Always a pleasure reading your posts Tu Le. Perhaps the problem with Nio is that its vehicles are a hodge podge of different sizes, which fit different end user preferences/needs (this strategy works if you're the lowest-cost player like BYD), whereas the other successful small EV startups have a distinctive focus (Li Auto with family SUVs, Xiaomi with the image of being young people's first Porsche) that allows them to stand out. Do you agree with this analysis & what do you think Nio has to do to achieve consistent sales growth?
Hi Ran Bi, great observations and yes, I think NIO may have too many products that have a decent amount of overlap. It's tough to judge whether they are making any real progress, but in China at least the swapping is a difference-maker. If they cut some products and really try to carve out positioning in China, I think they could do really well.
Li Auto makes great SUVs - full stop. And they are completely focused on the China markeet so I think that's a big reason they are successful. I visited them two weeks ago and will share more of my thoughts on LI in a post soon. As for Xiaomi - brand is strong in China. Lei Jun is the closest thing China has to Elon. Young Chinese consumers gravitate to him. Can Xiaomi be more than a one trick pony? We will see before the end of this year...
I think this is a good take on the tariffs and the likely lack of effect it will have on Detroit's competitiveness.
I think US industrial policy should have more of a focus on building globally competitive companies if not global leaders in key industries.
These tariffs are unlikely to help US companies overtake CATL, BYD, Longi, etc in respective industries. Tesla has a hail mary with AVs (though China's EV market size means more data for training better AV models). No battery maker in the US will touch CATL or BYD in lithium ion batteries until they face the Innovator's Dilemma - i.e. via a significant tech paradigm shift that catches them off guard. Similarly for Chinese solar cell / module OEMs like Jinko and Longi.
This export focus is why every leading industrial nation historically has been, well the leader. Britain with textiles, then the US thanks to Hamilton's Report on Manufactures and tech transfers from Britain (some legal/some less so https://www.history.com/news/industrial-revolution-spies-europe). US's later dominance in oil and auto exports, and hence the ability to build the arsenal of democracy in WW2. Japan and Korea caught up in the latter, and now China is surging ahead.
Exporting and global competitiveness is the true marker, not protecting domestic industries that will serve the relatively small (and shrinking) US market vs the growing international market.
1. America is very good at being protectionist. (So much for "land of the free!") We've had a 25% tariff on imported pickup trucks since 1964! And "punishing China" is one of the few issues that unites Republicans and Democrats here. Further, from the average American's point of view "it costs nothing." NOT being able to buy a cheaper EV TOMORROW doesn't hit the wallet the way paying more for eggs TODAY does. (Notice I am not endorsing the tariffs, just throwing in some more info.)
2. Yes the Chinese market is larger in units than the US market. And will get even bigger! But my friends at Bernstein tell me the ATP in China is something like $17,500, and in the USA is is something like $45,000. That makes China new-car revenue some $525 billion and US new-car revenue some $700 billion. I don't doubt that China revenue will pass US revenue some day, but for now the US market is larger in currency terms. I have always wondered why automotive measures success in units, not revenue. By doing that we assume a Maybach is a Mazda is a Maruti. Walmart never announces "We sold 4 billion pairs of socks last year" -- but that is what auto does! (grin) Glenn Mercer at Car Charts glennmercer.substack.com
One More Thing re the punitive EV tariffs. On the question of "What could American OEMs do in response?" One response which has not been talked about much is the one THEY HAVE DONE TWICE BEFORE! When the Japanese and then the Koreans showed up with good-quality low-cost (GQLC) cars, the Detroit Three indeed tried to make their GQLCs: remember Vega, Pinto, Gremlin, Saturn, etc.? Didn't work out so well so they turned to JVs: Ford/Mazda, GM/Suzuki, Chrysler/Mitsubishi and then GM/Daewoo and Ford/Kia, etc. They brought in badge-engineered Asian cars and sold them under American brands until such time as they could get competitive themselves. Then Ford unwound Mazda, GM unwound Suzuki and bought out the wreckage of Daewoo, etc. Why not do it again? (See Stellantis/Leapmotor) I don't understand why this option is generally ignored at present. Remember Diamond Star Motors, the Illinois Chrysler/Mitsubishi plant? Instead we get mass hysteria along the lines of "Their cars are better we can't match them we're all going to die." Possibly true but not exactly the most helpful advice. It's like telling your kid "You're not the best softball player, so quit the team now, it's hopeless." There are various levers to pull out there. (Another learning from the past: VRAs, as applied to the Japanese. "China, we will reduce the tariffs but replace them with quotas." If BYD e.g. can only sell 20,000 cars in the USA now, they will sell 20,000 EXPENSIVE HIGH-MARGIN cars, relieving the GQLC pressure. This is what birthed Lexus. It may not be good for Detroit in the long run, but buys some breathing room.) I guess my point is automotive competition is not always a zero-sum game....
Always a pleasure reading your posts Tu Le. Perhaps the problem with Nio is that its vehicles are a hodge podge of different sizes, which fit different end user preferences/needs (this strategy works if you're the lowest-cost player like BYD), whereas the other successful small EV startups have a distinctive focus (Li Auto with family SUVs, Xiaomi with the image of being young people's first Porsche) that allows them to stand out. Do you agree with this analysis & what do you think Nio has to do to achieve consistent sales growth?
Hi Ran Bi, great observations and yes, I think NIO may have too many products that have a decent amount of overlap. It's tough to judge whether they are making any real progress, but in China at least the swapping is a difference-maker. If they cut some products and really try to carve out positioning in China, I think they could do really well.
Li Auto makes great SUVs - full stop. And they are completely focused on the China markeet so I think that's a big reason they are successful. I visited them two weeks ago and will share more of my thoughts on LI in a post soon. As for Xiaomi - brand is strong in China. Lei Jun is the closest thing China has to Elon. Young Chinese consumers gravitate to him. Can Xiaomi be more than a one trick pony? We will see before the end of this year...
I think this is a good take on the tariffs and the likely lack of effect it will have on Detroit's competitiveness.
I think US industrial policy should have more of a focus on building globally competitive companies if not global leaders in key industries.
These tariffs are unlikely to help US companies overtake CATL, BYD, Longi, etc in respective industries. Tesla has a hail mary with AVs (though China's EV market size means more data for training better AV models). No battery maker in the US will touch CATL or BYD in lithium ion batteries until they face the Innovator's Dilemma - i.e. via a significant tech paradigm shift that catches them off guard. Similarly for Chinese solar cell / module OEMs like Jinko and Longi.
This export focus is why every leading industrial nation historically has been, well the leader. Britain with textiles, then the US thanks to Hamilton's Report on Manufactures and tech transfers from Britain (some legal/some less so https://www.history.com/news/industrial-revolution-spies-europe). US's later dominance in oil and auto exports, and hence the ability to build the arsenal of democracy in WW2. Japan and Korea caught up in the latter, and now China is surging ahead.
Exporting and global competitiveness is the true marker, not protecting domestic industries that will serve the relatively small (and shrinking) US market vs the growing international market.
Glad you are back writing on line! Two comments:
1. America is very good at being protectionist. (So much for "land of the free!") We've had a 25% tariff on imported pickup trucks since 1964! And "punishing China" is one of the few issues that unites Republicans and Democrats here. Further, from the average American's point of view "it costs nothing." NOT being able to buy a cheaper EV TOMORROW doesn't hit the wallet the way paying more for eggs TODAY does. (Notice I am not endorsing the tariffs, just throwing in some more info.)
2. Yes the Chinese market is larger in units than the US market. And will get even bigger! But my friends at Bernstein tell me the ATP in China is something like $17,500, and in the USA is is something like $45,000. That makes China new-car revenue some $525 billion and US new-car revenue some $700 billion. I don't doubt that China revenue will pass US revenue some day, but for now the US market is larger in currency terms. I have always wondered why automotive measures success in units, not revenue. By doing that we assume a Maybach is a Mazda is a Maruti. Walmart never announces "We sold 4 billion pairs of socks last year" -- but that is what auto does! (grin) Glenn Mercer at Car Charts glennmercer.substack.com
One More Thing re the punitive EV tariffs. On the question of "What could American OEMs do in response?" One response which has not been talked about much is the one THEY HAVE DONE TWICE BEFORE! When the Japanese and then the Koreans showed up with good-quality low-cost (GQLC) cars, the Detroit Three indeed tried to make their GQLCs: remember Vega, Pinto, Gremlin, Saturn, etc.? Didn't work out so well so they turned to JVs: Ford/Mazda, GM/Suzuki, Chrysler/Mitsubishi and then GM/Daewoo and Ford/Kia, etc. They brought in badge-engineered Asian cars and sold them under American brands until such time as they could get competitive themselves. Then Ford unwound Mazda, GM unwound Suzuki and bought out the wreckage of Daewoo, etc. Why not do it again? (See Stellantis/Leapmotor) I don't understand why this option is generally ignored at present. Remember Diamond Star Motors, the Illinois Chrysler/Mitsubishi plant? Instead we get mass hysteria along the lines of "Their cars are better we can't match them we're all going to die." Possibly true but not exactly the most helpful advice. It's like telling your kid "You're not the best softball player, so quit the team now, it's hopeless." There are various levers to pull out there. (Another learning from the past: VRAs, as applied to the Japanese. "China, we will reduce the tariffs but replace them with quotas." If BYD e.g. can only sell 20,000 cars in the USA now, they will sell 20,000 EXPENSIVE HIGH-MARGIN cars, relieving the GQLC pressure. This is what birthed Lexus. It may not be good for Detroit in the long run, but buys some breathing room.) I guess my point is automotive competition is not always a zero-sum game....