SAI Weekly 21 - 24: EU Tariffs, Elon's Pay, US Charging Challenges

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Just got back to Michigan this AM and spent most of my day yesterday in Sunnyvale, my old apartment about a 10-minute drive away from Plug and Play where they were having their annual Silicon Valley Summit. Always a well-attended event with this year being no different. Weather was beautiful – if not a bit hot. The three-hour time difference ALWAYS has me staying up late while still waking up at 4-5am local time. Not good if you’re trying to get a good night’s rest.

For this trip, I decided to rent an EV, a Kia Niro EV to be exact. It has a 65kWh battery and a range of about 250 miles. Charging hasn’t been that great, which I detail a bit below. I may have to do a fair bit of local travel (local = w/in the US) this year and if I need to rent a car, I’ll try to rent an EV to see the progress being made, if any.

I had to drive from South Bay to SF for a meeting (~55 miles one way) so that one trip took up almost have of my range. The 2^nd day, I stayed pretty local but got stuck in traffic and did drive from San Jose to the Peninsula, back down to Sunnyvale then San Jose which left me with about 80 miles of range. That’s when my range anxiety started to kick in. I downloaded the EVGo and Chargepoint apps and decided to use EVGo because the UX on their app was friendlier.

I found a 350kW L3 DC fast charger but wasn’t getting anywhere close to those speeds. I spent the better part of 1.5 hours getting to an 80% charge at which point it throttles the current even further so the last 20% would’ve taken another 1.5 hours. Why do this? And if you were wondering, there was no charging at my hotel near SJC.

I stayed busy while waiting for the EV to be charged but still, Tesla owners have it SO much easier and better. Tesla Superchargers are going to start to get crowded soon though, if some of these more affordable EVs that have recently launched or will launch soon hit.

One other thing I was able to do, thanks to Jeffrey Johnston (X: @niosanfrancisco) was visit NIO’s new San Jose headquarters. They basically moved around the corner from where they used to be in San Jose. Not a huge office, as you’d expect but a very nice one. It’s in the heart of San Jose a few minutes away from SJC. They had a bunch of M-plated NIO’s lined up for us to take around 880 / 101.

I’ve driven NIOs before (Jeffrey too I think) except for the ET5 which they had a gold-ish / banana yellow ET5 for me to rip around in. Alas, no ET5 Touring. With that said, if reasonably priced in the US, that’s one EV I would have to take a long hard look at. It looks great, the proportions fit much better than on its big brother, the ET7. Team NIO, thanks for letting me spend my afternoon with you!

CHINA EVS & MORE

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As I’d mentioned last week, I have some work travel ahead of me first to CA then to London / Paris.

I’ll be moderating two panels for the MOVE London conference that’ll be held at the ExCel London conference center on June 19^th & 20^th.

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BIGGEST NEWS THIS WEEK

The EU believes similarly to the US – China EV Inc will do severe, perhaps irrevocable damage to a pillar industry for both country / region if left unchecked, so they decided this week to tariff individual companies based on their level of cooperation during the investigation. In summary and in addition to the 10% tariff already in place:

BYD: 17.4%

Geely: 20%

SAIC: 38.1%

Significance of each – BYD gets off with a slap on the wrist.

This is when you mark down the non-win as a win. In addition, there are no additional tariffs for PHEVs another HUGE strength for BYD. My guess is that they begin to ship a ratio of at least 2-3 : 1 PHEVs : BEVs into Europe.

A major concern of PHEV skeptics is that the hybrid never gets used (or plugged in) and they just use the ICE engine. I am not even sure tracking that is on the EU’s radar, but it should be something that is monitored, especially if there are subsidies received by the buyers to purchase these vehicles, but they’re still polluting like normal ICE vehicles.

We should also note that Stellantis will be helping LeapMotor with its EREVs into Europe and likely utilize that same technology for a few of their current European brands, I am thinking the French ones.

With Geely - it’s complicated. Except for MG, which sells a lot of cars in Europe, oops maybe I should write they did sell a lot of vehicles there, Geely is the only other Chinese automaker that has some pretty significant foreign nameplates in its stable of brands.

In a pre-tariff world, that would’ve likely helped them quickly re-connect with European consumers. Lotus, Volvo, Polestar, Smart (with Merc), but right now margins are low for many of these brands since they are all relatively new to the clean energy sector. And except for Volvo, don’t sell in any real volume that would allow them to absorb a 30% tariff and still eke out a decent profit margin. Let’s see how they go about their new reality for Europe.

Zeekr was also well-known to be moving aggressively into Europe and I don’t see that changing, but their pricing certainly will need to.  

SAIC – Is Europe off the table?

With a ~50% tariff, SAIC is probably kicking itself for not being nicer to the EU when they were asked to cooperate. How does ANYONE deal with a hammer that large being dropped on their ambitions? MG is a mass market vehicle that’s already low margin.

I think other SOEs will fall under this higher tariff as well. Companies like Changan who have a couple fairly popular brands in China, firmly believe that those brands could sell well into the European market. Let’s say that SOEs are persona-non-grata in the EU for now.

As for general thoughts, this is what I’d written on LI yesterday and looking at it again, it all still holds:

- A good(-ish) day for BYD …as much as a 20% lift on the price of your product could be considered good.

- As my friend Ed Carson pointed out, doesn't seem to include #PHEVs. If it doesn't, #BYD will ship 2-3:1 ratio of PHEVs : BEVs to 🇪🇺.

- SAIC (and likely other SOEs) are being taxed the most, almost 50%. Is it a coincidence that SAIC is one of the largest exporters of #NEVs to 🇪🇺 not named #Tesla?

- 🇨🇳 EV Inc adjusting their pricing & sales forecast to reflect new reality. Southeast Asia, Africa, 🇲🇽, 🇧🇷 and a few other countries just got moved up on the export priority list. How will they respond?

- What happens to the Dacia Spring and the Volvo Cars /Polestar vehicles?

- 🇫🇷 🇮🇹 luxury goods &🍷🍷🍷 sectors can’t feel good right now.

- The 🇺🇸 & 🇪🇺 both did what they thought they had to do to slow down and protect - more slow down than protect though. Which legacy automakers will not take these gifts for granted look to move faster and make the tough decisions that will lead to doing the work necessary to get viable, affordable, dare I say - desirable products into the market sooner than later.

- Remember to watch up and down the supply chain - any significant hiccup in demand (like huge tariff increases) slows the speeding train down which could also affect batteries, chips - stop me if you think that you've heard this one before...

- What can 🇨🇳 really do when it's economy desperately needs more FDI?

There is talk that the tariffs will pull in plans for China EV Inc to build locally in Europe and I can buy that. But one pressing issue that’s currently been on the world’s minds is the overcapacity in China. I’ve argued that most of the overcapacity is on the ICE side, but EV companies are also starting to build out additional capacity (see NIO going to 1M units).

If they dial down exporting to Europe because in the next three years they’ll have domestic capacity to build locally what is going to happen to the capacity that’s already in excess and likely to get worse in those three years?

If you’re thinking – It’ll go to MX, BR, Southeast Asia, Latin America, Middle East, Africa – Even if you combine all that potential demand in those markets, you’re not going to get the bang for your buck that you would from the US or EU markets. And if it seems like you’re dumping into those markets, those countries will also look to protect their markets.

Brazil has already announced that they’ll raise tariffs on imported EVs to 35% by 2026. This is a bit symbolic because Brazilians aren’t sold on EVs. They were .5 of all vehicles sold last year. Their clean energy of choice? Ethanol powered ICE vehicles. And these vehicles are already very popular with millions of them on Brazilian roads.

Another dimension worth a few lines. The Chinese is not in great shape. The Chinese govt has already said that they would retaliate though. What’s going to happen? There is still a fair amount of uncertainty with the US market because we are about 5 months from electing our next President. Let’s assume that if Biden wins, his administration stays the course and isn’t very friendly to China EV & Battery Inc., then the US market is likely really off limits.

If Trump wins, I could see a scenario where at least 2-3 China EV & Battery Inc investing in the US to build a manufacturing presence there within the next 20-24 months. Trump would roll out the red carpet to this FDI because he’d likely steer it to the southern states where he has supportive people and governors.

But big picture here. After the election either side is going to be able to stretch its legs a bit and be more pragmatic about FDI from China into the US. If Biden is re-elected, he could turn around and support FDI into the states that supported him (which also likely happen to be UAW country, something the Chinese would not welcome).

And if he’s looking to buy the US Three about 2.5-3 years, that’s about how long it would take China EV Inc to set up a factory, set up supply chains and move close to Job #1 – that’s about as close a Win-Win as you’re going to get. If the US Three can’t get their shit together within that timeframe and get out at least 2-3 viable options / company for Americans to choose from, they could become niche within their own home market.

As long as we believe that jobs for Americans outweighs the need to protect the US Three from potentially getting demolished (in Elon’s words).

Finally, let’s talk retaliation. The Chinese govt has already warned that they would slap tariffs on high displacement engine ICE vehicles. ABB still imports most of their top of the line vehicles which provide them with a TON of margin but they do build most of their high runners locally in China with JV partners.

One particular brand that ONLY imports their vehicles? Porsche. They may be the ones that need a hug. Sales were down in China for Porsche by 25% in 2023. It was down about 15% in Q1’24 too. Slapping a huge tariff on their SUVs would be kicking a man when he’s already down.

Will they retaliate? Yes, they already said they would, so they would lose face if they didn’t do anything at all. I don’t think it’ll be too extreme though. Europe is still a HUGE trade partner. The Chinese economy isn’t doing well and they want to convince foreign companies to invest further into China so coming off petty might not be the way to attract more FDI. That’s not to say they wouldn’t.

They wouldn’t need to do anything formally anyway if they want to be seen as staying above the fray. How it could work - If social picked up the ‘anti-China’ sentiment coming from the EU, or however that messaging will be positioned, it could create a boycott like situation for foreign brands in China.

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Elon is getting paid …maybe.

The Tesla shareholders voted that he should receive that $45B pay package. A ridiculous salary package and unprecedented for any CEO. But Elon and his STANs are not normal. Now Elon needs to convince a judge to reinstate the deal. Still no guarantees but a huge hurdle was dealt with this week.

As a capitalist, I believe things and people are worth what people will pay for them. There are enough people that still think Elon is linchpin to Tesla’s success, including institutional investor Ark Invest. How many investment firms can make that those types of endorsements for Elon and / or his wishes without really understand the type of challenges Tesla has in the China market is mindboggling, almost negligent. Ark is completely drinking the FSD kool aid.

What Tesla needs to do to position themselves toward the future is nothing close to what all the legacies need to do just to try to keep up with China EV Inc. The China market is very unforgiving, especially if you’re losing. Elon knows that and knows he needs new product in China if Tesla is going to come close to any future goals Tesla has communicated.

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This weekly newsletter is a collection of articles we feel best reflect the happenings of the week or important trends that have effects on the global automotive and mobility sectors. We also provide a point of view that we hope educates and sparks debate.

The Sino Auto Insights team

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Sino Auto Insights is a Beijing, China-based market research and advisory firm that specializes in assisting companies analyze, strategize, and develop products and services that will shape the future of mobility and transportation.
 
Members of our team have experience working in Detroit, Silicon Valley as well in China across multiple sectors and functions as entrepreneurs as well as working at larger companies like Apple, Google, Amazon, GM and FCA, and many others.