So far, all our discussions and explorations are based on the assumption that BEV is indeed the answer to future clean mobility. We base our assumption on several key factors:
There is no technology so far that can potentially outperform the BEV;
All major automotive manufacturers have or are making major investments into electrification, most of them making do-or-die bets;
we still staunching hold on to the belief that battery technology will continue to improve exponentially and that the energy density will go up significantly while at the same time costs will come down significantly as well;
Governments all over the world have made commitments to BEV and phasing out the fossil fuel vehicles.
What if - just what if - the BEV is not the answer? What if a new technology comes along within the next 5 years to challenge the BEV? What if the BEV production cost remains high, and that the price parity to the ICE cannot be achieved? What if, owing to geopolitical tensions, raw material sourcing for batteries become near impossible or prohibitively expensive, and that international conflicts result in a collapsing power grid which forces governments around the world to abandon the car electrification objectives?
Some people have made references to the early automotive years where battery was the first power source before being replaced by the engine due to the limitations of the BEV. Could history repeat itself and the same thing happens again, where we are back to ICE and governments around the world take and wait-and-see approach for a better technology to come along?
Such a question is of course very provocative, but in my opinion very unlikely to happen. There really is no other competing options to the BEV at this point of time. Even if there is a budding new technology now that shows signs of potentially challenging the BEV, the development process will take decades. On top of that, automotive production planning and design takes at least 5-10 years depending on the strengths and capabilities of the automaker, so the automotive manufacturers' commitments today will really only fully take shape in about a decade from now, so like a massive vessel, it does not change course in a split second. In fact, to change the course away from BEV today will take decades.
Moreover, the battery technology is developing fast and more abundant minerals are being studied to hold charge and lighten both the weight and cost of the batteries.
In any case, the ICE will still be around for quite some time, and during this period the ICE itself will go through a process of refinement and more efficient ICE drive trains will continue to be introduced, until such time where the BEV becomes mature and reaches price parity with the ICE and when the charging infrastructure reaches a level of adequacy then we shall see the gradual demise of the ICE vehicles.
BYD made a major announcement that has taken the market by surprise. It will stop producing pure ICE vehicles, and focus on BEVs and Hybrids. This is in contrast with the other major automakers who want to continue producing pure ICE vehicles together with EVs until such time that the EVs become mainstream and ICE vehicles are phased out.
Which strategy is better? The earlier argument is that both ICE and EVs must make up the product range, as the ICEs are mostly profitable for the legacy automakers and the cash cows can fund the growth of EVs which is reckoned to take some time before turning over a profit. Hybrids serve as the transition to fully electric. So what has made BYD change its strategy?
In reality, when we look closely at the pure ICE BYDs, the sales figures have dropped over the years, even though total BYD sales has soared. The engine that is in fact driving BYD's growth is the electric one (including HEVs and PHEVs). BYD reckons that the PHEV and EV sales would have been higher if not for cannibalization by it's own ICE vehicles.
BYD also argues that the ICE is the cash cow that can fund EV's growth. Their financial analysis shows that the cost of maintaining 2 production lines in fact added costs that almost wiped out their ICE profits, therefore maintaining just one line for EV has significant savings that add to the bottomline.
Of course, there is also the added reason that BYD's other main business is the supply and development of batteries. This makes it different from the other car makers.
The Japanese automakers, on the other hand, and banking on a slower transition to electric. Honda, for instance, identified markets least likely to go electric soon, and put their resources. These markets fit the non-electric offers from Honda.
With raw materials for battery getting scarce and costs escalating also due to supply chain issues, the Japanese auto manufacturers are putting their hopes on a slower route to electrification.
In the first quarter of 2022, new energy vehicles were on the rise, and the global market penetration rate reached a new high. The sales outlook for the full year is buoyant and is expected to witness significant growth again, with market penetration in China likely to break 30%. There are two factors contributing to the high sales of new energy vehicles in the world, one is policy-driven, and the other is product-driven.
According to the International Energy Agency's (IEA) Global Electric Vehicle Outlook 2021 policy, more than 20 countries have enacted full electrification schedules or promulgated bans on gasoline vehicles, and 8 countries plus the EU have announced carbon neutral commitment; In terms of products, almost all traditional auto giants have started electrification transformation and stepped up the launch of electric vehicle models. The global sales volume ranks among the TOP 20 vehicle companies (the total sales volume in 2020 will reach 90% of the global sales volume), of which 18 have announced its electrification strategy.
In terms of products:
the optional models are abundant, and new models emerge in an endless stream. In the past, the bottlenecks of electrification, such as mileage anxiety, high car prices, and insufficient charging network, have all begun to be gradually improved.
In the Chinese market, electric vehicles mainly focus on the high-end market above 200,000 yuan and the low-end market below 100,000 yuan in the early stage of promotion. Electric cars are missing. With the introduction of mid-segment models by BYD, ORA, Nezha, etc., the market gap has gradually been filled.
Recently, car companies have also turned their attention to the upgrade market for mobility scooters over 100,000 yuan. Great Wall Ora Cat and BYD Dolphin are positioned as young and fashionable, and are deeply loved by consumers.
The prospect of new energy vehicles is bright, but the embarrassing situation of low retention rate of electric vehicles still needs to be overcome. Some car owners directly said that they would not consider buying an electric car at all.
There are two reasons. First, they are worried about the cruising range. Second, the value preservation rate of new energy used cars is "horrible." Is the actual situation really what he said?
Since this year, the second-hand price of electric vehicles seems to be showing signs of a sudden rebirth. There are two reasons for it to be popular now: one is the shortage of supply caused by the lack of cores, and the other is the consumer wailing behind the oil price.
In the past, consumers were worried that the battery decayed too fast. Thinking that once the battery is unusable, the car is equivalent to scrapping, but if the battery is replaced, the cost is extremely high, and consumers might as well buy a new car.
Battery technology has been greatly improved, and a battery that has been used for 10 years can still retain 80% of its storage function, which is no longer a reasonable reason for rejecting electric power. The only electric car used car price to overcome.
Once electric vehicles become popular, the second-hand market transaction volume will naturally rise gradually. The rising tide of new car prices is unstoppable, and the price of second-hand car naturally rises with the tide. When consumers and used car dealers have more confidence in electric vehicles, the retention rate increases.
A second-hand car dealer observed and found that some electric vehicle brands with insufficient product strength are indeed not good at retaining their value, but the electric vehicle brands that have already come out such as Weilai, Ideal, Xiaopeng, and Tesla, the market has shown that they are not good enough.
Therefore, the value preservation rate is relatively good. The value preservation rate for one year is about 65%-70%, and the value preservation rate for three years is about 50%. Although the retention rate is not very high, it has been greatly improved compared to previous years.
Buyers of second-hand electric vehicles have higher requirements on the EV than buyers of fuel vehicles. The reason is that the structure of electric vehicles is more delicate and the body is more delicate. A slight collision may affect the circuit, central control system, cameras, etc., so the car When inspecting and evaluating vehicles, dealers will be more careful and have higher requirements.
I’ll have an appointment with an agent for dinner two days later. In the used car business, I will encourage him to start focusing on electric vehicles. Now is the golden moment, after all, the competition is not so fierce.
I believe it is good for us to, from time to time, take a few steps away from the action, and reflect a little on the overall development of the automotive industry, and to ponder on the macro aspects of the business, especially in the field of car electrification. Today, I would like to talk about 4 major changes that are affecting the automotive industry as a result of electrification.
Firstly, there is now a major divide between the traditional automotive powerhouses, and the new players. The traditional players tend to have a long history and has acquired decades of experience that are difficult to duplicate. However, due to electrification, some of these strengths may not be able to be carried into the future. Take for instance the strengths in power train. As the electric motor replaces the engine and transmissions, the decades of accumulated experience in transmissions loses its value. Had it not been the case, it would be very difficult for new players to come in as gear transmission design and manufacturing is a complicated business and the entry barrier would be very high.
However, when the electric motor replaces the traditional power trains, the opportunity for new players to come in is presented. These new players shift the focus from beefing up the muscle of the power train to the software part of the customer experience (rightly so, as the electric motor itself is more efficient and powerful than the engine so there is no need to brag about power anymore).
Secondly, the mix of skills and talent in auto production has also changed. Traditional car manufacturing plants start to see a higher mix of software engineers and fewer mechanical engineers. NIO said in an interview that more than half of their engineers in the production department comprises of software engineers. This is very different from the traditional car manufacturing process where the focus is on the mechanical side, to ensure safety, comfort, ease of operation and durability.
Thirdly, as the mix of software engineers gets higher and higher over time, there is more and more female participation in the workforce. This is a major change in the workforce composition, because the automotive industry is traditionally very male dominated. In the past, due to the focus on the mechanical aspects of design and production, the industry attracts males and deter women from joining.
Fourthly, I predict that Japanese brands will start to lose their dominance, especially in Asia where they are currently still very dominant. Take for instance in Thailand, Japanese brands make up 90% of all new car sales. This is about to change, as we see more and more Chinese news coming into the market (MG, and now GWM/Haval/Ora). More and more Chinese brands will come into the market as electrification becomes more widespread. Other than Chinese brands, new players like Tesla is growing in market share too. Thus, in the longer term, Japanese brands will lose market share as they struggle with electrification.
All these major changes in the industry presents both risks and opportunities.
Great Wall Motor (GWM), through the acquisition of the General Motors/Chevrolet production plant in Rayong, Thailand, embarked on production in Thailand and then using Thailand as the base to reach out to the rest of Southeast Asia and beyond. This GWM factory is their first outside of China and for sure they have great plans and hopes for the growth of GWM in this region. They plan to do this through innovative ways of sales and marketing.
One of the first unique introductions to the Thai market, and possible beyond later, is their new and innovative way of network development. Unlike the traditional way of having the dealer network serve as the proxy for the OEM, by reaching out to the end customers and to try to keep them, GWM's direct sales method means that they play a very active role in the prospecting of customers and then to own the customers. Dealers have been "relegated" to being just order takers and service providers. This extends to after-sales services even, and all the customer database is in the hands of GWM. I think this is the future trend and other brands are likely to follow.
Mercedes Benz has introduced such direct sales method too in other markets as trial and will roll out to the rest of the market when they are confident of the model. Dealers do not even need to manage vehicle stocks, they are all under one roof managed by Mercedes Benz (and this is the same model for GWM), so dealers become more like brokers instead.
The other fundamental change is the skills requirement in the dealership. Many studies have shown that the vast majority of dealers are still not ready to sell EVs. To be equipped with the basic knowledge of EVs for sales and service activities, dealership personnel will need to know about the basics of electrical engineering, at least to understand different types of motors, inverters, on-board off-board chargers, EVSEs, batteries, and to have a basic understanding of words like voltage, resistance, current in ampheres, wattage, AC DC current, current conversion, and the safety issues related to handling EVs and charger installation. Though not likely to become prevalent anytime soon, dealers should still start to traing their staff for basic understanding of even things like induction charging. These are new skills and knowledge that dealerships need to quickly acquire to have a greater impact on promoting electric vehicles.
Dealer staff will also need to be able to liaise with car makers on issues related to software and future upgrading (usually OTA nowadays), and cybersecurity issues. As the technology of EVs progresses, dealerships will need to be able to pick up skills and knowledge to sell and service self-driving cars, GWM already offers level 2 autonomous driving in the Ora good cats now, and they plan to elevate self driving technology further in the next 2-3 years. If the dealers do not start to build the knowledge and skills inhouse NOW, they may have no time to react in the near future.
There has been a lot of reports and media attention on Toyota's very open resistance to car electrification. This comes as a surprise to many and shock to others because Toyota has long been the pioneer of clean energy cars with their first hybrid car Prius and their dominance in ICE and Hybrid vehicles sales worldwide. Toyota is also the first to commercially launch hydrogen fuel cell car with the Mirai.
Despite having the early lead in clean energy vehicles, Toyota currently does not sell any electric vehicles in major markets outside China, while its competitors have been pouring resources into developing EVs and preparing for the end of ICE vehicles. However, Toyota has said that it plans to sell 15 battery-electric models globally by 2025, part of a wider lineup of 70 battery-electric, hybrid and hydrogen fuel cell vehicles to offer “diverse choices” to buyers.
On 14 December 2021, Toyota announced that it plans to invest $35 billion into battery-powered EVs and roll out 30 models by 2030. Prior to this, Toyota announced that it will invest approximately $3.4 billion (380 billion yen) in automotive batteries in the United States through 2030. The venture will first focus on producing batteries for hybrid electric vehicles. Toyota has said that it plans 15 additional battery electric models, including seven different Toyota bZ (Beyond Zero) models, by 2025. Two of those bZ models—the bZ4X crossover, followed by an electric sedan—are due to bow by the end of the 2021 calendar year. One of the others will be an electric pickup.
In its first EV market, Toyota's three electric models are the battery-electric versions of the sister models C-HR and IZOA, which were introduced in 2020 and are built by Toyota’s joint ventures with GAC and FAW, as well as the Lexus UX 300e. The Toyota bZ4X, the first electric vehicle under the automaker's new bZ brand, will come to the U.S. in mid-2022.
Being the world's biggest auto manufacturer, and for a long time the leader of clean energy vehicles and the most valuable car company in the world, why is Toyota losing ground for electrification? There are several reasons.
Firstly, Toyota has invested heavily in hybrid technology and they want to recoup the investment first before moving to fully electric. That is why Toyota has consistently argued for hybrid technology saying that it s better than full EV as it overcomes range anxiety, has efficiency almost as high as full EV (well...) and that EV's are not that green after all.
Secondly, Toyota believes that electrification can only be commercially viable in 10 years or more. Hence, it is in no hurry to electrify its cars. It is betting on denser batteries like solid state batteries and hoping to turn the tables against the current EV leaders. Toyota is also hoping for breakthroughs in fuel cell technology so that it can be the first mover.
Thirdly, Japan has infrastructure limitations to expanding the grid. Unlike China which imports 30% of energy needs, Japan imports 96% in 2020! After Fukushima, Nuclear energy dependence is significantly reduced, and oil and natural gas became the substitutes. Therefore, it may be a politically motivated move for Toyota and Japan as a while to resist electrification.
Fourthly, despite Covid chip shortages, Toyota's market share in China and worldwide remains strong, so there is very little motivation for change. Think Kodak...Toyota, like other Japanese corporations, have very close relationships with their suppliers, even to the extent of cross ownerships, that results in resistance to change as it would impact manufacturer-supplier relationships.
Fifthly, electrification necessitates massive internal restructuring, change in mindsets, new thinking and innovation, which is never the strength of Japanese corporations. Like Germany, Japan has the propensity to seek perfection, so they do well in tasks for continuous improvements (Kaizen), not revolutionary changes with great uncertainty and imperfect information.
Success is not always a good thing. For Toyota and the Kodaks of the world, when you are the clear leader and raking in good profits, it is very difficult to convince yourself and your team to change, to make short term sacrifices, for a long term goal which you may not even be there to enjoy the success when attained. Moreover, I really think there is still a lot of skepticism on electrification in Toyota's power corridors.
I read with interest the new retail concept of Mercedes Benz called Retail of the Future, now in its pilot stage in several markets. If proven to work well in the test markets, this new structure will be introduced gradually in the rest of the territories.
So what exactly is Retail of the Future? The details are still sketchy, but it essentially means that Mercedes Benz will sell directly to the customers, with the dealers relegated to "Franchise Partners" whose main role is to provide after sales service.
Mercedes Benz cited several reasons for doing this. Firstly, the company said that new car sales profitability is always a roller coaster depending on seasonal factors, age of the models, production schedule and so on. After-sales or fixed ops as it is called in US is more stable. Therefore, Mercedes Benz argued that this new format is good for the dealers because it takes out the instability of profits over time.
Secondly, Mercedes Benz argued, retail cost can be reduced since dealership stock carrying cost is minimized. Presently, 10 dealers within close proximity of each other may be forced to display say 3 colours of the same model, but with the new sales format, MB carries the inventory in their so-called central repository, and the cost savings can be passed on to the customers.
Thirdly, with the growing need for touchless service, the role of showrooms have been reduced. More online activities are expected to take place as the new normal, and online services are better served by MB in a centralized manner.
Fourthly, as cars moved towards electrification, MB argues that current dealers are not yet adequately equipped to serve the customers, so MB can apply their expertise for their customers. New sales presentation requires deep understanding of touchscreens and software, energy computations (watts, kilowatts, voltage, current, resistance, types of motors, AC/DC, brush or brushless, permanent magnet or not, types of batteries, cylindrical, pouch, prismatic, blade etc, EVSE types, cables, current, power tariff etc). The expertise on ICE power train becomes obsolete.
So how does EV play a role in the change? Well, because consumers and potential car buyers do not know the new EV players, these new players have to introduce their products and have the customers experience the EVs, play with the features, understand the cars better, drive them to build confidence, and you cannot do this with the dealership format. For the dealership format, the customers walk into the showrooms after doing their homework, and usually already have adequate experience with the cars they intend to buy.
The new concept introduced by the new EV players is called the experiential centre, designed to be family friendly, a place to drop by while shopping, to linger, to try, to test, and to relax. The atmosphere is different from a typical showroom which is often highly pressurized, with a lot of wheeling and dealing, hard negotiation, going on.
The confidence in the format without dealerships is further boosted by the success of the brands which have done away with dealerships, Tesla being a good example.
Are we seeing a future landscape with dealerships being just a place for customer service support? Please feel free to drop your comments
In line with GWM's strategic plan, The Ora Good Cat EV has been officially launched in Thailand on 29 October 2021. Thailand is the entry point for GWM's growth plan for Southeast Asia and, following the success of Ora which garnered more than 1000 orders in 2 weeks, The Black Cat EV is poised to enter Thailand before the end of the year.
This launch is interesting because it is the first time I have witnessed a fully online product launch event and the amount of technology applied is simply eye catching. The theme for the online launch event is "Future Ready", during which 3 models were introduced, namely the 400 Tech, 400 Pro and 500 Ultra. The prices ranged from THB989,000 to THB1,199,000.
Through the proprietary Ora Smart technology, GWM has packaged Ora with lots of technology including AI, facial recognition, sensors and cameras to reach L2 driving, and a distance range of up to 500km based on NEDC. GWM has promised Thai customers new energy driving and smart car technology.
Of the current 19 sales outlets throughout Thailand, 9 are GWM-owned experiential centers, and the others are independent dealerships. GWM plans to expand the network to 35 before the end of next year. Many new dealers have been attracted by the success of the Haval 6 HEV since its launch in June this year.
GWM places a lot of importance on the success of Haval and Ora in Thailand as it is the first time that GWM has ventured abroad and set up production facilities, so it must succeed, there is no other alternative. GWM's other planned production overseas in India has been put on hold due to political reasons.
Early this year 2021, a deadly car crash in Singapore resulted in widespread media attention and discussion. 5 young men were racing in the early hours of the morning in the narrow streets of an older part of Singapore. All died tragically in the crash. The saddest part was that the girlfriend of one of the dead men went to the burning car and tried to save her boyfriend. Without the fire, the men would have been dead anyway, but why was the car engulfed in flames which eventually caused severe burns to the girl trying to extricate her boyfriend from the car? How causes car fires?
For the internal combustion engine cars, there is fuel flowing through many parts of the car. The fuel tank is usually located at the back of the car, and the fuel has to be transported to the front into the engine, passing through various channels. Fuel is carried via these channels through hoses and casings, which have valves, rubber hoses, various types of clips, bolts and nuts and so on, all of which are subjected to ageing and deterioration, or even defects due to lack of proper maintenance. However, sometimes, fuel leaks can be due to manufacturing defects.
Fuel is highly flammable (that's why it is used for the combustion), and when leaked, a small spark can result in fires. Hence, wherever the fuel may pass through, there is a chance of fire. The spark can come from heat, electrical short circuit, or even from external environment (never park the vehicle near flammable items).
Fuel is not the only cause of car fires. Oil can also start a fire. All oil in the car including transmission fluid, brake fluid, radiator coolant, and power steering fluid circulating throughout their respective systems when a vehicle is running can cause fires. However, fuel is the most dangerous because it is highly flammable. Other than fuel and oil, gases can also ignite. For instance, battery charging can result in gas being released, which can lead to fire when ignited. Likewise, storage of fuel also results in gases which can also ignite.
Ok, having explained all these, now let's compare with the electric car. There is no engine. No fuel. Less oil. No combustion operation that causes fires. So EV is much safer than ICE in terms of possibility of fire? Well, yes and no. In the EV, the cause of fire will invariably be from BATTERIES. There is little chance of the motor catching fire. Hence, when battery technology reaches a very high level of fire resistance, we can say goodbye to car fires. To me and all EV supporters, this is great news.
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Someone read my previous article “Let’s talk about batteries” hoping to learn something about batteries, I mean, the fundamentals of batteries. Instead, he was to complain to me, all he learnt was about 2 battery makers namely CATL and BYD and how they compete against each other for a bigger slice of the pie and how they become so wealthy from batteries. I told him that, despite his misgivings about the article, most people who asked me about batteries are not interested in the technical part of it, but more interested in knowing about the key suppliers, and how prices will be driven down further from the competition. They also want to know enough for their EV purchase consideration and to make sure they make the right decisions for their mobility needs.
Well, we are not calling anyone pedantic (certainly NOT!), we can talk about batteries from a more technical perspective, and to share and exchange knowledge with each other if you may, hence today’s article.
Batteries are highly important in promoting alternative energy, because without the ability to store energy, most of the energy produced can go to waste. Take for instance, solar energy. Without the battery, you can only use solar energy in the day, and only when the sun shines, and hopefully it does not rain…On top of that, most of the solar energy produced goes to waste unless it is immediate consumed.
Battery technology has not changed much in the last 100 years. As I told you before, I used to sell lead acid batteries for a few years, for both motive and stationary power. Motive power refers to power for mobility, so it is used in cars, forklifts, and so on. Stationary power is used for non-mobility purposes, such as your uninterrupted power supply (UPS), even to power the telecom base stations. For motive power, I sold car starter batteries (all types, flooded, AGM, Gel, start-stop etc), deep-cycle batteries, traction batteries. As I said earlier, the technology has remained very stable for decades, unchanged, with innovation mainly in recycling.
Batteries for EVs are different, as EVs require much more powerful batteries. Such batteries have also evolved over time, with the Lithium Ion now being the most widely used. These EV batteries are basically many mobile phone batteries put together to generate more power. Hence, all the issues one encounters with phone batteries apply to EV batteries, though EV batteries have more issues, as there is also battery management system, and protection to prevent explosion from collision, and so on.
Is there any difference between the way lead acid batteries and lithium ion batteries work? The principle is the same, which is the movement of electrons for storage and power release. The main difference between the types of batteries is the material for the electrodes (cathodes and anodes), and the electrolytes. There can be some technological advancements in separators but this is not the most critical component. So battery makers try to develop and enhance batteries by finding material that can help to:
Thus, the continual search for material that can fulfill the above 5 requirements. Lithium ion used to be ideal until the demand soars, and the world soon finds out that supply is limited, and so demand forces drive up costs, so now lithium is getting more and more expensive, and soon it may no longer be commercially viable. Remember, EV makers also have to make sure that EV cost becomes very competitive to internal combustion (ICE) cars. So, CATL is researching sodium batteries, why?
Because sodium is so abundant and cheap. BYD’s blade batteries try to overcome the problem if explosion, but it is expensive to make. Traditional automakers like VW and Toyota are exploring solid state batteries where the electrolyte is not liquid but is solid, hence more compact, non-explosive due to no thermal run away, and potentially more energy dense. E-waste will become a serious issue if lithium ion batteries continue to be expensive to recycle. Note that one of the main reasons why the lead acid batteries can be commercially viable for so long is because 95% of it is recycled.
I told my friend, now that you are armed with the basic knowledge of batteries, you can judge for yourself which battery maker has brighter prospects, and hence higher market value in the near future. He can also decide for himself whether battery leasing is a viable business in the next 5 years. One has to bear in mind that battery costs today is 10% of what it used to be just a decade ago. Had it not been so, Tesla would have been history, imagine that! Finally, he can decide whether his next car should be an EV!
In the previous article, I commented that had BYD focused on batteries, they would have been valued higher today. Let’s talk a little about the market leader for batteries, CATL. This is a company that adopted a different strategy to BYD. CATL focused sole on batteries. It is the biggest battery supplier today. The founder of the company is the richest man in Hong Kong (he became a HK resident and citizen), overtaking Li Ka Shing. The company CATL was only listed in 2018, so it is a very young listed company, however, since then the share price has increased 160 times. This means that, if you had invested US$100,000 in the company in 2018, you can cash out for US$16 million today! Now compare that to BYD, which is worth 32 times more than when it first listed in 2008 (which, by the way, is itself a remarkable achievement), that is why some have argued that BYD would have been worth so much more had it focused on batteries.
CATL, including the years before it became CATL, actually has a long history. It started in 1998. However, over the years it focused on batteries even at times when this laser sharp focus was being tested tremendously. Together with LG Chem, Panasonic and BYD, they control 80% of world EV battery supplies. This stronghold is being challenged now that car OEMs are starting to invest in battery production as well, the most notable being Tesla.
Others planning to product batteries include Mercedes Benz, BMW, and VW. On top of that, battery technology is always evolving and so CATL has to continue to stay ahead of the competition and invest heavily in R&D. The product has to continually evolve, to have greater energy density, to be non explosive, to be cheaper, to allow for faster charging without accelerating battery deterioration, the increase charging cycles, to reduce in size and weight. Yes, customers want all that, and it will take a lot of skills, expertise, resolve, perseverance, to attain these goals.
As mentioned in the previous article, BYD is challenging CATL today with the blade batteries. As the founder of BYD said, the blade battery can make the battery explosion a thing of the past (刀片电池会让电车自然这几个字从字典里消失). In recent articles, it seems that CATL is also developing non-explosive batteries to challenge BYD’s. The most interesting development which CATL announced is the sodium battery aiming to replace lithium, which is becoming more and more expensive due to demand and supply forces. LG Chem’s problems in GM Bolt have also given BYD the edge over the Korean battery makers as the world gradually turns away from the Korean suppliers.
There are also more and more new entrants to the battery market but in the short to medium term, these small players are very unlikely to challenge the very entrenched positions of the big 4, namely CATL, LG Chem, Panasonic and BYD.
Many car OEMs have no reservations about using CATL batteries as compare to BYD’s, as I mentioned in the previous article, because CATL focuses on batteries and they do not produce EVs, so CATL is not a competitor in any sense of the word. That is why many stock analysts believe that, in spite of the 160 times share price increase in the last 3 years, the share price is CATL is still expected to increase 3 fold in the next 2 to 3 years, as demand of batteries surges due to the EV productions worldwide.
The future challenges to CATL will be potentially new and revolutionary battery technology in the hands of competitors (solid state batteries, possibly?), politically reasons as rivals may attack them for their close relations with the current president of China, or BEVs losing the race to FCEVs (which is very unlikely in my view).
Many of us know that Warren Buffett invested in BYD way back in 2008 at a time when even the most optimistic of EV proponents had not in their wildest dreams thought that New EV automakers would one day have market values much greater than the well established brands like GM, Ford, even Toyota. With the benefit of hindsight, we know that his investment had increased 32 times since, and we would probably be thinking on his behalf that perhaps he should have invested more than the 10%.
However, compared to its peers, BYD’s share price actually hadn’t done as well. As such, many, albeit with the benefit of hindsight again, raised questions about BYD’s strategy and asked if they should have done better if only they had focused on just making batteries instead of spreading their resources so thinly across so many product types. For those not yet in the know, BYD makes a lot of things other than batteries. They also produce cars (ICE, hybrids and EVs), electronics, phone component parts, and when COVID struck, they even produced masks.
Compared to CATL which makes only batteries, BYD’s market valuation is much lower. This could be hard fact for BYD to swallow as they are the pioneers of car batteries. It makes me wonder, if BYD had stuck to just batteries, would they be the undisputed number 1 today? The reality is that today, BYD is only number 3 in China for batteries. Though holding the status of being the first in China to venture into EV production, today they are still not the number 1 in China. Matter of fact, BYD started researching batteries 26 years ago and produced their first EV, months before Tesla even rolled out their first vehicle.
BYD has struck back with a vengeance recently with the introduction of the blade batteries, to rival CATL’s claim to non-explosion batteries. Indeed, the blade batteries are truly revolutionary and is a strong testament of BYD’s strong battery expertise. However, when compared to CATL, BYD does have a disadvantage when it comes to selling batteries to other car manufacturers. You see, car brands have no problems buying batteries from CATL or LG Chen or Panasonic, because these brands do not produce their own brands of cars, whereas BYD has how car brand and so car maker would be supporting a competitor if it buys BYD batteries.
What BYD has done very well is in the promotion of their electric commercial vehicles especially buses. It has a worldwide acceptance. To me, this is a very clever move, because the typical reasons holding back EV car buyers do not apply to the commercial fleets, especially government-run public transportation. There is not issue about range anxiety (public buses run on specific routes), second hand value (note that in Singapore BYD buses are expected to run for 17+3 years until the end of its useful life), payback period since the high mileage means that investment is recovered quickly.
I have a lot of respect for BYD, especially their persistence and perseverance, from the days when everyone doubts their ability to survive, when everyone doubts their vision of an EV future. When it comes to exports, BYD share the international market essentially with only 2 other Chinese EV makers namely MG/SAIC and GWM/Haval. The rest of the EVs offered outside of China come from the traditional car makers from Europe and a few from USA.
Of late, BYD has entered into strategic partnerships with well known car companies, for example Mercedes Benz, and that should pave the way for BYD to further strengthen their position in the EV battery market in the near future.
A business associate shared with me the news of Xiaomi's planned foray into EV manufacturing, and asked me what I think of it. I have heard about this plan quite some time ago, but had thought that it could go the way of Dyson and eventually abandoned. However, with more news coming, it seems like this is for real and we could eventually see the Xiaomi car rolling our of the car plant. That got me thinking, why would a smart phone maker want to design and produce cars?
There seems to be no synergy here. Delve further, and you can find news about search engine companies like Baidu wanting to get into car production as well. Apple had plans to be involved in the EV business too but that enthusiasm seems to have fizzled out. I can go on and on, Google, Tencent, Alibaba, and so on, why do they want to be part of the EV production?
The motivation behind these tech companies wanting to participate in EV is to find new growth areas. As Xiaomi hinted some time ago, the room for growth in smart phones now is very limited, at best you go for bigger screens, faster and wireless charging, better cameras and so on, there is not much Xiaomi can do to revolutionize the market. However, in the EV business, car makers need to work with software suppliers in order to produce the modern car which would gradually bring them closer to autonomous driving, all of which requires digitech which the car makers do not have. Car makers are good at producing cars that run well, are safe on the roads, can cater to and adapt to diverse driving habits and yet operate well and safe. What they do not possess is digital skills and technology. So they have to work with the software suppliers and new digital communications players.
Cars now require Apple Carplay and Android Auto, and the EVs are built like a smart phone on wheels, there in lies the connection between cars and Xiaomi, and offers Xiaomi potentially a growth market. However, I question the need to get into car manufacturing, why not just form alliances with car makers, so that the car makers bring the cars to the table, and Xiaomi put in the communications technology for the connected car? In this way, Xiaomi can offer their expertise while the car makers offer theirs.
Some tech companies I spoke to seemed to have this belief that for EVs, the car becomes a much simpler machine and the entry barrier is lowered such that new players can come in to challenge the traditional car makers most of them with many decades of experience in car manufacturing. No need to worry about the entire ICE system, the technology, the supplier chain, the knowhow, when you take that entire system out you have a much simpler car design, and so the tech companies think the simplicity allows them to enter the manufacturing side. Well. not quite. Even Tesla struggled for years before getting on track somewhat. Even today, traditional car makers still have a clear edge over new players like Tesla in terms of design and quality. What Tesla wants to offer is revolutionary stuff, and Tesla has to keep going that direction to stay relevant, because if Tesla starts to compete with the VWs and Toyotas and Hondas in terms of EV built quality, that will be end of Tesla. The decades of car manufacturing experience cannot be copied overnight, Tesla will need many more years of learning curve to be on par with the traditional car makers.
Car manufacturing is a complicated business and it takes years to learn, that is why I think Xiaomi's ambition to build cars may eventually destroy them, unless they are going the route of partnerships with established car makers.
A few days ago, a good friend complained that he had missed the opportunity of Tesla's stock rise. He once held a lot of Tesla shares. Later, when he saw Elon Musk constantly making wilful comments in the media, he felt that there was something wrong with the company.
After careful consideration, he decided to cash out all. Later, the trend of Tesla's stock had saddened him. Not only Tesla's stock did not fall, but it rose sharply. He couldn't sleep well for several days, and kept blaming himself for being too sloppy at the beginning. Tesla shares should be sold. As for me, I also suffered, and I had to listen to his constant complaints patiently.
Is Tesla's stock price soaring because of his sales? Here, let’s talk about the top sales of electric cars in China. What kind of car is it? Is it Tesla? Tesla has a real price advantage after domestic production (made in China). Is Tesla the top sales of electric vehicles in China? the answer is negative. The sales champion is actually Wuling Hongguang MINI EV. The sales volume of Wuling Hongguang MINI EV can reach 2,000 units in a single day, which is much higher than Tesla’s sales in China. Let’s talk about why this sacred car is favoured by Chinese consumers, and whether this sacred car has a chance to go abroad to create the sales miracle in overseas markets.
Speaking of Wuling Hongguang, I have to mention the miracle created by the previous fuel version in the Chinese market, becoming the country's highest-selling model. Continuing the great achievements of this car, Wuling Hongguang MINI EV, with its own advantages and very clear market positioning, has created another great achievement for Wuling. How did this car become such a successful model?
First of all, this sacred car is really cheap. The entry-level version is less than RMB 30,000, which is not much more expensive than a motorcycle, but it is still four-seater, so you don’t have to worry about being drenched in rain compared to a motorcycle. The car reviews are basically still very positive, and the speed, driving feeling, quality, and still get quite good reviews. Of course, we can’t compare it with Tesla or other electric vehicles. After all, the market positioning is different and the price span is very large.
It is not so much a scooter in the coming era, as it is the leader of electric vehicles in the future, because to popularize electric vehicles, you must not only attack the high-end market, but must become a Volkswagen vehicle that everyone can have. This sacred car has everything it should have, a USB port, air conditioning, plus a few hundred renminbi, there is an iPad option, four seats, or an LCD screen. It's really not so fussy.
I have said many times that electric vehicles must be popularized, not just toys for the wealthy, they must meet the needs of the general public in their daily lives, and the price is reasonable, and this Wuling Hongguang MINI EV just meets the needs of consumers. .
特斯拉股价猛涨，是不是和他的销量有关呢？这里我们就来说说，中国电动车销量之冠，是什么车？是特斯拉吗？特斯拉国产（中国制造）后有实际的价格优势，那特斯拉是中国电动车销量之冠吗？答案是否定的。销量冠军其实是五菱宏光MINI EV。五菱宏光MINI EV单日销量就可以达到2000台，远比特斯拉中国销量高，我们来聊聊这台神车为什么会被中国消费者青睐，还有就是这台神车有没有机会跨出国境，在海外市场同样创造出销售奇迹。
说到五菱宏光，不得不提到之前的燃油版在中国市场创造的奇迹，成为全国销量最高的车型。续着这台车的伟绩，五菱宏光MINI EV 凭着自身优势和非常明确的市场定位，为五菱再创伟绩。这车到底是怎么成为这么成功的车型？