late.
 
 Hence I think it may
 
 Tu Le (22:43)
 Well
 
 Lei Xing (22:43)
 be some reservation on the stock price. I don't know. there's a sense of
 
 Tu Le (22:47)
 And that's what's that yeah, that's
 
 I think that's one of the things that took gave the stock price a hit. I also think that the reconfiguration or the configurability of the it's kind of a more of a marketing thing, I believe, than an actual innovation that other companies
 
 Lei Xing (23:03)
 it's a part
 
 Tu Le (23:04)
 will use it and take it and and try to incorporate
 
 Lei Xing (23:07)
 Sure.
 
 Tu Le (23:08)
 it into their vehicles. But I don't think it's like this game changing thing.
 
 Lei Xing (23:12)
 No. No, I think that
 
 Tu Le (23:12)
 I think people
 
 were waiting to make for Xiaomi and Lei Jun to make some huge announcement or something like that. And it didn't happen.
 
 Lei Xing (23:20)
 I think it's
 
 more of a product feature innovation rather than a tech innovation because we've seen suppliers, ZEEKR MIX. There's some other ones that already offer this type of rotating seats. and then you have to think about the quality of these long rails, which are provided by Yan Feng, by the way. The electric power sliding rails. and then these other ones providing the seats. I think the seat frame is FORVIA.
 
 And then Adient and Lear provides the seats, I think. still it's international supplier.
 
 Tu Le (23:46)
 The thing that's important to underst
 
 what's also very important is that people that are sitting backwards will have to get used to it. does that make them queasy? some people will need to adjust. So is that going to be a feature that's used or is
 
 Lei Xing (24:01)
 Well
 
 Tu Le (24:01)
 it a feature that people like to say they have, but it never gets used?
 
 Lei Xing (24:05)
 What
 
 yeah, well everything this is only works in a park mode. You can't do a smoving. Yes, so you know, we gotta stress that, but
 
 Tu Le (24:12)
 is that right? Okay. No no I'm saying but you can you can
 
 you can turn the seat around and then drive, correct? Or okay.
 
 Lei Xing (24:20)
 No, no, no. I we actually w I
 
 asked Xiaomi about this. No. you're not able to drive, let's say I'm facing forward and you're sitting in the passenger seat you're facing back. No, that's that's not gonna happen.
 
 Tu Le (24:34)
 it's actually much more limited than I
 
 Lei Xing (24:34)
 stationary. It's parking.
 
 Tu Le (24:36)
 thought.
 
 Lei Xing (24:37)
 Yes. Yes. No, but I was gonna say the funny one of the funny moments is Lei Jin was showing this picture of a family with the door opened 90 degrees, which is one of the features that the second row doors. And he's saying, Well, this picture is of these families sitting in the car.
 
 on the sand next to the sea and he's like, We want the sea breathe to come through all the way because the door is open 90 degrees. One of the things that cracks you up.
 
 Tu Le (25:07)
 So does
 
 it open and slide?
 
 Or it only opens.
 
 Lei Xing (25:10)
 what do you mean?
 
 Tu Le (25:11)
 Does it slide? Because 90 degrees that means that you would have
 
 Lei Xing (25:14)
 No, no, no. It's
 
 only o open. There's no sliding doors.
 
 Tu Le (25:17)
 Okay.
 
 Okay. 'Cause you would need obviously to not be parking next to anyone, so
 
 Lei Xing (25:20)
 Because yeah, it it is a
 
 2-2-3 setting. And then two things they showed is typical Lei Jun style is doing this tire double tire blowout test at 160 km/h with seven people in the vehicle and their CTO behind the wheel. And once that's done we saw that right
 
 Tu Le (25:42)
 Yeah, I I saw that video. I thought that was a pretty good flex. I thought it was pretty big
 
 flex.
 
 Lei Xing (25:47)
 And then when the car went on the stage, they had seven people come out and then with seven luggages, 20 inch luggages, in the trunk come out and then one of the guys was like 6'6" or something. showman.
 
 Tu Le (26:01)
 Well, remember the LA Auto
 
 Show when the Gravity was unveiled, they had put in all those
 
 Lei Xing (26:06)
 Yeah.
 
 Tu Le (26:06)
 suitcases as well. So
 
 Lei Xing (26:09)
 But I think
 
 I don't know, I think this thing puts the Gravity to shame, to say the least.
 
 Tu Le (26:14)
 What are your reflections?
 
 No
 
 no no was there a lot of Guoji Meiti ma? (global media)
 
 Lei Xing (26:17)
 Yeah, well there's the usual suspects who's based in China.
 
 Tu Le (26:21)
 But not flown in.
 
 Lei Xing (26:22)
 No, no, no. I don't think there was any flown in. Just a local there's a few German media saw and
 
 mostly fans, owners, Chinese media,
 
 Tu Le (26:35)
 So it's like NIO.
 
 Lei Xing (26:36)
 Yeah, and actually the auditorium they used at the Changping campus was smaller than the Xpeng event. I think it was
 
 Tu Le (26:43)
 Mm-hmm.
 
 Lei Xing (26:44)
 probably a few hundred people. Not a thousand, I don't think. So relatively smaller. There's three different
 
 Tu Le (26:50)
 So
 
 Lei Xing (26:50)
 floors of the auditorium. So we were sitting on the second.
 
 Tu Le (26:54)
 Do you get the impression that SkyNomad is like a MONA? Like a sub brand?
 
 Lei Xing (27:00)
 It's a series because it's still got I think similar. I think similar because it's
 
 Tu Le (27:02)
 Like a dynasty? Okay.
 
 Lei Xing (27:04)
 still got the Xiaomi badge. it's a series dedicated to the EREVs.
 
 Tu Le (27:09)
 Well he had emphasized that the YU7 SU7 was the driver series and then the SkyNomad family car, family series.
 
 Lei Xing (27:13)
 driver's car and this is the more to to w yeah, family, yeah.
 
 Tu Le (27:19)
 So the other thing that I wanted to talk to you about was I heard you're driving a new car.
 
 Lei Xing (27:25)
 So
 
 It's
 
 Tu Le (27:27)
 zen me yang? (how is it?!)
 
 Lei Xing (27:28)
 the last few I'll be leaving in less than two weeks. So I try to get as much hands on as much different variety of vehicles and there's hundreds and thousands of them that obviously I can't do everything, but this is a unique case because the four letter AUDI E7X after having it for last couple of days.
 
 I'm very impressed with it actually. in terms of the Momenta R6 ADAS, it's offering the typical German Audi kind of feel, but with the Chinesification of the smartification, I think it's well done. The only issue is the pricing. I think everything else is awesome. the ADAS is not
 
 So much worse than VLA or other ones.
 
 it is the best of both worlds. I think Audi did a good job, but branding wise, I'm not sure. And especially now, they're actually going in deeper because at the April Beijing Auto Show, they announced this technology center in Shanghai, which will take more of the development work for four new models coming. So there's one more model on this current platform and then four new coming, I think.
 
 2028ish sales, it's been okay. a few thousand better than Mercedes, I'll say that.
 
 Tu Le (28:41)
 No, it's it's it's not doing well. It's not doing well.
 
 Lei Xing (28:47)
 Well
 
 Tu Le (28:48)
 so yeah. So
 
 well you also saw that BMW announced that they're
 
 Lei Xing (28:52)
 I think it's well done. I think it's well done, but
 
 Tu Le (28:54)
 They're trying to lay off 8,000 workers, which is right around 5% of their staff. So
 
 Lei Xing (28:59)
 Yeah. it's solid.
 
 Tu Le (29:00)
 I think if you go to
 
 Lei Xing (29:00)
 You you can you can tell
 
 you can tell that Audi tried hard to to be what the Chinese smart EVs are. And it is.
 
 Tu Le (29:08)
 Yeah, it's just it's hard when you lost so much momentum and
 
 It it seems like a desperate move to create another brand. I don't know. I'll be honest with you. Maybe I should try to find out. I can ask around. I don't know if Audi Four Rings Audi and AUDI Audi share anything.
 
 Lei Xing (29:30)
 So
 
 that's the other complicated thing is about there's three different joint ventures for Audi in China. And that technology center
 
 Tu Le (29:36)
 Yeah.
 
 Lei Xing (29:37)
 coming up is gonna be the fourth one. So they have the North Joint Venture, they have SAIC Audi, which is this one, they have the two North ones. There's the FAW Volkswagen, there's the Audi FAW NEV.
 
 but they're committed. I'm speaking to their people it seems that they're committed, at least on this fall level. Next couple of years. Next couple of years.
 
 Tu Le (29:53)
 I I I don't know how you move faster
 
 by I don't know how you move faster by creating more bureaucracy.
 
 Lei Xing (30:02)
 Yeah. but the car itself
 
 Tu Le (30:03)
 So
 
 Lei Xing (30:03)
 is nicely done. I I appreciate it.
 
 Especially the assisted driving part of it. I'm pleasantly surprised that it's quite good.
 
 Tu Le (30:09)
 And
 
 not to be outdone by its AUDI brother, the four rings launched the Q9. So which is for the US market. So the which is for the US. Yeah,
 
 Lei Xing (30:20)
 There has to be a nine series. There has to be a nine series somewhere.
 
 Tu Le (30:25)
 I'm sure they're gonna try to sell it in China too, but it's a $90,000 large SUV.
 
 Little bit smaller than a Tahoe, but I don't know if that $90,000 was announced pre-tariff or post tariff because it's gonna be built in I wanna say Bratislava, where a lot of luxury vehicles. I think the Macan
 
 Lei Xing (30:41)
 Mm-hmm.
 
 Tu Le (30:44)
 and the cayenne are built, in the Bratislava, but
 
 I just feel like they're not simplifying and they're continuing to do the only thing that they know how to do, continue to complicate things, continue to add layers in
 
 Lei Xing (31:01)
 I mean
 
 Tu Le (31:02)
 muddy waters when they need to be crystal clear, laser focused, and have sprinter speed with.
 
 how these changes are going to happen because my concern for them is that you can get rid of a hundred thousand people and still have the wrong strategy. Just because you get rid of 20% of your staff doesn't mean that automatically things are going to be different.
 
 Lei Xing (31:25)
 So actually interesting, Volkswagen Group and Audi has almost the exact same setup in China. So Volkswagen Group has three joint ventures plus the VCTC in Hefei. And then Audi has three joint ventures plus the upcoming tech center in Shanghai.
 
 And then Volkswagen
 
 Tu Le (31:44)
 Yeah. It
 
 Lei Xing (31:45)
 group with Xpeng with Horizon robotics.
 
 Tu Le (31:48)
 So
 
 I learned, Lei, and you will smile when I say this is hen fuza, like very, very complicated. So
 
 Lei Xing (31:59)
 But I mean earlier earlier
 
 this week we've heard the Germans reporting financial figures for Q2 and first half. And I think there's a mixed bag.
 
 Tu Le (32:09)
 Silver lining for Porsche.
 
 Lei Xing (32:10)
 Porsche. right. I was exactly going over there, not selling in China, but their profit went up by how much? Or return on sales? Something like that.
 
 Tu Le (32:18)
 Tw yeah, yeah. their operating profit is or something like that. Selling more nine elevens.
 
 Lei Xing (32:25)
 Other ones are still under pressure. and then you mentioned about Oliver Blume, right? His comments went so far as to for the Volkswagen group to put out a statement on his stance toward the EU tariffs on PHEVs
 
 Tu Le (32:41)
 Yes.
 
 Lei Xing (32:41)
 earlier this week.
 
 Tu Le (32:42)
 Which likely surprised
 
 Lei Xing (32:43)
 Is it? It was actually Volkswagen Group
 
 China that shared that statement first to the local media.
 
 Tu Le (32:49)
 Yeah, so that likely surprised some folks. Yeah,
 
 Lei Xing (32:51)
 Because I think it's part of partly damage co control. Yeah.
 
 Tu Le (32:55)
 surprised some folks in China.
 
 And then the last thing I want I want to just mention is that GM and Ford GM is doing really well with their latest quarter selling more trucks. Now this
 
 Lei Xing (33:06)
 Getting visit from Trump.
 
 Tu Le (33:07)
 yeah, and then Jim Farley had an internal town hall and said that Chinese vehicles are likely going to enter the United States within the next five to ten years.
 
 I don't know what it's going to take for the US automakers, especially if they continue to print money selling trucks and SUVs, large trucks and SUVs. again, still my concern is can they disrupt themselves while they're making so much money? I don't know. why don't we do this? I don't think there's a ton of comments, but let me check.
 
 MB617. What is the reason NIO doesn't ship ES8 ES9 and the latest generation of the others outside of China? Here in the UAE, they don't sell as they anticipate because most buyers want the main big SUVs.
 
 Lei Xing (33:54)
 The answer is simple.
 
 One word will answer this question. Profitability. full year profitability. So their export, I think Europe certainly is on what's called strategic pause. And their overseas exports, I don't think at this point matters that much in the short term. And if you look at why the reason they moved NIO Day to December, is because they want to focus on sell, sell, sell. They don't want any distractions.
 
 Otherwise it should have been held in September, based on last two years.
 
 They don't have any new products come out remaining of the year.
 
 Tu Le (34:27)
 I'd also remind everyone that if they sell in large volume or try to sell in large volume, they need to make sure that the foundation of swapping stations is already in place. otherwise consumers could be very, very disappointed, not in the product, but in the service, the capability or the ability to battery swap. So 'cause they lean so heavily on that feature.
 
 SSJJ0055 to be honest the new Xiaomi SkyNomad doesn't look as good as the YU7 and SU7. So I don't know why they suddenly decided to go for an original design.
 
 Lei Xing (35:01)
 I probably half agree, half not agree. the positionings are different. BEVs, EREVs, large SUVs, sedans, kind of sporty performance, driver's car versus a family hauler, trip, you know, that type of thing. they actually made it different.
 
 separated the designs. and then very controversial, Because of the rear taillight looking like some other brand's vehicle.
 
 Tu Le (35:25)
 Yeah, the rear end looks looks a little ZEEKRish. I I'm gonna put it much more simply. You like the SU7 than the YU7 because the SU7 looks like a Taycan and the YU7 looks like a Purosangue I'm being sarcastic, but not really. SPX Nomad. Go ahead.
 
 Lei Xing (35:42)
 But yeah.
 
 it's the next Land Rover, the Yizhuang Land Rover, Range Rover. I joked.
 
 Tu Le (35:52)
 rumors of Tesla thinking selling Shanghai factory. Who will be prime bidders? My guess is Xiaomi and SkyNomad Auto. If true, will
 
 Lei Xing (35:59)
 Yeah.
 
 Tu Le (36:00)
 this catapult Xiaomi to global cross-industry juggernaut status? Also, the Xiaomi
 
 Lei Xing (36:05)
 Yeah.
 
 Tu Le (36:06)
 invest in battery swap operator. Adding to EV ecosystem news. How much does this validate the business case for BaaS model?
 
 Lei Xing (36:15)
 Again, I don't think it has to be a zero sum. and I don't think anybody has to validate anything. The NIO is gonna go with their battery swap which I think works for them. it's a nice strategy. others doing other ways, I think they're fine. I just don't see conflict. That it has to be
 
 Tu Le (36:34)
 I'm gonna quickly answer the Tesla question and we can move on, Lei. I think there's gonna be, unless you want to add anything, there's
 
 Lei Xing (36:39)
 Mm-hmm.
 
 Tu Le (36:40)
 gonna be limited suitors. I don't believe Xiaomi will want to add a million units of capacity, because there will be way too much pressure for them to sell that volume in a short period of time. And I'm not sure they're ready for that level of pressure. we've already seen that.
 
 the SkyNomad N70 and N90 disappointed shareholders. So unless two or three more products are runaway successes in the next twelve, eighteen months, there would be no reason for Xiaomi to add a million units of capacity.
 
 Lei Xing (37:13)
 they probably sooner they will have to look at capacity outside of China than in China. Because their next biggest
 
 Tu Le (37:19)
 Yeah. Agreed.
 
 Lei Xing (37:21)
 thing that they're doing is launching Europe next year.
 
 Tu Le (37:24)
 Yep. SSJ J again NIO cannot run a profitable business overseas. Please correct me, Lei, and Tu, but unlike in China, where Weineng serves as a dedicated battery asset management partner, NIO's overseas business requires the company to carry battery assets on its own balance sheet. This creates a significant financial burden
 
 And constrains the scale at which NIO can expand internationally compared to its domestic operations. In China, for customers who purchase vehicles under the BaaS model, NIO collects the vehicle body priced directly from the customer and recovers the battery price by selling the battery pack to Weineng. As a result, NIO is able to recognize revenue equivalent to the full vehicle price, including the battery. Meanwhile, customers benefit from wow, this is a lot.
 
 to purchase price by excluding the battery. I'm not gonna read everything. the three party structure creates mutually beneficial and also worth noting that NIO and CATL are Weineng's largest shareholders.
 
 I'd mentioned that NIO was gonna have problems finding a third party to carry the batteries on its balance sheet outside of China. I'd written that in the newsletter and we always have to remember NIO wants to emphasize battery as a service in China. They don't need to do that outside of China, because you can charge that vehicle, okay?
 
 And if I were them, Xpeng and BYD have announced they're gonna invest billions of dollars or billions of euros to build charging infrastructure. Piggyback off of that. If you want a quick way without battery swapping, because it's not an OR, it's it's not battery swapping or charging, it's and so in Europe, in the Middle East, maybe they lean into the charging part of it rather than the battery swapping part.
 
 Lei Xing (39:07)
 So NIO officially launched in Europe in 2022, I believe, They had a Berlin event. And since then it's been kind of roller coaster and now it's on strategic pause. So the next thing that they will have to do is a lot of it is because of this high upfront cost and investment into this direct sales model. and the vehicles themselves, to be honest,
 
 having to deal with Audi naming conventions. That takes, efforts and cost, if not cost.
 
 They're expensive, some of the vehicles. I don't know whether they're competitive against some of the other existing local European ones. but at a certain point they will have to rethink about what type of channel strategy distribution back into the European market. and that's not the time right now.
 
 Because they want to focus on selling, selling and being profitable.
 
 Tu Le (39:57)
 It takes discipline for NIO to not feel FOMO. I'm sure they're feeling FOMO, but that's discipline for them to not react. And they just kind of sort of figured out pricing in China for the ES8. So assume that it would take them a little time to find the right pricing model. And then that would also depend on if you're in Europe, how much is ZEEKR pricing at? How much is BYD pricing the Tang at?
 
 There's all these other things going on. Cause let's assume that the Chinese premium brands are going to always price below BMW, Mercedes, Audi in the European market. They still can't be more than their domestic peers as they ship and build in Europe. So building a solid foundation in the China market will create more flexibility for them elsewhere.
 
 Tom H, NEVs are projected to get 64.5% of the China market this month. What's the floor for ICE in China going forward?
 
 Lei Xing (40:56)
 So I think I mentioned the 70:30 rule, which is rapidly approaching. the ICEs, Li Bin said 90%, and then someone recently said 80% before the end of this decade.
 
 So you can kind of guesstimate. and the way it's going that it's gonna be faster than anybody predicts.
 
 Tu Le (41:15)
 We always have to also think about behind the scenes what's going on because all of the oil companies in China are state-owned, and so they're not gonna want to see adoption so high and ICE vehicles go away so quickly, and there's gonna be some political wrangling going on behind the scenes, number one, number two.
 
 if they get rid of so many ICE vehicles over the next few years, people have talked about eighty, eighty percent, ninety percent, that's fine, but we've already shed seven million units. That means factories either need to be retrofit or they need to be closed. And we know that electric vehicles take less people to build. So how does China and the Chinese government reconcile that delta?
 
 If we have 30 million units of capacity, 50 million units of capacity for ICE vehicles, we need X number of employees up and down the supply chain. If we have the same capacity, but for EVs, is there a delta minus on the number of employees needed? And what's going to happen with that minus employee number? What are they going to do with those people?
 
 The
 
 central government thinks about this, but it's the provincial governments, the local governments that have to deal with the secondary and tertiary effects of this mass transition over to EVs. So to just kind of giving more background, at least how I understand it, than answering your question. But I hope that also lets you think through that, okay, it's not as easy as
 
 flipping this switch, although some companies would want to do that. Other companies invested interests would rather see a gradual increase in adoption.
 
 Lei Xing (42:56)
 What we can be sure is the ICEVs are not coming back. And what
 
 Tu Le (43:01)
 They're not.
 
 Lei Xing (43:01)
 is the realistic domestic consumption threshold in terms of how many NEVs are sold per year in China? What is a realistic? That number may go down. Which means given the recent
 
 We mentioned last episode how many models were launched in the first half? Five hundred, six hundred models. I think the time is ripe for
 
 the Chinese auto industry is at a point turning point where
 
 There's needs to be this
 
 I don't know what the English is for for, but this description of where you have to scrape the meat off the bones type of repair, if you will, Because it's too involuted.
 
 of pricing competition, product iteration. every single day there's multiple products launching.
 
 And then the exports.
 
 Tu Le (43:49)
 Here's the other thing that is really important when we think about
 
 this. Because if we see EV adoption move towards 80, 90% over the next couple of years, what you're gonna see is the Chinese OEMs that are still building ICEs try to jam them into Latin America, Southeast Asia, Africa, emerging markets. They're gonna try to export that rather than close those factories. So that's gonna create alarm bells and
 
 Assume that these emerging markets, South Asia, Southeast Asia, Latin America, and Africa, will need ICE vehicles for the foreseeable future due to grid restrictions or constraints, due to investment or investment constraints, not being able to build more chargers, not being able to accommodate more NEVs. So there's those knock-on effects.
 
 To see if we're at 80-90% take rate in China, I bet you a ton of capacity gets dumped into Russia. So ICE capacity. So that's my thoughts. Anyways, that's all I have, it's late for you, so let's just end it here.
 
 everyone else, good morning, good afternoon, good evening. We will talk with you all next week.
 
 Lei Xing (45:00)
 Same here, likewise.