CEM #133 Transcript
Recorded 9/15/23

Tu Le:
Hi, everyone and welcome to China EVs & More after a brief hiatus of the live show, 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, we will open the room up at around the 40 minute mark to anyone who's keen to ask us any questions. What Lei and I discuss today is based on our opinions and should not be taken as investment advice. For those of you 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 about this podcast and of course, tune in again next week.

My name is to Tu Le and 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 I encourage you all to do. Lei, a Detroit Lei, and a cross town Lei. Can you please introduce yourself.

Lei Xing:
Good morning from Detroit? And I can't believe that both of us are in the same location, but we still have to do this in separate spots. But anyways, good morning, good morning, good morning, from, what can I say…Detroit.

Tu Le:
Corktown. You're in Corktown.

Lei Xing:
Corktown, Detroit, Motor City, the Big 3, UAW on strike. And this is episode #133. Where do we begin? I mean we can talk about the climate in Detroit, not weather, but the automotive…

Tu Le:
Let’s, you summarize to everyone what you've been doing for the last couple weeks while we haven't had a live show.

Lei Xing:
I think we've been on the road pretty much. So IAA, the first week, not the first week, the first 9 days pretty much, 8 days of September, coming back, and then rest a few days and then here in Detroit. And I mean, Ford people that we met said it the best: this was thin, this is a thin auto show. Yeah.

Tu Le:
So, for some context to our audience, there was an event after Tuesday's first day, which was kind of the pre-show. And then Media Day was Wednesday, right, Lei? So there's a happy hour. And we met some Ford employees, and we talked pretty candidly. They were very open, very nice, very kind, but they were pretty tight lipped, but even they had to admit that this year's auto show was even more disappointing than last year's, although the first person that you said hi to seemed to think the opposite. And when I came to the table, about a minute or two after you had begun speaking to him, he got upset at me because I told him how disappointed I was, but let it be known that Munich is a couple of notches above the Detroit Auto Show at its current form. It's gonzo. If this is the way it's going to be moving forward, there's no future for it.

Lei Xing:
So let me read off my tweet yesterday or the day before: quick thoughts on the 2023 Detroit Auto Show. Within the last 5 months, I've, but you and I have attended Auto Shanghai 2023, IAA Mobility 2023, and just now the Detroit Auto Show. Auto Shanghai shocked the world, mostly foreign legacy autos. IAA Mobility, the Germans outdid themselves in reimagining what an auto, mobility show could be like, not the same can be said about their EV transition, and bringing the world to an awesome party. The 2023 North American International Auto Show, what a bummer, no yellow duck, no Biden, no all new vehicle models, no excitement, and ICEs still dominate the show and very U.S.-centric. And watching some of these reveals of the updated ICE models from the three brands was underwhelming and weird. Weird, like after right, we've seen all these futuristic EVs and having experienced, driving them, I said it was a little bit lame.

Tu Le:
There is a section of the Detroit Auto Show called AutoMobili-D, where all the startups have booths. And I actually believe that there is, or I think there is much more energy on that side in like Hall D, than the auto show side where the vehicles were or the vehicles are. And I feel that the vibe is like, I'm not sure what to do, because the rest of the world is focused on the China EV Inc., on the transition, on Tesla. Here at the Detroit show, again, I'm not blaming the OEMs, I'm largely putting this at the feet of the NADA, the National Auto Dealers Association. And I'm not sure what the, what their goal is, because I want to say that once it opens to the public, there is going to be a reason to have the show because you can't in one place have all these cars for a regular person who's super busy during the day. They can come, bring their kids and look at all these cool cars, right? I think that's a great reason to have it. But for media, for excitement, I just felt like people just didn't know how to react to things. Two things: Munich, well, with Shanghai, there was an extra built-in excitement because it was open for the first time. China was open for the first time in 3 years.

Lei Xing:
For the, mostly for the foreigners.

Tu Le:
Yes. And then with Munich, I think that they did their best job of honestly trying to make it multidimensional and inclusive to the Chinese EV companies, the Chinese AV companies, the Chinese chip companies. So that brought an extra dimension of excitement and then having that Open Space and then the Summit, great great great ideas that I think is a winning formula.

Lei Xing:
And Munich was also the first time, a large, let's say, A-class global auto show was held in Germany since the pandemic. It was the first time for a lot of these Chinese companies and media to head outside of China, whereas Auto Shanghai was for the foreigners to come into China for the first time. So these two had their, right, the vibes that now Detroit is just…

Tu Le:
Well, pointing back to your tweet, right, Lei? Think about this, you and I, little kids in Shanghai. Did you see this? Did you talk to that person? And when we bump into these people that we've either never met or met through emails and digitally, but never met in person? We're excited about seeing them, number one. Number two, we're talking about, we're pointing at things at the show. You need to go check out this booth. You need to go check out ZEEKR X. You and I, we are nerds, but I didn't feel the need to tell you, you should go see this booth, or you should go do this. That's kind of the epitome of how I feel. And I'm a homer, remember this, right? You know this, I'm an advocate for Detroit for sure, but it’s hard.

Lei Xing:
Yeah so there's no new model reveals, right? The CEOs weren’t here. There were no activities. There is, I mean you're correct that the Plug & Play and the AutoMobili-D was actually more, had more buzz. And then the ongoing concurrent Battery Show had more buzz, right? And that was out in Novi. But, so you know what the only China factor in Detroit was?

Tu Le:
What's that? Your dinner last night? 

Lei Xing:
No, no. It's your co-hosts from China EVs & more.

Tu Le:
Oh yeah, right on.

Lei Xing:
And so there wasn't any talk of China until Silvio Angori, the CEO of Pininfarina had a slide on China saying that they've been helping designing cars for Chinese companies since 1997. And then their latest creation was the Polestones 01. So that was like one of the few, I guess China factors and then…

Tu Le:
Contrast that Lei with the World New Energy Vehicle Congress, where Wang Chuanfu, where Li Bin, where who are the other Chinese? I think Horizon, the CEO, I forget his name…

Lei Xing:
Yu Kai.

Tu Le:
But a bunch of Chinese leadership at the mobility companies and EV companies came over to present. Contrast that, okay, and the Inflation Reduction Act has a lot to do with that. And that's fine. But excuse me, this is hometown stuff. You walk outside Huntington Place where the Detroit Auto Show is being held in the shadow of GM headquarters. Literally a quarter mile away is the four towers or five towers of GM headquarters. So they did show the new Escalade EV but it wasn't unveiled or it was just kind of on the stand. And I like it, I tweeted that I liked it. It's humongous. And listening to John McElRoy talked to Malcolm Gladwell. I think that was pretty interesting, one of the highlights. You know, just the pitch contest that you had to leave early. I think that was really, really great. It shows kind of where some of the market is moving in the United States. Overall, I don't want to dump too much, because we spent quite a few minutes.

Lei Xing:
So granted that we shouldn't. Yeah, you're right. We met quite a few interesting people here and experienced the Hummer EV. I tweeted that what a bummer, but we had fun in the hummer.

Tu Le:
That thing is a monster. I mean, how much power do those electric motors have to have?

Lei Xing:
Yeah and to point that out, like, Malcolm Gladwell, he's the ambassador for the Ultium platform. He said that the Hummer EV was the heaviest joke. I mean.

Tu Le:
So a couple of things that hopefully are maybe a silver lining or maybe a valid reason for the muted auto show going on right now in Detroit. The UAW at midnight decided to strike at three facilities, one Stellantis, one GM and one Ford facility, so.

Lei Xing:
Unprecedented.

Tu Le:
Yeah it would be bad optics for, I think, of this huge celebration of the brands and their OEMs so I think that kind of weighed on the show a little bit. When you and I were walking to the car two days ago, we bumped into the City of Detroit's chief mobility officer, Tim Slusser. And he said that he really wants to benchmark some of the other shows. And hopefully the mayor has some influence with NADA on updating the format and making it a bit more inclusive, friendly, and bringing part of the city into it as well.

Lei Xing:
That's exactly the key word, inclusivity, inclusive. And you cannot repeat IAA Mobility in Detroit unless you have that inclusivity, which means you cannot just have the Big 3, the Japanese and the Hyundai Kias come and try to repeat IAA Mobility. And the Chinese currently they are a little reserved and they had reservations of participating, putting their brand out because of the current climate, right? So that's going to be difficult to achieve, even if they had gone to the Munich route.

Tu Le:
So let's move on to, I don't know. Can you tell me and the audience Lei what an anti-subsidy probe is?

Lei Xing:
I have no idea what that is, except to say that EU is not competitive. It’s really hiding that fact. That's why I said it should have been called anti-competitive probe. What subsidies?

Tu Le:
Yeah, and we know that Germany is in a precarious position, because I’m sure on one side of the debate, they feel that yes, we would love to have, and this is not going to be localized ever. We would love to have some sort of protections, but on the other side, they depend so much on the China market. And although you and I have spoken about how things have changed, how their share has shrunk, it's still significant for Mercedes, Volkswagen Group and BMW, and we're talking, if they lost that share, they wouldn't be who they are, they would be regional players effectively. I mean they're strong in the United States, but they're not, they're not as effective. They don't create the economies of scale without China, okay?

Lei Xing:
And the Ministry of Commerce in China came out with a statement basically saying it's a naked protectionistic policy, that's it. And they specifically said in the statement that all these European companies, how they have, right, been in China. And so this is going to, I mean the Oliver Blumes, the Ola Kaleniouses, they're going to have a headache.

Tu Le:
And I can just see that in the EU behind the scenes, the leadership of Germany and France are probably sitting down and figuring out next steps, what to do next.

Lei Xing:
So I saw your segment on CNBC, and you said at the beginning, it was, this is going to be a speed bump. Yeah, I agree. I think, first of all, this is going to take what, a 13-month investigation. So during that time, you're still going to see right? August, I think China auto export was over 400,000 units. I mean to put that into perspective, right? China exported a million vehicles annually for many years in a row, one million vehicle annually. Now you have one single month that many vehicles exported. I was also looking at the numbers. I think basically a quarter of the vehicles exported are NEVs.

Tu Le:
But remember, we also have to include, a decent percentage of those are still Teslas, so.

Lei Xing:
Yes. Yes. Correct.

Tu Le:
Because who's the largest NEV exporter right now, it's got to be BYD, into Europe?

Lei Xing:
Besides Tesla? 

Tu Le:
Yeah, besides Tesla.

Lei Xing:
I think it’ll have to be SAIC Motor MG, should be up there.

Tu Le:
And Polestar, probably right?

Lei Xing:
If not BYD right? So.

Tu Le:
And, man, I just posted something on LinkedIn that said I started the newsletter, we started this podcast because this was plain to us, this was plain to see to us. And so I don't need validation, you don’t need validation, but those people that are surprised about this should go listen to our older podcasts, number one. Number two, read my older newsletters because this was so predictable, right? This is so predictable.

Lei Xing:
So I went to the RoboSense reception, and I brought in a few listeners. 

Tu Le:
Can you tell us who RoboSense is and what they do?

Lei Xing:
RoboSense is a Shenzhen-based LiDAR company, so they just turned 9 years old and they are already on vehicles, onEVs being sold in China. In fact, they supply the Xpeng G6 with the two LiDARs and they're trying to expand internationally, including the U.S. So I went to this reception last night with the head of North America operations. And there's a few other Americans, and I just told them what I did and they immediately followed the podcast, so.

Tu Le:
It's interesting to see, through 2030, we're going to see turbulent times for a lot of these automakers, I think. I believe by the time 2030 comes around, there's probably going to be, may be a handful of European and American brands that are on their last legs if not have already shuttered, so. Because the thing is right, without, I mean Peugeot, Citroen, they're nonexistent in China effectively. And they don't sell in the United States. So they will become like these Chinese brands that you and I are familiar with, but most of the western audience, because they've never seen them outside of China, right? Renault is in a tough situation, we haven't heard from Wei-Ming Soh forever.

Lei Xing:
Yeah, what happened to the BeyonCa? What happened?

Tu Le:
What happened to Renault China, right? Like there's no announcements or anything. I've reached out to some people, but I'm not getting responses, but any other news that…

Lei Xing:
No, you know we've been so busy traveling that actually, yeah, I think we haven't talked about the data.

Tu Le:
So I know that you had begun to talk about August sales. So can you continue doing that?

Lei Xing:
Yes, August sales out of the very top numbers to bear in mind is basically a 33% take rate of NEVs. Export numbers, a quarter of the exported vehicles are NEVs. So that's what we're looking at. Then really, we haven't talked about the August sales number in detail because we were in Munich. So other than that, I mean it's just…

Tu Le:
The economy is continuing to struggle. So I think we're going to see more subsidies. I noticed that Shenzhen is offering subsidies for NEV purchase, they just rolled that out. So I still see a bit of weakness in the overall economy.

Lei Xing:
Didn’t Shanghai also come out with some new policy?

Tu Le:
That was last month, right? Shanghai’s?

Lei Xing:
Yeah, like still like giving out like RMB10,000 if you're trading in for NEV.

Tu Le:
So it looks like the central government is kind of stepping back, waiting to see the municipalies, the provincial level, the city level, create these incentives. So it'll be an interesting end to the year because of all of these huge announcements, and including the UAW who knows how long they're going to be striking, I would think. And maybe this is me being hopeful that something can be negotiated and finalized before next Friday, because we don't think about this, but when the OEMs strike, it's the suppliers downstream that suffer quite a bit.

Lei Xing:
It's a ripple effect, right?

Tu Le:
And I didn't think it was going to get national coverage, but I turned on, almost every news channel.

Lei Xing:
CNN is like interviewing Mary Barra or something.

Tu Le:
So because this is going to be directly, this is going to be something that the Biden administration is going to probably be pointed at with some responsibility, so.

Lei Xing:
So I saw this, one of the pictures, basically said 46% raise in salaries, 32-hour work week, but still being paid 40 hours and then getting some of the traditional pensions. And then UAW tweeted like one of those, right? The Jim Farley on CNBC and he's like oh he made $21 million last year, like and Shawn Fain saying these companies and CEOs, these statements are just BS and they're just lying that Ford is going to be bankrupt.

Tu Le:
I don't know. It is just really difficult for me to understand how they just turn it off.

Lei Xing:
How do you compete?

Tu Le:
Yeah. Farley last night effectively said, if we even get close to those terms, the 40%. So COLA, is cost of living adjustment. So they're asking for a COLA. And they, Farley said that if we were to do anything close to that, we wouldn't be able to invest in our future. So he conceded that they were willing to negotiate, bring their best interests, but…

Lei Xing:
Yeah GM had a final offering of what, 20% raise, which is already significant, right, anyway you look at it.

Tu Le:
The one thing that is peculiar to me Lei, is that no one is talking about job guarantees in the era of the EV.

Lei Xing:
There is no job guarantee.

Tu Le:
Well, they are talking about re-implementing the jobs bank, okay? So there is no jobs guarantee, which in the past was something that was on the table. But even the UAW I think, concedes that because EVs take less labor, perhaps what they're trying to do is not get too much smaller as opposed to growing the labor force for UAW membership. So the jobs bank for those that aren't familiar, the UAW had negotiated what they would call the jobs bank. So if you got, so Lei…

Lei Xing:
Basically if you're out of work, you still get paid, right? That's basically what it is.

Tu Le:
And not only that. And I think it's up to two years at least. So my dad was part of the jobs bank. He had gotten laid off. There's a foundry in Pontiac. And he got laid off, he got put into the jobs bank. I don't think it was 100% salary, I think it was like 80% or something like that. And he got put in the jobs bank for almost 18 months, I want to say, before a job opening came up in the jobs bank for his skills. And it was in Indiana. And if you don't take the job, then you effectively get fired. And so for two years, he would drive on Sunday night to Indianapolis from Michigan where we lived, about 5.5-hour drive. And every Friday after work, he would drive back to Michigan. So he just didn't want to move the family to Indianapolis. He put on, he had a Pontiac Bonneville at that time, black one. And he put on 100,000 miles in no time basically. But it was. I remember that vividly because prior to him getting that job in Indianapolis, he was just he just seemed a little depressed like he wasn't providing for the family. And I know that that was very stressful for him so that they're trying to implement that back. I think.

Lei Xing:
This is, yeah I mean, where do you draw the line, right? It's, depending on who whose perspective you're talking about, I mean you just gave a great example, right?

Tu Le:
We owe a lot to the automotive industry, but we owe a lot to the blue collar stuff. My brothers and sisters were all white-collar workers. But if it wasn't for the UAW, the contract in place, I don't think we would be in the situations that we are in. Generally, my whole family is doing okay. So I see it, man, I experienced it. So I'm a bit torn because the capitalist in me is like, man, how can they ask for this stuff, right? But the other side, I mean I understand it. I get it because I experienced it. But anyways, anything else that you wanted to talk about?

Lei Xing:
I just thought of something. Since you mentioned the dealers early in the show that Xpeng is moving away from direct sales to the older dealership model. I thought that was kind of interesting.

Tu Le:
So I guess there is a place for dealers and China.

Lei Xing:
Having said that, I just saw that there is this major news out of China, this whole complex of dealerships. And I think it’s in Shijiazhuang, got torn down, all the different brands of dealers. And this is like making a big news right now in China, I'm not sure what happened, but yeah.

Tu Le:
So for our audience, the dealers are normally not very close to city center, not many of them. They're all clustered in like a big area, like industrial park, almost, right? It's not super glamorous. And recently over five, last 3, 4, 5, 6 years, when you go to a mall, you'll see a lot of retail stores, like you would see a Tesla retail store in the United States. But it seems that they're kind of sort of going away maybe a little bit of hybrid. Because I think the premium brands still want that retail experience, because they want to still engage directly with the customer. But from a volume standpoint, I think Xpeng realizes that they can't be the mass market smart connected vehicle, electric vehicle without help from a third party to kind of amplify their sales channels. So.

Lei Xing:
The other news was NIO EC6, new EC6 was launched today completing their NT2.0 platform refresh.

Tu Le:
Transition. And it's more than the ES6, and it's more than the ES6, a couple thousand (RMB) more.

Lei Xing:
And the phone is coming in a matter of days, right? And speaking of by the time you hear this episode, hopefully you have either seen or heard the previous episode, which is 132 that was recorded in the NIO ET7 while on our way to the Munich airport.

Tu Le:
I'm going to try to get a get it finished. I want to try to get it finished, and we might have a few surprises with that. So stay tuned.

Lei Xing:
We have to what?

Tu Le:
Surprises. So stay tuned on that. We recorded audio and video. Let's just say that.

Lei Xing:
That was fine.

Tu Le:
But I don't want you guys to see how terrible of a driver I am while I'm trying to record a podcast, so. Anyways, but hey, glad to have you here. It wraps up a couple of weeks that have been really eye opening.

Lei Xing:
I think here's how I would put it. So for the second consecutive September. So last year the week in Detroit was great, was awesome, but I have to say the week in Munich, trumped that. I'm sorry, but right, and this year Detroit is a little bit, still nice, I think to be here just to feel the low ebb, if you will, and then seeing some familiar people and kind of being in this. I mean we've been in part of the history, right? Auto Shanghai, Munich, being here while the strike, the first day of strike. So and that kind of gave us a great perspective on the three continents, what's going on and where things are headed. 

Tu Le:
So the next big show for us is going to be LA. I'm leaning towards not going to Tokyo. So.

Lei Xing:
Yeah, that's too much of a trek, I think.

Tu Le:
So I'm excited to see. You know what the best part is that there's always at least a handful of people that either we haven't seen, that give us this feeling of welcomeness, number one. Number two, kind of, like we're not outsiders like trying to pry into what's going on. I feel that we're right in the thick of things with covering, seeing and experiencing these shows, which is good and bad, right?

Lei Xing:
Yeah. So I think we've educated quite a few people while we're here already. And you were on CNBC, BBC. I think I talked to the, what's the name, Deutsche Welle?

Tu Le:
Deutsche Welle.

Lei Xing:
Deutsche Welle, right? Which is basically the Sound of Germany, is that what the…Yeah, so talking about the exactly the same issues, the recent few days.

Tu Le:
Alright, I'm gonna see you in about 45 minutes. So.

Lei Xing:
Alright. I'm going to pack.

Tu Le:
And then I have a busy weekend, this weekend as well.

Lei Xing:
Yep. I know that.

Tu Le:
And shout out to Steve Levine, because we got to see him, he came to our happy hour. That was a really good happy hour. And I think you got to see, last year for me, it was kind of drinking through a fire horse because I had just returned from China. Here, this time you got to kind of see my real job. You met some of the people that I help, you met some of the people.

Lei Xing:
Yeah it was good to talk to some of the startups in the battery space.

Tu Le:
Yeah, so and then that happy hour, it's going to be an annual thing. And I really enjoy, people just coming in saying, hi, whatever. 

Lei Xing:
Let's see what happens next September.

Tu Le:
Maybe we're going to have to have a happy hour in LA, right? Because Alicia will be there, others will be there. Anyways, hey, thanks for joining us, everyone. Good morning, good afternoon, good evening. We will talk with you, hopefully, on a normal kind of schedule next week.

Lei Xing:
Same here.

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.