SAI Weekly 23 - 24: VW & Rivian Embrace, Tesla STILL has STANs, On to Paris

Had a great time in London, now sitting in a kitchen in my Paris Airbnb. With the MOVE Conference over, I spent a few days being a tourist and enjoying the glorious London weather which bathed me in sunlight for almost the entire time I was there. I am now sitting in a kitchen in District 9 in Paris – weather still amazing.

I’d said this before, but I definitely miss the city life. I walked almost everywhere while in London and have a feeling the legs will get a pretty good workout here as well. A few anecdotes from my fantastic time in London. There seems to be a willingness there that I don’t see yet in Detroit to embrace technology for mobility. We have to remember that London was the OG was the congestion tax way back in 2003.

I didn’t ride any Lime bikes but I really didn’t have to. Walking suited me just fine after I got used to looking right (and not left) while I crossed the roads. People fall in love with the cities they live in because you feel free. You walk out your door and you’re off. Living in the burbs ties you to a car and a lot of downtime sitting in traffic.

At least in a city, you feel a bit healthier because you’re walking about, getting some sun and feel much more like an explorer as you spend the few minutes checking out new neighborhoods, stores and restaurants you add to your list of things to try.

Something that was definitely disappointing. Eating at DTF or Din Tai Fung in Covent Garden. DTF is one of my favorite places on the planet. It’s one of both my son’s favorites as well. The food just didn’t taste the same. The hot and sour soup didn’t have the depth of flavor that made it an all-timer for me. And for reference, I’ve been to a few different DTFs. The reason you go to a DTF is that it’s consistent and what I really mean is that its consistently good.

Next, I had the chance to talk to Rory, a London black cab driver and what I gleaned from our 40 or so minute conversation was that:

• He’s on his 2^nd electric black cab

• He paid for it using a 5-year loan. That aligns with the cab’s 5 year warranty so when he pays off the cab, he can then trade it in with the value of the trade-in as a down payment on a new cab. Seems like an endless debt cycle for the cab driver but that’s a subject for another day.

• He said the electric black cabs are very expensive, almost like having a mortgage. I didn’t ask him how much the payment was since I wasn’t sure if that would be rude.

• On January 2018, London stopped licensing diesel fueled black cabs which means that by 2033, all cabs in London should be Cabbies have 15 years to convert to clean energy black cabs (from diesel), so the example he gave me was that the cab in front of us was purchased in 2013 and would need to be replaced before 2028. That cab would either be sold at auction to another, smaller city in the UK or scrapped altogether.

• Rory’s cab was actually a hybrid. A ‘poor hybrid’ that he said gets about 50 miles of range, before it needs the petrol generator to kick in. When the aircon is on the battery loses ~20% range and gets only about 40 miles of range.

• He said that it only took him a couple weeks to get used to the touch screen, but said he uses the phone for his mapping because the mapping system that is part of the infotainment system is terrible.

• Finally, he said the tires wear about the same as the diesel version he used to drive.

Overall, he likes it and thinks its good for London but if Geely (and I know a few of them read this) is listening, this feedback is coming straight from a loyal customer.

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The co-sponored London event was a great success. When Steven and I ideated this event, in my mind having 40-50 people would’ve been a HUGE win. We had around 250 show up to listen to a thoughtful discussion on the UK’s past / present relationship with China and how the new administration that’s being elected next week should approach China. Let me first say this - Rishi Sunak, the current UK Prime Minister has not met with Xi Jinping yet. How is that?

The UK slots into a unique and weird place. Post Brexit, it’s still trying to sort out its place in the world and in particular Europe. A major importer AND exporter of passenger vehicles, how will they respond to any China tariffs and are they as concerned as the EU about overcapacity and ‘cheap’ Chinese vehicles?

Simon Wright, Henry Sanderson and I aimed to tackle those topics and discuss a few more during our discussion which included questions from the audience. But a few notes about the UK market worth noting for context.

The UK is the 7th largest passenger vehicle market in the world behind China, the US, Japan, India, Germany and Brazil. It bought ~1.9M vehicles in 2023 of which 350K were ZEVs aka Zero Emissions Vehicles (the acronym they use for battery electric vehicles).

Of the Top 10 ZEVs, 4 are built in China: Tesla Model 3 & Y, the MG 4 EV & the Polestar 2. Their current climate goals are to have 80% of vehicles sold be ZEVs by 2030 and 100% by 2035. Suffice it to say, they will not hit those numbers so something’s gotta give.

Here’s a great summary from Steven Lynch about the event. This could become an annual thing because of the very positive feedback and EVs aren’t going away, especially those from China anytime soon.

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The 🇨🇳 EVs & More Podcast: Unpacking EU Tariffs, Tu's Cali EV Adventure, For VW - It's Complicated

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I took the London electric cab because I was running a bit late for an appointment over at Bloomberg London HQ in the ‘City of London,’ not to be mistaken for London. I stopped over to grab a coffee and catch up with Beijing friend Tom Mackenzie. Wow, Bloomberg has to be one of nicest offices in ALL of the City of London and / or London.

There’s a balcony off the 6th floor with outdoor seating for coffee / lunch that looks out at St. Paul’s Cathedral and the view is absolutely fabulous.

For those in London, Tom is an anchor for their Daybreak Europe morning show so don’t forget to catch him every Mon - Fri weekdays from 6am.

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BIGGEST NEWS THIS WEEK

VW Group taking a stake in Rivian. A $1B stake that could balloon to >$5B. So VW Group has now invested billions of dollars in its own Cariad and press the reset button on that department / group / division or whatever they are calling it today at least three times resulting in no real value, at least not in the cars on the roads today.

The latest with Cariad is that they have effectively moved it to China while still trying to maintain arms length oversight of it from Wolfsburg.

They then also invest / commit billions of dollars into a partner for China and a formal partner for the US on the technology side.

When does .50 +.50 NEVER equal 1? When it’s a joint venture between two car companies with no clear leaders. A friend texted me after I’d asked if he’d heard about the transaction - “You and I know that today will be the day of the Rivian / VW relationship.”

One that can’t manufacture at scale and another that can’t do software - full stop, which also happens to be losing its shirt in its most important market because its two most important brands are and have been bleeding profusely from it - one for over a year, the other for years.

Let’s not forget that Rivian WAS courted by a company in Dearborn I won’t name but starts with an F and ends with an ‘ord.’ Has Rivian learned how to work with one of the big dawgs? Has Volkswagen learned how to work with a startup that just before that ink dried wanted to crush its soul?

I’ve said this over and over again. VW Group’s challenges aren’t technical. Hire as many technical folks as you want. Hire all the smart people from the companies you want to emulate. But if you don’t get out of their way to let them work and then give them the autonomy to lead you, what’s it all for?

VW Group has a culture and speed problem. The culture they currently have will NOT allow them to go faster. AND they have car guys leading their most important teams. Will they get out of the way so their latest big checks can try to help pull them out of the China sized ditch they’ve driven themselves into? From what I’ve heard, STILL NO.

And how does a company move faster? By simplifying things.

If I told you that a company who’s most important and new division was working on its third reorg since having been launched just 4 years earlier and that they brought in someone whose prior role was managing one of the most niche products in their portfolio, one that sold a whopping 13K cars in 2023 but also has NO PRIOR software development experience, either as a manager or developer, to lead that team and then decide to split that team so that the local China team could build products in China for China. Would you think, oh man these guys are ready to move faster.

But that’s not all - they wrote a $700M check to a Chinese EV company to license a platform and some software from then for products that won’t come out till 2026, would you then say, this company is poised to throw its afterburners on?

Does everything I just laid out sound like they are simplifying things?

Now let’s add Rivian to the mix. AND Scout. Can’t forget about Scout. Let’s just say the folks at Scout are probably feeling a lot worse today than the day before that VW / Rivian announcement.

Why I am so pessimistic about this? VW’s crown jewel has lost its shine in its most important market. And tariffs slapped on an already wounded dog could cripple any chances of it recovering any lost ground from the last year and a half. Porsche sales in China are down more than 30% the last year plus. While Porsches profit accounted for 32% of the VW Group’s total operating profit. So yeah, I think they’re doing the opposite of simplifying.

The EU is just plain being mean now. The EU decided that yes, indeed the tariffs were too high for China EV Inc and decided to reduce them.

SAIC from 38.1% to 37.6%

Geely from 20% to 19.9%

BYD no change

These things are NEVER coincidental and likely signals to the Chinese govt that these tariffs aren’t going away so let’s get to the table to hammer out a way for both sides to better about the current situation.

Tesla still has STANs. A Stifels Investment Bank analyst has recently begun covering Tesla and sees a bright future for Tesla over the next few years. There’s another analyst that CBNC loves to stand up that also recently proclaimed Tesla is building towards a bull run.

First, let me state this: Do not look at anything I write as investment advice. It’s an opinion, a pretty educated and experienced opinion, but nonetheless should be taken as such. BUT what I do know is that in the largest market in the world, Tesla is barely able to tread water. No new products, the new products coming down the pipeline already have a number of valid and competent competitors.

I mean really, have these fellas even attempted to visit China to see for themselves? There’s a lot going on over there and I don’t ask that you believe me and what I write, but use it as a prompt to go see for yourself (where you’ll see that I am right 😃).

If Tesla struggles in the China market, do they really have that bull run in them over the next three years? Next time you’re at a analyst call or private investor meeting and those guys (they are ALL guys except for Cathy Wood), ask them if they know what Tesla is doing in China. Then ask them who their competitors are in that ‘space.’ Then ask them what they see in any new Tesla products that would leapfrog the current set of intense competitors that want nothing more to do than to ‘beat’ the Mighty Tesla.

Then wait patiently to hear what they say. You may be there for a while so make sure you’ve filled your coffee to the brim.

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INTERVIEWED / QUOTED

Friend of Sino Auto Insights, Peter Ramsey happened to sit in on the Global EV panel I moderated at MOVE and wrote an article that summarizes what we discussed in great detail, much better than anything my memory could spit back out so for those that couldn’t attend, take a few minutes to read the piece here.

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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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