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Analysis EO
Analysis · 2
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Analysis EO
Jun 14, 2019 08:44 pm ·

NIO is Deep In Competitive Vortex

Ministry of Industry and Information Technology of the People’s Republic of China released a statement on June 12. According to the announcement, Chinese new car manufacturer WM Motor will launch a new model, EX5 500+. Currently, there are three versions of EX5 (a compact all-electric SUV) on sale, with a range of 300km, 400km and 460km. The new model will have a battery pack with a capacity of 69kWh and a range of 520km. Xpeng Motors, another Chinese new car manufacturer, will launch an upgraded version of the G3 with a 67kWh battery pack, in two versions with a range of 480 km and 520 km. As for the ES6 that was released last year, it has a maximum range of 510 km. At the company’s annual "NIO Day" 2018 at the Shanghai Oriental Sports Center, NIO unveiled the ES6. They described the SUV in a press release: “The ES6 high-performance long-range intelligent electric SUV hit the market with a high-strength aluminium & carbon fibre reinforced plastics (CFRP) hybrid structure, the ES6 features 4.7 seconds 0-100 km/h acceleration, an NEDC range of over 510 km, and 33.9-meter braking distance from 100-0 km/h. The ES6 expands the design language of the NIO product line with a stylish and sporty exterior plus a refined, high-tech interior.” Both WM and Xpeng will be big competition for NIO, which was overtaken by WM Motor and Xpeng Motors in terms of sales last month. Data shows that the sales volume of Xpeng G3 was 2,704 In May 2019, WM Motor delivered 2,056 units EX5, NIO delivered 1,089 ES8. Xpeng is expanding rapidly in sales channels. Up to now, it has opened experience centres in Guangzhou, Beijing, Shenzhen, Shanghai, Hangzhou, Wuhan, Dongguan and other cities, and plans to add more than 100 offline stores in 2019. The relatively mature and smooth manufacturing system and the growing sales system have gradually improved the delivery of Xpeng G3. Xpeng started relatively late, delivering G3 in December 2018. By the end of May this year, the total delivery volume of Xpeng G3 has reached 5,500 units. The change in monthly sales volume shows that new car manufacturers have basically entered the market test stage in terms of delivery. NIO and WM Motor both had orders for close to 10,000 vehicles in the lead-up to the deliveries, and both have now run out of "order stock", meaning that the current sales volume is the true market volume of these brands. In addition to poor sales, NIO also faces mounting losses and a plunging share price. With sales below expectations, NIO shareholders are impatient to wait. The company's share price began falling in March when the company cut its delivery forecasts and cancelled plans to build a factory in Shanghai. NIO's share price fell further last month after it said car sales fell by 55% in the first quarter of this year and that demand would fall further in the second quarter. Li Bin (李斌), NIO's founder and CEO, said in an interview that investors should understand the cost of making cars, even though the company has lost more than 70 percent of its value in three months. NIO went public in New York in September 2018, and Li Bin said the company is moving forward with the financing announced in May to fund product development. Under the deal, Beijing Yizhuang Investment will invest CNY 10 billion (USD 1.4 billion) in NIO, taking a minority stake in a new entity called NIO China. NIO China will be controlled by NIO. "It's unrealistic to expect a company like ours to make a big profit from the start. The long-term investment value of NIO is not fully understood by the market,"   Li said.  The latest news about Xpeng will no doubt put more pressure on NIO. According to CNBC, Xpeng Motors says it's hoping to close a funding round this year which will probably be a "comparable amount" to the last round that was about USD 600 million.  Anyway, from the second half of this year, the major new car manufacturers will enter the real market competition, how they compete with traditional car companies in the market and get survival seat, will be the key to determine the future.

Analysis EO
Analysis · 2
report
Analysis EO
Jun 5, 2019 10:10 am ·

Three Pillars of China's Electric Vehicle Industry

In the previous article, we dissected China's Electric Vehicle (EV) industry, talking about its historical development and the present posture of affairs. We traced out the growth trajectory, describing both the big picture and the micro-level state of things within the car market. One of the key findings there: the EV industry has been cementing its market presence with a six-year market share CAGR of 88.6%. This report is an attempt to go deeper in our analysis in order to delineate substantial conditions that led to the industry's rapid growth. Here we pay particular attention to the three interconnected pillars of EV success: government support, investment and infrastructure. Indeed, the three are interrelated, and it is extremely hard to puzzle out the causality: Was it the government that indicated the importance of the new industry and, by this, ignited the markets' interest, or vice versa? Do companies get involved in the new EV infrastructure-related projects owing to the state support, or because of the future prospects foretold by the thorough VC players? Chicken or the egg? At least, we can say for sure that the motivation of government and major investors to directly affect the EV market varies, as the core interests of political and business institutions are unalike. Another point to stress: infrastructure construction is rather the result than the cause of the abovementioned two. Let's dissect the triad one by one. 'Helping hands' We closed the preceding article using the argument: "Investment and state support are those helping hands that new EV enterprises have to rely upon." This rule is applicable to any other newborn subindustry that somehow disrupts the current order. Thus, there is a spacious room for the conceptualization of the phenomena related to the appearance of newcomers challenging the market incumbents.  The matrix above depicts five possible stages of a new sector development shaped by the two factors that are closely discussed in this chapter: government support presents the axis of ordinates, investors' optimism is on the axis of abscissas. The coordinates determine the short-term position of a certain industry in each case, and the arrows indicate changes as time goes by. As for the zones, the brief description is below. Hyping – Being highly acclaimed by investors due to the cutting-edge nature of business and/or a breakthrough technology backing it; Industry players consistently attract funding. Reaping the fruits – Investors consider the industry as a promising one; the government, at the same time, is willing to support it; Companies representing an industry collect funding and use preferences such as reduced taxes and subsidies. Stepping-stoning – Low or moderate investors' interest is accompanied by a high level of government support (that usually doesn't last long); Businesses within an industry are subsidized widely but aren't considered as game-changers by the market. New normal – Moderate level of benevolence coming from both the state and investors; Resulting from that, a new model gradually substitutes the incumbents, elbowing them out to the annals of history. Dying out – the "dead zone" of the map; Industry verticals that have been substituted by newcomers or disruptive technology may find themselves within this area. The five zones have blurry borders, but, being connected schematically, show all the possible transitions. Clearly, it is feasible to put any new market sector (and any subindustry, industry vertical as well) onto this map and track its historical path. Some markets might have experienced stochastic waves in terms of performance, investors' perception and state support. Consequently, in a number of cases, an industry might even return to the same point on the graph over time.  EV market emerged from the junction between the two lower quadrants: the public officials (except for those rooting for sustainability) at the beginning didn't really consider the incipient industry as a strategic dimension in their internal political lines. In China, the issue became viral due to severe problems caused by the negative outcomes of the fast-growing economy. Still, it took the Chinese government six years to realize that the budding EV segment might become a decent solution to the air quality problem: in 2007, historically the first list of the national standards directly affecting the EV market was promulgated. We recorded every step undertaken by the state as well as the path of the EV in the "Industry chronicles" part of the preceding article. Throughout one and a half dozen of years, industry investors' mood has undergone some changes; In order to illustrate these attitude shifts, the share price records of the global behemoth (Tesla, Inc.) could be used as a bellwether. We argue that, internationally, the first wave of hype about EV was already over in 2016, and this trend found an echo in China too. This is bound up with the market maturity process: once the market gains scale, the final products become commodified. The competition also contributed here, lowering prices and expanding the scope of products available in the market. And the industry zoomed in China: in 2017, almost half of all the battery electric vehicles produced worldwide were manufactured in the country. 579,000 cars of this type were sold in the country within the same year – the number grew 72.32% since 2016. In the following chapters, we talk about the two dimensions in detail. VC laid the foundation of the EV industry Investors' optimism is always reflected in the amount of money collected during funding rounds; another acid test is the share price when it comes to the post-IPO companies. New car manufacturers' rapid development exceeded industry experts' expectations. Local leaders in this segment (NIO, Xpeng Motors, WM Motor, CHJ and SITECH) gained more than USD 8 billion from investors over the last five years. Xpeng Motors (est. in 2014) and WM Motor (est. in 2015) have already become unicorns (that is usual for the auto market, where production costs are high); CHJ and SITECH are close to the status. NIO is a local high roller with the historical track showing a prime example of comparatively fast growth and, at the same time, it is one of the two pure EV listed companies in the world. Taking the view that the rest of newborn EV companies will walk a similar way, we decided to learn from NIO's example. Founded in 2014, NIO was listed in the United States on September 12, 2018. In April 2018, media reports said that SoftBank had been in talks with NIO to buy a stake of about USD 200 million in the latter's IPO. SoftBank's presence boosted investors' confidence in NIO, but the Japanese multinational conglomerate ended up backing away from buying a stake. This motion had dented the car maker's chances for a successful IPO. NIO still went public without a hitch. According to its prospectus, the company raised CNY 2.26 billion (USD 327.2 million) in 2016 through completing Series A, B and B+ rounds of equity financing. In 2017, NIO raised CNY 12.23 billion (USD 1.77 billion). By the end of the first six rounds, NIO had raised CNY 14.5 billion (USD 2.1 billion). Li Bin, founder of NIO said that the number of investors betting on the firm has reached 56, and each of them is willing to help the company financially on an ongoing basis. On May 28, the company released the first quarter of 2019 earning results. Having net loss of CNY 2.62 billion (USD 390.9 million), NIO announced the new financing: according to the company's statement, Yi Zhuang International Investment and Development Co., Ltd. would invest CNY 10 billion (USD 1.45 billion) in NIO China through its designated investment company or other organizations, in order to obtain yet undistributed shareholders' equity. Investors are not just interested but utterly dedicated to the company. Subsidies lighten the market burden Government support is essential, and this is the case when interest happily coincided with the duty. Helping the emerging sector, the Chinese government killed two birds with one stone: contributed to the environmental problem resolution and cultivated a number of potentially highly competitive companies. On October 22, 2015, the National symposium on energy efficiency and NEV industry development was held in Beijing. Li Keqiang, China's Prime Minister, issued an important directive, emphasizing that accelerating the development of new energy technologies, including NEV, is an urgent task to fuel transformation of the automobile industry. According to the high-ranking official, modernization is vital for China that is striving to become a major player globally. EV might be also a key part of the qualitative structural shift in the economic system that's recently pursued by the Chinese government. Meanwhile, it is obvious that these goals can't be reached without taking measures such as: stimulating independent innovation ability and enhancing overall technical level; Implementing and improving the set of supporting policies; optimizing logistics and communication lines, ameliorating environment and rationalizing energy consumption. Under the government's promotion, electric car makers have been reaping the benefits. However, on March 26 this year, the Ministry of Finance of the People's Republic of China issued a notice to state that the subsidies for new energy vehicles will be significantly reduced. 2020 will be a hard year for the small-scale enterprises that lingered and, eventually, didn't ride the waves of the government-originated aid. Besides subsidies, there are other various measures used by the Chinese government to promote EV. In overpopulated Beijing, for instance, conventional cars can be used only on certain weekdays, according to the license plate number. This and other rules of a similar nature don't affect EV at all. Queueing to get the plate number is a normal practice for those buying traditional cars in the capital city, but there is a tiny number of formalities to pass when you buy an EV. Charging infrastructure must be considered as a tool Managing core electric-vehicle infrastructure is utterly important due to the two main reasons. Firstly, if the demand for the new vehicles keeps up, lack of charging stations and other auxiliary infrastructural elements might become a tough barrier in the course of wide EV adoption. However, if the regulators approach this issue rationally, the charging system might become a decent tool of demand-stimulating. Li Ye, executive director for regulation at the National Energy Administration of China, said on January 12, 2019, that by the end of 2018, the number of charging piles countrywide hit 760,000, around 300,000 of which were public-based. According to Mr. Li, the percentage of home-based piles is increasing dramatically, especially in first-tier cities. By the end of November 2018, 219,000 new energy vehicles were registered in Beijing. At the same time, the city possessed 147,000 charging piles, among which 73% (108,000 units) were privately used. In Shanghai, 231,000 new energy vehicles were in the list, the number of piles amounted to 206,000 (and 67% of them are home-based). Nevertheless, other regions are yet to catch up.  As we can observe, some of the key provinces having a vast market potential lag behind in terms of EV infrastructure adoption. Highly populated Henan is an excellent example of such a region. We also expect Sichuan, Hunan and Liaoning to overtake within the next 5-10 years. Yet, natural, self-sufficient sector growth and faster EV adoption are infeasible in these and other trailing regions. State support can be the very impulse that China's periphery needs. Asymmetric regional subsidy programs might be invigorated in the near future, but, like any other unbalanced measure, can also cause a heated debate. The half-grown urban charging system isn't the only concern. In general, EV battery structure is a way simpler than the engine used in conventional vehicles, and the technology is not mature enough; lately, charging duration and safety issues are widely questioned by the public. Some cases of spontaneous combustion of NIO ES8 were recorded last month. After-sales service and insurance are other issues to talk over. Neither these two nor other auxiliary services and mechanisms are excellent. There is a long way of "learning by doing" and "improving by trying" ahead. The path of new car manufacturers has been shaped by the objective (market) and subjective (the state) forces. New industry leaders have formed a solid, complex competitive landscape domestically. But have they prepared for the global EV leader's impending arrival? We are going to work out the answer in the following article.

Analysis EO
Analysis · 2
Analysis EO
Mar 29, 2019 11:19 am ·

Beijing Cuts Electric Vehicle Subsidies, Winter is Coming for the EV Startups

Four ministry-level authorities including the Ministry of Finance introduced tougher subsidy policies to improve the technological standards of the NEV (New Energy Vehicles) industry in a statement on the official website on Tuesday evening. NEVs include pure battery vehicles as well as plug-in hybrids ones. The subsidies for the pure battery electric cars with a driving range of 400 kilometres and above will be cut by half, from CNY 50,000 to CNY 25,000. Battery-powered cars with a range of less than 250km will not granted any subsidy, at all.  There is a three-month "grace period" until June 25, firms can still apply for subsidies according to last year’s policies. The ceiling-level central-government subsidy for an electric car is being more than halved, cut to CNY 27,500 from CNY 66,000 starting from June.  Subsidies from local governments, which have been as much as 50% larger than the national ones, are being eliminated.   Under Subsidies, 1.3 Million NEVs Sold in 2018 in China China, the world’s largest car market, experienced sales of 1.3 million NEVs in 2018, including 770,000 EVs were manufactured and sold within the year; a jump of 61% from a year earlier, according to the China Association of Automobile Manufacturers. Chinese authorities have provided manufacturing incentives to EV companies and subsidies to consumers who purchase EVs to encourage industrial growth. Tens of billions of dollars from the national and local governments to EV firms, according to one estimate—have allowed domestic manufacturers to sell vehicles more cheaply, creating the largest electric vehicle market in the world.  Depending upon the range, China’s Central Government has paid subsidies from CNY 20,000 to CNY 44,000 ($3,000 to $6,600) per vehicle, and most local governments have added between 15% to 50% onto that. Therefore, total government subsidies on the purchase of an EV with a range of 250 kilometres (150 miles) or greater have been approximately CNY 66,000. In addition to consumer subsidies, many cities have provided favourable policies, such as the assured issuance of a vehicle license and eased access to the carpool lanes for the EV purchasers. Subsidies have been the key to make plug-in hybrids and EV market greater in the last years and the disappearance of subsidies may be a destructive move. Different Reactions To The New Policy Subsidies were first introduced in 2009 and peaked in 2014. It is expected that Beijing may entirely suspend the subsidies for EVs in 2020. Beijing is also urging local governments to remove subsidies for the majority of NEVs after the grace period, including the new energy buses and fuel-cell vehicles, according to the statement. If local governments continue with their subsidies, the central government will correspondingly lower its share. But the local governments can still spend money to support the building of charging facilities and hydrogen fueling stations. Reduced subsidies will force buyers to pay more for an electric car and affect sales in the coming months. After all, many Chinese car buyers are price-sensitive and they may have reactions toward the heightened prices. Even with the development widely anticipated, most of the new electric vehicles in China will be affected by the new subsidies policy include NIO, Great Wall Motors, BYD, Geely Automobile, Kandi Technologies, Volkswagen, Tesla, Ford, and Dongfeng Motor. Car makers have had a mixed reaction towards the policy. The US-listed EV startup NIO closed down by more than 7% on Tuesday. Before the new policy was announced, the NIO ES8, with an official maximum range of 500 kilometres was eligible for a total of CNY 67,500 in state and local subsidies. However, it was already evening when the policy was announced and it is arguable whether consumers could place a firm order within four hours. That also means NIO had to pay CNY 27,000 out of its pocket for every ES8 sold in the four-hour period on Tuesday.   What's more, WM Motor has also launched the "Insurance plan program" this afternoon. The company said if the customers place a firm order before March 31, still can get subsidies up to CNY 82,500 in the areas that meet the policy. In fact, not only the policy but New Energy Vehicle Startups will also face the competition from Joint Venture Brand. Volkswagen has already launched nine new energy products in China. According to the plan, the first batch of Audi e-Tron models will enter China as an imported product this year and become domestic in 2020. The first Mercedes-Benz all-electric model, the EQC all-electric SUV, will also be available by the end of the year. Form 2019 on, ABB will join the melee and bring the promotion of new energy vehicles into a new era. For instance, Tesla, which has started to build its own factory in Shanghai, has entered a range of CNY 300,000 for the minimum price of a new car, not to mention the entry price of the Model 3, which is relatively less expensive. Wang Chuanfu, chairman of BYD, believes that many new energy auto companies could not survive and only those who survived are truly capable. It is either sinking or swimming time for Chinese EVs... Cui Dongshu, secretary general of China Passenger Car Association, stated that governments should roll out other incentives to spur further growth of EV industry after reducing subsidies. “Policies to support fast construction of a national charging network should be worked out to facilitate the use of new-energy vehicles,” he stated.

Analysis EO
Analysis · 2
Analysis EO
Mar 25, 2019 04:37 pm ·

China's Answer to Tesla: Xpeng and NIO Backlash

Internal disputes, lawsuits, layoffs, reorganization, and operations changing, this is what baffling new Electric Vehicle companies. Waymo is a decade old and has seen these trends and changes enough. One reason staffers quit Waymo is because the company paid them so much, reported by Bloomberg. Google launched the division in 2009 and unveil its unorthodox bonus system. “It was constructed to tie employees' fortunes to the performance of the project, rather than Google's advertising money machine. The precise metrics that the division was measured by-- and caused the bonuses to balloon-- are not known,” Bloomberg writes.   When Waymo was trying to turn the project into a real business and emerging rivals were recruiting heavily, the system contributed to a talent exodus at a time. Some of them has earned a multiplier of 16 applied to bonuses and equity amassed over four years. Talents Flow or War? Tesla (NASDAQ: TSLA) accused one of its former engineers of stealing confidential autopilot information and then joining Chinese competitor Xpeng Motors last Wednesday, eight months after one of Apple's (NASDAQ: AAPL) former employees was charged with taking autopilot secrets to a new job at the same company. Tesla accused CAO Guangzhi (曹光植), a former engineer on its Autopilot team, of uploading more than 300,000 files and directories, as well as copies of source code, to his personal cloud storage account before abruptly quitting the company on Jan 3, Bloomberg reported. Xpeng denies having any part in the alleged theft by the engineers. The lawsuit is "questionable," Xpeng Chairman HE Xiaopeng said in a WeChat post on Friday. HE also expressed his doubts via his Weibo account, saying that he heard that Tesla’s discussing Xpeng several weeks ago but did not expect Tesla would choose to hurt engineers in a way of filing a lawsuit. “Both Xpeng and Tesla are innovation companies researching on autonomous driving using their own technologies. Only Competition makes progress and creates user values. For instance, we are going to upgrade self-parking system through OTA (Over-the-air) technology, an unprecedented way that has never been seen in the industry,” HE says, “The phenomenon that talents flow between countries is normal, especially high-end talents. We should always focus on developing talents other than reducing talents flow.” Xpeng has poached a Tesla autopilot engineer, GU Junli (谷俊丽), to oversee a 100-employee autonomous driving and AI operation in Mountain View, California on Oct 2017. One year later, We’ve reported that the company welcomed WU Xinzhou (吴新宙) to join the team as the company's VP and head of autonomous driving (see more in this article). Xpeng only announced new senior executives in March, along with WU Xinzhou. Xpeng did not give a clue about GU’s position. NIO delivery volume: Too good to be true? Tesla's CEO Elon Musk told employees that vehicle deliveries 'primary priority' near end of the first quarter, according to a reported internal memo. It's the "biggest wave in Tesla's history," Musk said in the memo.  “What has made this (delivery targets) particularly difficult is that Europe and China are simultaneously experiencing the same massive increase in delivery volume that North America experienced last year,” Musk said, Reuters reported. The company's Vice President Sanjay Shah sent an email looking for company volunteers for delivery shifts, addressing the company’s struggling in the delivery mission. As first-listed China’s Electric Vehicle maker, NIO has put itself under the spotlight and inevitably are shot at from all sides, from investment institutions, law firms (see more in this article) and even its former employees, this time. March 21, an alleged former worker in NIO posted that some misconduct and dishonesty existed in the company’s car loan procedure and the overall more than 10 thousand delivery volume. The company was even cutting employee numbers as well. NIO replied one day later, saying that the company has delivered 13,964 units of ES8, 2% of which are purchased by employees by themselves or shared with the company after purchase. As for the layoffs, NIO replied that it has moved into a precision operation and systematic stage. Thus, NIO will be reconstructing its businesses and related employees to suit the development strategy. NIO is continuing recruiting talents at the same time. To become consistently profitable while introducing lower-priced vehicles, such as the long-awaited USD 35,000 version of the Model 3, Tesla laid off 7% of its employees in January. The company once expanded its team by 30% in 2018 as it ramped up production capacity of Model 3 sedan, according to Elon Musk in an internal memo, reported by Business Insider. Declining delivery volume facing NIO, the company recorded 1,805 units of delivery in Jan and 811 units in Feb. The seasonal slowdowns surrounding the January 1st and Chinese New Year holidays, as well as the current slowdown of macro-economic conditions in China, particularly in the automotive sector, has led to the problem, the company claimed in its Q4 financial report (see more in this article). After all, talents and delivery are the top two primary priorities for Electric Vehicle companies.

Analysis EO
Analysis · 2
Analysis EO
Jan 10, 2019 04:29 pm ·

Take a Breath Amid the EV Frenzy, Think, and Further March Ahead

Automobile manufacturing is one of the typical industries that businesses yearn for scale advantage to succeed. An army of automobile brands emerged in the early 20th century in the United States. At a certain point, interestingly, each state has its own automobile brand; after approximately 100 years of blood-shedding battles, only three behemoths survived and ended up settling in Detroit, the global automobile manufacturing center. While the Far East witnessed the mushrooming of EV brands in recent years. Some of the wealthy Chinese regard the personal vehicle as a symbol of their social status. The "mobile sofa" with four wheels is considered to be many Chinese mother-in-laws' second "spiritual home" and the basic requirement for a Chinese young man hoping to marry their daughters.      Global sales of renewable energy vehicles from January to June in 2018 reached 720,000 units, an increase of 32% comparing to the figure in the same time period last year. Sales volume of renewable energy vehicles in China reached 350,000 units, registered a year-on-year increase rate of 60%. In 2017, the global sales of renewable energy vehicles exceeded 3.4 million units. The cumulative sales of renewable energy vehicles in China is roughly 1.8 million, accounting for 52.9% of the global figure. Although the volume seems very impressive, the future for Chinese EVs does not look so pinky after all. Wildly multiplication in quantity only represents the beginning of the development in most industries, while quality improvement will become the ice breaker when a stagnation is reached during development; also, high quality is the determining factor of whether a company would succeed in the long term, when one is struggling in the fierce battles with its competitors. Vehicle bodies and batteries are oversupplied currently, which warns investors to identify the applicable and truly advanced technologies from the other newly emerged, mediocre ones when invest to avoid potential loss.  The car builders, on the other hand, should be in car users' shoes and think for them in terms of safety, comfort, convenience and so on; Also, accelerate R&D in core technologies, including battery energy storage solutions and battery performance, and amelioration in intelligence.  HIS Market forecasted nearly 76 million vehicles with some level of autonomy sold by 2035. What powers the flourishing phenomenon of autonomous vehicles in the future reside now in the tiny size, but crucial in roles, various intelligent parts formed together to enable the high performance of an autonomous vehicle. Acceleration in intelligence is no doubt going to increment the competitiveness of the enterprises in the future battle between EV brands home and abroad. Right now, ADAS (Advanced driver-assistance systems) subsystems often work independently of each other. In this instance, a holistic ADAS approach where all sensors across the automobile form a connected collective, to make smarter decisions through cooperation. In terms of self-driving technology. NIO, WM Motors, Xiaopeng Motor, and BYTON all already have the capabilities of carrying L2 self-driving systems in their EVs; today in CES, NVIDIA launched an L2+ ADAS, while Mobileye claimed it will cooperate with Great Wall Motors (长城汽车) to jointly develop L3 level ADAS, and help to install Mobileye engineered ADAS (below L3) to some batches of their EVs in 3 to 5 years' time. Nevertheless, most other EV brands in China are still hovering about without the related technology at all. Google's Waymo has already been testing its Level 5 self-driving system vigorously. Smaller enterprises like May Mobility and Drive.ai are experimenting small-scale but revenue-generating shuttle services, Audi also launched its L3 self-driving EV A8 L e-tron Quattro in Quarter 3 in 2018 ; Other automobile giants like Ford, GM, Toyota, and Volvo are investing heavily on R&D and testing as well in EVs of L3 to L4, predicted to be able to launch their models by approximately 2020. Arguably, in terms of Self-driving technology, the west is the front runner for now. Some Chinese manufacturers then emphasize that they should learn from the western car makers and it seems like if anyone could reach their level first would be the winner in the battle. In fact, the mindset, however, is inappropriate, if not wrong. Of course, Chinese manufacturers should first aim at catching up with their western counterparts, but they should clearly know their end goal in this game. It's to build a car using clean energy, therefore, benefit the environment and hence the human's respiratory system; Also, restrain the usage of fossil fuel, which has already draining extremely rapidly because of excessive human activities, so that the earth may still have chances in surviving from global warming and what it caused – extreme weathers and more frequent natural accidents. This car is, at the same time, brings comfort, convenience, maybe privileged experience and high-level satisfaction in in-vehicle entertainment and security. If a car really does all these, it is undeniably a profit gainer. This is how every EV brand in China and abroad should think of along the way of their R&D, testing, and production. Chinese EV manufacturers probably need to take a breath in this EV frenzy and think a bit prior to marching. Reaching operating break-even point is not the aim; Go to IPO is not the end. There's a Chinese saying goes "A wise man reviews his own behaviors three times a day". Aim high and continuously examine what is being lacked, where does the company stand, and how far ahead does it need to march. Have the big picture in mind, and also keep feet steadily on the ground. More to read: China's EV Is Booming, Auto-Pilot, and Connected Car Still In Infancy                            A Booming market, A Decreasing Cost, and A Strong Enemy

Analysis EO
Analysis · 2
report
Analysis EO
Jan 10, 2019 04:29 pm ·

Take a Breath Amid the EV Frenzy, Think, and Further March Ahead

Automobile manufacturing is one of the typical industries that businesses yearn for scale advantage to succeed. An army of automobile brands emerged in the early 20th century in the United States. At a certain point, interestingly, each state has its own automobile brand; after approximately 100 years of blood-shedding battles, only three behemoths survived and ended up settling in Detroit, the global automobile manufacturing center. While the Far East witnessed the mushrooming of EV brands in recent years. Some of the wealthy Chinese regard the personal vehicle as a symbol of their social status. The "mobile sofa" with four wheels is considered to be many Chinese mother-in-laws' second "spiritual home" and the basic requirement for a Chinese young man hoping to marry their daughters.      Global sales of renewable energy vehicles from January to June in 2018 reached 720,000 units, an increase of 32% comparing to the figure in the same time period last year. Sales volume of renewable energy vehicles in China reached 350,000 units, registered a year-on-year increase rate of 60%. In 2017, the global sales of renewable energy vehicles exceeded 3.4 million units. The cumulative sales of renewable energy vehicles in China is roughly 1.8 million, accounting for 52.9% of the global figure. Although the volume seems very impressive, the future for Chinese EVs does not look so pinky after all. Wildly multiplication in quantity only represents the beginning of the development in most industries, while quality improvement will become the ice breaker when a stagnation is reached during development; also, high quality is the determining factor of whether a company would succeed in the long term, when one is struggling in the fierce battles with its competitors. Vehicle bodies and batteries are oversupplied currently, which warns investors to identify the applicable and truly advanced technologies from the other newly emerged, mediocre ones when invest to avoid potential loss.  The car builders, on the other hand, should be in car users' shoes and think for them in terms of safety, comfort, convenience and so on; Also, accelerate R&D in core technologies, including battery energy storage solutions and battery performance, and amelioration in intelligence.  HIS Market forecasted nearly 76 million vehicles with some level of autonomy sold by 2035. What powers the flourishing phenomenon of autonomous vehicles in the future reside now in the tiny size, but crucial in roles, various intelligent parts formed together to enable the high performance of an autonomous vehicle. Acceleration in intelligence is no doubt going to increment the competitiveness of the enterprises in the future battle between EV brands home and abroad. Right now, ADAS (Advanced driver-assistance systems) subsystems often work independently of each other. In this instance, a holistic ADAS approach where all sensors across the automobile form a connected collective, to make smarter decisions through cooperation. In terms of self-driving technology. NIO, WM Motors, Xiaopeng Motor, and BYTON all already have the capabilities of carrying L2 self-driving systems in their EVs; today in CES, NVIDIA launched an L2+ ADAS, while Mobileye claimed it will cooperate with Great Wall Motors (长城汽车) to jointly develop L3 level ADAS, and help to install Mobileye engineered ADAS (below L3) to some batches of their EVs in 3 to 5 years' time. Nevertheless, most other EV brands in China are still hovering about without the related technology at all. Google's Waymo has already been testing its Level 5 self-driving system vigorously. Smaller enterprises like May Mobility and Drive.ai are experimenting small-scale but revenue-generating shuttle services, Audi also launched its L3 self-driving EV A8 L e-tron Quattro in Quarter 3 in 2018 ; Other automobile giants like Ford, GM, Toyota, and Volvo are investing heavily on R&D and testing as well in EVs of L3 to L4, predicted to be able to launch their models by approximately 2020. Arguably, in terms of Self-driving technology, the west is the front runner for now. Some Chinese manufacturers then emphasize that they should learn from the western car makers and it seems like if anyone could reach their level first would be the winner in the battle. In fact, the mindset, however, is inappropriate, if not wrong. Of course, Chinese manufacturers should first aim at catching up with their western counterparts, but they should clearly know their end goal in this game. It's to build a car using clean energy, therefore, benefit the environment and hence the human's respiratory system; Also, restrain the usage of fossil fuel, which has already draining extremely rapidly because of excessive human activities, so that the earth may still have chances in surviving from global warming and what it caused – extreme weathers and more frequent natural accidents. This car is, at the same time, brings comfort, convenience, maybe privileged experience and high-level satisfaction in in-vehicle entertainment and security. If a car really does all these, it is undeniably a profit gainer. This is how every EV brand in China and abroad should think of along the way of their R&D, testing, and production. Chinese EV manufacturers probably need to take a breath in this EV frenzy and think a bit prior to marching. Reaching operating break-even point is not the aim; Go to IPO is not the end. There's a Chinese saying goes "A wise man reviews his own behaviors three times a day". Aim high and continuously examine what is being lacked, where does the company stand, and how far ahead does it need to march. Have the big picture in mind, and also keep feet steadily on the ground. More to read: China's EV Is Booming, Auto-Pilot, and Connected Car Still In Infancy                            A Booming market, A Decreasing Cost, and A Strong Enemy

Analysis EO
Analysis · 2
Analysis EO
Jan 9, 2019 11:14 pm ·

A Booming market, A Decreasing Cost, and A Strong Enemy

Despite the strong performance of EVs (Electric Vehicles), China's EV makers see some threatens and enemies looming. China’s electric car sales were more than 141,790 in November 2018, up 59% (YoY). The whole 2018 year sales will surpass one million units if we extrapolate sales peak at 155,000 units in December. One million is the number that electric car sold globally in 2017. The 2018 electric car market share rose to 3.8% share in China, for November is 6.3%, which is around 3% in other main markets, for instance, 3.2% in Europe, and ~2.5% (October figure) in the US. Envision Energy (远景能源), a Shanghai-based company, claimed that it will produce batteries for USD 100 per kilowatt hour by 2020, predicting the price will drop to USD 50 only five years later and end the reign of the internal-combustion engine at Stanford University's Global Energy Forum. Lei predicted that fossil-fuel cars will disappear "overnight" when EVs become cheaper. A BCG report shows that thanks to the Chinese government’s incentives, the consumer’s TCO (total cost of ownership) for BEVs(battery electric vehicle) reached a five-year payback in 2015. Somehow manufacturers in this EV supply chain has managed a way to reduce the costs and boost sales of EVs. This signs all told us that it seems that EV is going to slay the gasoline car. But don’t forget, China is cutting its subsidies gradually. China planned to cut subsidies by 20% in 2017 and 40% by 2019-2020, eliminating them altogether after 2021 so that the industry does not grow dependent on subsidies. September 2017, MIIT (Ministry of Industry and Information Technology) released so-called cap-and-trade policy, saying that automakers must obtain a new-energy vehicle score -- which is linked to the production of various types of zero- and low-emission vehicles -- of at least 10% starting in 2019, rising to 12% in 2020, reported by Bloomberg. Under the stricter policies, the EV automakers in China are facing a counterpart Tesla rushing into China local market by setting up a factory in Shanghai, which will start production in China of its Model 3 and a planned crossover by the end of the year. Tesla broke ground for the factory on Jan 7. China announced that it will cut tariffs on cars imported from the United States to 15% from the current 40% on Dec 15, 2018, a gesture increasing imported car sales in China. SHEN Hui (沈晖), founder of WM Motor (威马汽车), did not take this event as a threat, saying that with Tesla marching into Chinese car-selling market, EV manufacturers are more likely to win over customers from diesel car manufacturers. More than 400 EV startups have emerged in the past few years. It is estimated that left unchecked, these companies, along with existing automakers, will increase annual EV production capacity in China to 20 million in 2020. That’s 10 times the government’s target of 2 million a year, reported by Automotive News China. 2019 will be the rush hour for these startups. Let’s catch up some updates about China’s leading EV startups. Dec 12, 2018, Xpeng Motors (小鹏汽车), the four-year-old company started deliveries of its first commercial model SUV G3, marking the company the third EV maker to deliver production vehicles in China, after WM Motor and NIO. Dec 18, 2018, WM Motor implied that the company may fail to deliver on the 10,000 vehicles promises, a break-even point which most EV startups needs to sell, mainly due to complications in subsidy policies and deliveries. Dec 15, 2018, Nio (蔚来汽车) launched the ES6 and announced that the company has delivered 9,726 models of ES8 in 22 cities in China. The company’s the world's first ever battery swap network on G4 Expressway received some questions.

Analysis EO
Analysis · 2
Analysis EO
Dec 19, 2018 05:39 pm ·

WM Motor Postponed the 10,000 Vehicles Delivery to 2019

Dec 18, SHEN Hui(沈晖), the founder and CEO of WM Motor, implied that the company may fail to deliver on the 10,000 vehicles promises in an interview with Yicai. SHEN attributed the reasons to delivery part, not production capacity. WM Motor's plant has manufactured nearly 2,000 units in the year to mid-November. The capacity is escalating gradually and estimated to reach a daily record of 200 units in November. What the company unexpected is complications in delivery. Rattling by the phasing-out subsidy policy and clamors concerning the exact delivery date, WM Motor did roll out Fast Pass Plan to address the issues and explore corporation with road assistance company Allianz Worldwide Partners to bring better user experience. According to SHEN, WM Motor have not foreseen this situation from the beginning and reclaimed the 10,000 vehicles goal can be achieved very much likely in the first month of 2019. Why the number 10,000 is so important? Because it's a break-even point which most EV startups needs to sell, from where profit margin is set to pick up rapidly after it achieves more scale and starts making money on services. Xpeng, joined the fray with its G3 smart SUV this month, pointed out the volume as well. Xpeng has raised more than CNY 10 billion (USD 1.4 billion) from investors including Alibaba, Foxconn and Xiaomi Corp. founder Lei Jun. Startups like Xpeng and WM Motor have no clear going public plan, the key remains how much volume they could deliver. Competitions coming outside China is looming, Tesla indicated that it aimed to bring portions of Model 3 production to China during 2019 and to progressively increase the level of localization through local sourcing and manufacturing in its third-quarter report. YING Yong(应勇), the mayor of Shanghai, visited the project site in the Lingang(临港) development zone in southeastern Shanghai and encouraged Tesla to accelerate construction, according to a statement on the city's WeChat social media account on Dec 5. Tesla is working on obtaining loans from local banks to fund the new plant, which will help Tesla to avoid some of risks involved with importing vehicles, such as higher tariffs caused by trade tensions between China and the US. SHEN did not take this event as a threat, saying that with Tesla marching into Chinese car-selling market, EV manufacturers are likely to win over customers from diesel car manufacturers. WM Motor has a healthy cash balance that can sustain the company through this “winter”(also refers to recent bankruptcy waves happening in China). SHEN worried more about how to attract critical customers and catch up with market trends according to the interview. Retail sales of sedans, multi-purpose vehicles and sport utility vehicles dropped 18% (YoY) to 2.02million units last month, the China Passenger Car Association said on Dec 19. Sales in the first eleven months of 2018 fell 4% (YoY) to 20.15 million units. This ups the pressure on automakers. The only other bright spot was new energy vehicle (NEV) sales, which increased by 58.6%(YoY)  to 129,522 units, adding up to 845,845 (YoY growth rate: 89.4%) units as of 2018. Despite the strong performance of NEVs, the consecutive monthly declines in total vehicle sales in six months have caused many industry observers worried. WM Motor is set to launch the EX6, a mid-size 6-seat all-electric SUV with a 2-2-2 seating arrangement into market in the fourth quarter next year. The model is designed to lure young consumers with a dynamic body and trendy LED light.   Even the NEV market seems promising and the company keeps launching new models, WM Motor still needs to ramp up delivery efforts to meet consumers’ needs. ——Author: LinYan.Write to LinYan at LinYan@EqualOcean.com 

Analysis EO
Analysis · 2
Analysis EO
Nov 15, 2018 03:52 pm ·

Too aggressive to achieve a goal taking Tesla 10 years

In 2017, Tesla delivered over 100,000 vehicles in total, which had increased 33% than that of 2016. The company’s first automobile Tesla Roadster was delivered in February 2008, which took Tesla 10 years to deliver 100,000 vehicles. However, an ambitious Chinese EV startup, WM Motor, aims to deliver 10,000 vehicles by the end of 2018 with targeted deliveries of another 90,000 units in 2019. It is a rather aggressive goal for a company founded in 2015. Concerns of Safety and Subsidy At the early phase, WM Motor’s founder, Freeman H. Shen, launched the plan of mass production and claimed that Tesla’s electric cars are high-quality but expensive while equivalents built by Chinese manufacturers are cheap but with doubtful quality. WM Motor is completely different from these two. However, looming series of queries towards EX5, WM Motor's first electric auto, appears to entail a departure from their visions. The story began on 14th May 2018. a car equipped with the battery from Godsend Power was reported to combust spontaneously, which also used by three kinds of WM Motor's declaration model according to the new vehicle public list published by the Ministry of Industry and Information Technology (MIIT) on 16th May. Even though Lu Bin, the co-founder and strategy VP of WM Motor, responded soon that the three models will not be delivered to customers in the second half year of 2018, it inevitably dragged the new-born company to Pre-order Cancellation Wave quickly. If the first thing is about safety, then the next is about money. Currently, the startup does not have any dealerships, so orders must go through from factory to so-called delivery places in 15 cities in China. As a result, customers are recommended to pre-order their cars from the nearest location if there is no delivery place where they live. WM Motor officially declaimed that under the influence of battery crisis, local subsidies are also applied. The Manufacture Suggested Retail Price (MSRP) of EX5 is ranged from CNY 186,000 to 247,000 , the price after applying subsidies is CNY 112,000 to CNY 164,000. The total subsidy is quite a large amount. However, another official term released in one of WM’s user group chat told a completely different story that, since 27th Sep 2018,  whoever ordered a car without citizenship from the 15 cities shall be overcharged a security deposit to cover the local subsidy. Users were furious and accused that it was a fraud. Moreover, concerns of failing to deliver 10,000 cars by the end of 2018 are arising, which means due to the deduction of central government subsidy, users might or must be subject to extra payment if they get their supposed-to-be-delivered-in-2018 car in 2019.   Rhetoric and Fulfillment WM Motor is marching on a way against what it stood for initially, affordability and credibility. To review the track of WM Motor, we shall focus on the vehicle itself. and ignore all the vehicle-related fancies  WM Motor provided,  such as Apps, digital services and car-sharing, For example, last year, Freeman H. Shen claimed that the model on sale next year would be qualified as L2 automated driving in an interview with a think-tank named 30 Intelligence of Chinese Automobile. ADAS(Advanced Driver Assistance Systems), which promised to be a standard, is not available to be installed in the 2018 EX5. ACC(Adaptive Cruise Control), LDW(Lane Departure Warning) and AEB(Autonomous Emergency Braking) and other functionalities will be open to optional equipment in April 2019. Both ACC and AEB are automated driving functionalities belonging to Level 1 or 2(Driver assistance and partial automation). WM Motor did one thing right, though. Unlike NIO, who is partnered with JAC( also known as Anhui Jianghuai Automobile Group) to produce ES8 and subsequent vehicles, WM Motor decided to construct its factory based in Wenzhou city in Zhejiang province, China in 2016, which has a production capacity of 200,000 units per annum. The success of Tesla is partly due to building its own factory rather than working with outside business parties. Reported by Nikkei, Shen, who previously was the senior vice president of Volvo Cars and familiar with the European automobile industry, said that experience and personal connections at Geely helped him a lot when he started the new business. Superior supply chain management is essential for an automobile manufacturer, which reflects in various aspects in the process of car-manufacturing and enabled the start of WM Motor’s volume delivery of EX5 SUV in late September 2018, "This is a milestone for WM Motor, and the first step in our long journey ahead," said Shen according to China Daily. As is the first company who accomplished mass production delivery among several ambitious Chinese electric-vehicle startups except for NIO, WM Motor was remarkable considering its delivery speed. One officer from WM Motor's calling center informs us that customers shall wait for about four months after paying the advance.   About Brand It is challenging to bring “luxury-alike quality to a mainstream car”. Especially in China, the competition between foreign and domestic manufacturers, and between traditional car-manufacturers and startups, is severely fierce. Mapping your customers precisely is crucial. For example, NIO aims to win the high-end customers’ heart while WM Motor portrays itself as an “affordable brand”, which we can tell from the competitive price. Even under such a rigorous subsidy policy, WM Motor still enjoys decent subventions. Chinese customers have one feature that is especially beneficial for EV startups-they care price and quality more than the brand name. EX5 may have confronted the first bar-its price(at least by 2020 when the subsidy policy will phase out completely), but the quality will take time to be testified in the future. ——Author: LinYan.Write to LinYan at LinYan@EqualOcean.com