The state of China’s electric vehicle market with Robert Yu

Business & Technology

Auto industry veteran Robert Yu talks about the booming EV market in China, which sold a total of about 3 million cars in 2021, compared to the 800,000 EVs sold in the U.S. the same year. He speaks to Chris about the current market, and how firms like NIO and Xpeng are exceptionally well-positioned around the globe, and have recently begun entering into the European market.

Image via NIO

Below is a complete transcript of the China Corner Office Podcast with Robert Yu:

Chris: Hi, everyone. Thanks so much for joining us today on China Corner Office, a podcast powered by SupChina, the New York based news and information platform that helps the West read China between the lines. I’m Chris Marquis, a professor at the University of Cambridge Judge Business School, and today’s episode features a discussion with auto industry veteran, Robert Yu, focused on the state of the China EV market. Robert has worked 30 plus years in the auto industry. He spent 20 years at Ford and was the Executive Director of GM China, and then most recently, head of manufacturing for EV pioneer NIO. Robert provides an insightful overview of the booming EV market in China, where there are over 450 officially registered companies that have sold about 3 million cars in 2021. And for comparison’s sake, in the U.S., about 800,000 EVs were sold in 2021.

One of the interesting features of the China EV market is how wide the price points are, and we discuss which market segments and makes are doing well these days. For instance, at the low end, SAIC-GM- Wuling produce a Mini EV, which since 2020 has sold hundreds of thousands of units with a starting price of just over $4,000.

Another segment with tremendous potential is the mid-market where NIO and XPeng have no significant competitors worldwide as much of the EV companies outside of China, like Tesla, produce higher end offerings. These firms have just started to enter the EU market and it is likely their influence will spread throughout the world.

We also discussed auto manufacturing processes in China; from Tesla’s Gigafactory in Shanghai to the unique manufacturing infrastructure at NIO, where Robert headed manufacturing. NIO is actually pioneering an outsourced manufacturing model like Apple with its iPhones. Apple designs its products, for instance, in California, and then outsources production, for instance, to Foxconn. NIO has partnered with Jianghua Automotive Corporation, JAC, who has built an assembly plant for NIO in Hefei. We discussed the pros and cons of this outsourced model and its potential to spread to other automakers.

Thanks so much for listening and please enjoy the show.

Chris: Robert, welcome to China Corner Office.

Robert: Hi, Chris. It’s great to be here.

Chris: Great. Well, we’re really excited to learn more about the EV market in China. I’ve been reading so much about the explosion of EV companies, fast growth of the EV car market, it’d be great to just learn a little bit about this market. Can you describe the current position of the market and what the ecosystem is like?

Robert: I’ll be happy to, Chris. The Chinese EV market, certainly I think everybody have heard a lot about in the last few years, very dynamic. The volume has grew tremendously. I think this past year the EV volume in China, the sales was a little bit over 3 million units, that’s compared to the U.S. at around 600,000 units, I believe. And it’s growing basically triple digits really in the last five years, exceeding expectations even within China. And there are quite a few players in the Chinese market. The number of automakers specifically producing EV, it’s quite amazing that there are around 450 registered EV automakers. I’m aware of over a 100 of them that’s actually active and produce some sort of a product. So it’s very, very dynamic. The best sellers changes year over year. Everybody introducing new models literally very quickly and I think that trend is certainly continuing.

Chris: Wow. That’s like 450 registered companies. That’s absolutely amazing. Any sort of trends around that? I know China had a very active e-bike industry with, like, I think hundreds of millions of e-bikes, there’s other established automakers. Who are the players that are getting into this market?

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Robert: That’s actually a very interesting question. And certainly my knowledge is not going to be all encompassing, but you have traditional automakers, of course, globally, and certainly there are no shortage of startups in China. You may have heard of NIO, Xpeng, Li Auto, there are many others. Pretty well any traditional automakers that’s strong enough, if you will, technically and has the resources are getting in there. And then there are really a tremendous number of startup. They are just people with ambitions, people with technology getting in. The three I mentioned are very typical ones and people know about because they IPOed in the United States.

But there are quite a swath of EV entrants that are, as an example, EV bike manufacturer, and they’re pretty spread out throughout China. There’s also a few battery makers that I’m aware of, they are people that actually used to make motors. So it’s actually a very broad set of entrants coming in, and geographically quite diverse as well throughout China.

Chris: Very interesting that diversity. Are there any hotspots geographically? I know like Shenzhen, BYD was an early player there. Are some other regions, like around Beijing or Shanghai or in the West somewhere?

Robert: Well, I think the traditional major cities in China, such as Beijing, Shanghai, Guangzhou, Shenzhen, there is actually clusters of these hotbeds for innovative companies, startups. Currently EV is certainly growing very rapidly around those large cities. However, there are also other clusters more inland. There are several companies around Wuhan I’m aware of, and I heard there are companies in Xi’an. These are central China cities. I wouldn’t be surprised that there are actually quite a few around what we normally refer to as tier three cities. For example, I know a couple in Suzhou, China, and I know there are at least one near Nanchang. So it’s actually surprisingly pretty spread out geographically, right down to at least tier three cities.

Chris: Wow. That’s surprising. Well, I guess with so many of them it makes sense that they are spread out a bit. You mentioned a number of market leaders like NIO, Xpeng, what can you say about their position. Is there in some ways a top tier that those firms and maybe some other ones that people might not be familiar with? How would you think about sort of who the real important EV companies to know about are?

Robert: Right. Certainly there are various ways of looking at, if you like, to say tiers or segmentations. If we use North American or European market or so called mature market as a reflection and correlate with their segmentation, NIO, and Xpeng, and LI are not just well known IPOed in the United States but they are also essentially targeted throughout the premium segment, or I should say they are more focused because they do have products that are slightly segmented. These three companies are very visible and they target towards products that’s around, let’s say, $40,000 U.S. to about $80,000 U.S.. So in the U.S. there will be like upper segment, or you can call them premium segment.

Robert: Within China there’s actually several other EV automakers that certainly have the ambitions and have produced products in the same segment or higher, but China actually because the volume, it is a 25 million to 30 million per year car market, so with that volume it’s segmented more. So in addition to the three well-known; the NIO, Xpeng, LI Auto for the premium market, there’s quite a few others that… I’m sure there are more than what I actually know. And then there’s really several tiers of automakers we are product-focusing on different pricing segments below that, and that actually is a much bigger volume than most people realize.

Chris: So you mentioned a potential market of 24 or 25, that’s the annual auto sales in China?

Robert: That is the annual passenger vehicle.

Chris: Oh, passenger vehicle.

Robert: So if you include a commercial vehicle it would be well over 30 million. Right now I think we’re focusing on the passenger vehicle segments. So yes, in China this past year is 25 million. I think China actually reached, I believe it’s 29 million, approximately several years ago, before the economy got a little bit more challenging, the international relationship. So yeah, very large markets.

Chris: How many of those are EVs?

Robert: I believe this past year the retail market in China for EVs is a little over 3 million. It’s around 15% of the market already. So literally in about three years, they went from about 2% or something like that. Low hundreds of thousands of EVs in about three to four years, now they are over 3 million, and around 14%, 15% of the passenger vehicle market.

Chris: How does that compare to other major markets? Do you have any idea in the U.S. or EU? Do you have those numbers off the top of your…

Robert: I would not be able to remember all the specific number but I can give you sort of the range. U.S., as an example, last year sold around 600,000 in total. Actually it’s one of the highest growth year. U.S. essentially started selling EVs actually ahead. So your word, there’s actually other company other than Tesla that have put out EVs before. So if I used roughly this past 10 years, essentially the EV market went from hundreds type units to now 600,000 in about 10 years. In China, basically there were probably EV products being introduced maybe as early as seven, eight years ago. There may be some earlier but the ones I’m aware of maybe first started about seven years ago. So in about seven years in China it grew from hundreds, if you will, to over 3 million. So you can see the growth rate, it’s rather incomparable when you look at numbers strictly.

Chris: Wow. I’d be interested to hear a little more about the different segments. I know in the U.S. Tesla, sort of the price wise at least it started out as a very premium brand. I think even more expensive than some of the NIO and Xpeng that you mentioned, they are selling $40,000, $50,000 U.S.. In China, I know Tesla has opened this Gigafactory in Shanghai. Where would you put Tesla’s competitors in China? And then also interested to hear a little bit about the lower price. Is there a segment of cars lower price than NIO and XPeng that are being sold?

Robert: Yes, no, that really it’s a very interesting and salient point. Tesla in the U.S. is clearly premium. Certainly it has a lot of cache, a lot of brand recognition, not just technology but pricing. In China, that segment, identical pricing exists, so for the income level of Chinese, that’s actually even a higher segment if you actually look at the buyer’s income to the vehicle price. So if we call that premium, in China, because the volume, they are several tiers, just to give you an example. I guess we can look at it this way. In China, the two highest volume vehicle EVs, it’s actually not the Tesla segment, it’s not the NIO segment, it’s not the XPeng segment, the top selling vehicle it’s actually SGMW, sometime called Wuling.

And that vehicle EV it’s around $6,000 U.S. and it sells about 50,000 units a month. I think this last year they sold around 400,000 units, and that’s a $6,000 to $7,000 EV. And I believe the second highest selling vehicle is the BYD Qin, and that vehicle it’s around $28,000 to $35,000 U.S. approximately. So that actually it’s essentially two vehicle pricing segment below. Certainly the Model 3 is a model of Tesla. And there’s actually more segmentation going down. So if you look at China and you look at the top selling vehicle, you will see much more volume below the Tesla, the NIO ES8, the Model Y, that segment. So the example I’m giving you, the SGMW Mini, $6,000 equivalent.

So you can see the pricing from about a $100,000 per vehicle literally go all the way down. I’m actually aware there are EVs that’s selling for about $4,000. And there’s lots of volume actually between about $25,000 to about $35,000. That range, there’s several models that sell well over a 100,000 units a year. Hopefully that gives you a feel of the segment and the volume in China for EVs.

Chris: Yes. Super interesting. I’m wondering, with all that diversity, is there any standardization on the plugging, ways to plug in the EV? I’ve heard some in the U.S.. You know, Ford was just introducing a truck and I think there’s issues where they can’t plug into the Tesla because they don’t want to pay, I guess, some licensing fees and so maybe they setting up their own infrastructures. How is that playing out in China as far as the charging infrastructure and sort of adaptability of the ways that cars charge themselves?

Robert: Yes. I think that is an evolving standard I think worldwide. However, in China, the government is very active in setting the standard. So the Chinese government has already set a pretty specific standard for volume EVs. Essentially, probably greater than 90% of the electric charging polls or charging stations throughout China all have that standard, and most automakers when they produce EVs, design EVs, they also use that standard. But there are various automakers who they want higher performance, they want their technology to be adopted, they believe their technologies are more advantageous to other, and certainly Tesla is the best example. Tesla, they do have their super charging network and Tesla has their own standard that they would like as many people to adopt as possible.

But in China, the different standard it is still an issue but it’s lesser of an issue compared to, if you like, the United States and Europe. Over time each continent has essentially sort of like, you can say, top one or two standards emerging, while in China you clearly have the government standard emerging as the top. Europe has their own. There’s really almost no difficulties to find the charging poll where your plug will physically fit and allow you to charge. Certainly, I will say, tier one, tier two city, it’s pretty well almost there. Tier three cities and below it’s different and you still see different automakers, whoever was there, they are the earlier versions.

Chris: Really interesting. I guess it doesn’t surprise me but very interesting thing to think about sort of how that actually helps the Chinese market grow. And for consumers, if there’s a lot of charging infrastructure, it makes it a lot more easy decision. Is there any government subsidies or sort of benefits to consumers for buying EV?

Robert: Yes, certainly Chinese government with this whole EV industry, this market, they are actually quite active and proactive. So the Chinese government’s heavily involved. They certainly has put a lot of incentive to help develop the industry, to develop the market, the consumer acceptance, setting standards, and all of that. And they have continued with the incentive, although pretty well all the consumer based incentive are phasing out.

The government actually tried, at least I can remember two other times in this past five years, to turn off the incentive. They turned it off and then they turn it back on, but they are currently seem to be very committed and the incentive is phasing out, There are several different incentive and there are still some provincial incentive but largely the incentive will be phased out in the next couple of years. The producer incentive actually has already evolved into somewhat of a mirror-based and long-term planning type. It’s not really available to anybody that wishes it anymore. So that is phasing out as well. That one I do not know the timing but I know the classification. The measurement to give producers incentive, it’s much more stringent, and that is phasing down as well.

Chris: Great. Would like to learn a little bit now about your role at NIO. I know you were relatively early in the company’s history the head of manufacturing, which was done in a really unique way compared to the auto industry overall. Can you describe your role at NIO a bit and what their approach to manufacturing was, or is?

Robert: Yes. I was the head of strategic manufacturing program. We internally referred it to as the campus program. I was responsible in setting up NIO’s internal manufacturing, and that is because NIO entered the market leveraging the strategy of outsourced assembly of its vehicles. In fact, NIO currently all the products still come out of their partnership program with Jianghuai Automotive, also known as JAC. So NIO does not manufacture its own products. It does pretty well everything else, but the manufacturing engineering, the facility and all that, it’s actually entrusted to its partner.

That model is somewhat similar to Apple iPhone, or iPad or Apple laptop, if you will. Apple, pretty well, does not produce most of its products, actually, they are produced by various companies. Typically people hear about Foxconn Electronics. So NIO use that model. It’s a light asset model and it leverages partners with more manufacturing expertise to themselves. I think it was a good way to start. And I was responsible to design, develop structure, organize NIO’s own manufacturing which is now underway.

Chris: Okay, got it. That’s really interesting. I mean, obviously I’ve heard about Apple’s work in the supply chain, which is really innovative, but I don’t know many or any other car companies that do this, and it seems that car sort of factories are sort of much more specialized and sort of specific to the type of car than maybe a cell phone or something like that. Can you say a little bit more about maybe how widespread this is in the industry and how they came up with, or how they found their first partner to do this?

Robert: Certainly. Actually it is quite rare in the automotive industry to have a different company assemble or produce your product. And you’re absolutely right, cars or automotive products generally have a lot of complexity. There’s a lot of, not just the traditional precision, there’s fit and finishes. There are products you actually have to sort of feel it and look at it. So it may not be as precise as a electronic product but actually it has many, many quality implications and technology implications, therefore… And the parts sometime are very expensive and large, so it’s very, very rare. But it’s actually not something that only happened recently. Magna, for example, has produced vehicle in Austria for Mercedes, BMW, Chrysler probably as early as about 25 years ago. The Graz plant actually, I think roughly that’s when it started. So it’s few, it’s rare but it has been in existence.

In the long run it’s generally not the method that most strategic automaker will go under. There are just a lot of things that needs to be controlled. And as you introduce new product, they are just fixed investment that you cannot avoid, and continuing to have this done by another company, it’s questionable what you get and what you give. So I think most automaker will continue on using that model. Although I will see, I think, maybe more startups, and certainly in the EV arena, having outside company manufacture the vehicle. I think we will see more of that.

Chris: That makes a lot of sense. As you get started maybe you don’t have to have the capital or even the expertise. If there’s companies that have this expertise already, it’s actually a real simple way to ramp up your production a lot easier.

Robert: Right. Right. And also if there are products that go through changes a little bit more frequently or lesser volume, it actually does make sense in certain business cases.

Chris: You mentioned this JAC company, are they working with other automakers as well or other companies in China pursuing this same strategy?

Robert: Yes, JAC actually has a partnership with Mercedes. My apologies, I think it’s actually Volkswagen. My apologies. JAC on its own actually has another specifically EV joint venture going on. Most recently I heard that they are talking about maybe changing the ownership structure a little bit, but it’s an ongoing program. And JAC has actually done some other program for local car companies too. So it’s a company that has a little bit of experience in that, and they were open to partnership with NIO, as an example, but they certainly… It’s not excluding pursuing this type of model. And certainly the partnership structure is something they seem to be open to. And they are quite competitive in general on a cost value basis as an automaker.

Chris: You mentioned about 450 registered auto companies, maybe 100-150 or so I think you said are active. I’m not sure if you have a sense, how many of those are actually trying to build their own factories and facilities versus do some sort of outsourcing model like this?

Robert: It’s difficult to talk about the numbers. What I can describe is that the one that I came across and have some knowledge, most of them are building their own plants.

I’m actually only aware of few that is actually going toward the contract bill model. And even out of that, just to give you an example, I mean, XPeng started that way as well but they literally started to think about their own plant and their own cooperation very, very shortly after they started kicking off the program. For example, early days, they had their products produced by Haima, which is a car company on the Island of Hainan, but they very, very early on started to plan out their own manufacturing facility. I think they are actually building their second one already. So I know some that’s pursuing the outside construction model. I’m aware a couple of EV makers in North America that’s doing the same, but I think in general they are a smaller portion compared to automakers pursuing their own manufacturing operations.

Chris: Interesting. Wow. Another sort of topic that I’m very interested to talk to you about is, these companies have been very successful within China and I’ve read that some of them are going to potentially start entering the European market. Like Norway, for instance, I just read that huge percentage of their car sales are EVs these days. Obviously Norway is not a very large country so I don’t think the overall numbers are too huge. However, I’m wondering about… I think I read that some Chinese companies are going to enter Norway. What’s your sense of how the Chinese companies are going to start expanding to other markets like Europe or the U.S.?

Robert: I think that certainly it’s just a matter of time. Several EV automakers have already entered, as example you give Norway. There’s actually several European nations they at least have begun the process pretty far down the road to allow various Chinese automakers to start exporting EVs to their country. I think, other than Norway, I believe Finland and Denmark, they may have even already begun importing EVs into them. So it’s beyond Norway already. NIO and XPeng, both of them, are in at least two countries. They both are at least in Norway. I don’t quite remember exactly what’s the second market they are into, so they already in there.

But what’s interesting is, actually there are several other EV automakers in China that are already in various countries in Europe. BYD, Shanghai Automotive, and GD, through their different brands, they actually have exported EVs to several European countries. They are in smaller volume. They are lower profile. I think they are experimenting with the market a little bit, learning about it, and they are waiting for their product portfolio to gather up. So I think for most of the EV automakers, they would like to be as global as possible. Europe is a good place to start, but they have quietly started in several other countries other than Norway already.

And some of the Chinese automakers such as China Motors, SAIC, which is Shanghai Automotive, they also have exported products in some of the countries in Asia. So I think if the geopolitical tension and the trade concerns with U.S. did not happen, we probably would have seen a few brands of Chinese EVs reaching in the United States as well.

Chris: So interesting. And I’m curious, them entering the European market… My experience most of my life has been in the U.S., usually Asian companies come in with value based products in sort of maybe sometimes a lower price segment. Is that where they are targeting in Europe? I mean, it seems like with the breadth of the products that exist in China there’s a variety of different positions they could take.

Robert: My understanding, my observation is that in Europe, most of the Chinese EV makers are targeting, or are at least starting with a higher segment as well. Both XPeng and NIO, as well as SAIC, they are putting out the higher priced product into Europe. And that makes sense. It is new technology. The lower priced vehicles the technology tend to be slightly less competitive. And I think for European markets that makes sense.

At the end of the day, volume is a big deal on how to make profit in the automotive market. In the U.S., if you look at the EV, it’s evolving the same way. I think most of the Chinese automaker, if they come through the United States or North America, it’ll be somewhat similar, but I think the longer term ambition certainly is not limited to premium vehicles. I’m aware of several of the major EV automakers. They are really coming down one segment at a time introducing new products at the lower price positioning points and larger volumes. That is just happening. I think it’s a good strategy. So Europe will see more of that lower priced product in some progressive manner.

In Asia it’s a little different. Asia seems to be more encompassing in terms of the varieties of the price of the EVs. And certainly right now that’s a smaller market, and I think to some extent there’s some experimentation going on there. The U.S. is working actually very similar. It’s a mature market. U.S. is actually very unique, but if you think about Tesla being the very clear success example, they actually started with a high end vehicle as well and they are working themselves down, both in terms of size and price point. So I think that all makes sense.

Chris: Yeah, that’s really interesting. Given your earlier comments I would have maybe predicted they would try to enter with more of a value play in some ways, but it’ll be interesting to see how they do in the higher price segment too. Given what you said about being sort of the advanced technology, that certainly makes sense. And I think that for the longest time, as you know, Korean companies expanded around the globe, Japanese companies obviously expanded around the globe earlier. There weren’t that many Chinese companies that were seen as brands that people really wanted and this might actually be sort of a turning point in that of Chinese brands, so really interesting.

Robert: Yeah, actually, Chris, I think that’s a very keen observation. With the traditional products, the so-called ICE, internal combustion engine products, I think customers over time, and knowing the product, growing up with the product, they know very well the level of technology, the level of quality, the reliability, the durability. EV it’s essentially a new technology coming in. And so Chinese coming in as a automaker in this overall landscape, it’s somewhat even footed, even basis, as comparisons for the actual product. So there isn’t a lot of inherent disadvantage, I think, and I think the Chinese EV automakers entrepreneurs seize the opportunity to do this.

I think there’s still a perception difference. I think people will recognize Tesla has the edge and so on and so forth, it’s most advanced, but the gap is much, much smaller and the value proposition it’s also closer and easier to manage. So I think that’s something I think you very keenly observed, and I think that is going on and they are taking advantage of this and has sort of shortened the gap of brand recognition and brand building.

Chris: I’m really curious to see how that plays out. I think that’s really going to be interesting not just the global sort of ecosystem of auto manufacturing changes but then sort of the role of China as a leader in that. It will be really interesting to observe.

I’m interested as well… You mentioned the internal combustion engine cars, and I know a lot of your background actually you had sort of decades of experience at both GM and Ford, and I’d like to hear a little bit about your experience there. I know some of it was in China. One of the things that always surprised me in the time I spent in China was that the manufacturing in China, the amazing factories in Southern China that are producing electronics, you know the iPhones, some of the most state of the art electronics are produced in China, but it seemed a real struggle to actually produce really high quality cars, at least of the Chinese brands. I might be off on that a bit, but it seems that they are taking this opportunity with the EVs in some ways to leapfrog the internal combustion engine technology, which from what I understand, actually it’s harder to make internal combustion engines cars than EVs, and so it makes a lot of sense to really forget about that older technology.

Robert: Yes. Certainly I have spent more than 30 years in this industry now. 20 years with Ford, a few years with GM, and then the rest of the time I spent managing automotive companies in China. And I will say, the first 20 years of my career, things were relatively predictable and the competition is actually quite fierce, and technology and quality performance were moving quite fast, but in comparison, nothing like what has happened in the last 10 years.

I spent the last 15 years mostly in China and I saw the evolution and the revolution firsthand. And in China it’s actually quite amazing because seeing things from basically zero to one, started with a white piece of paper and then seeing things develop around the Shanghai or the Yangtze delta area in terms of EVs. Very early days I had the opportunity to see what’s in Shanghai, in Nanjing, which is also a big area of EV automakers, and then Guangzhou, and Shenzhen. And then up in the north around the Yellow River delta, the Bohai Delta, I guess sometime it’s called, which is Beijing, Tianjin those kind of area. I saw these little companies grow up in a very challenging environment, and then quite a few of them succeeded, or maybe at this stage you say, well, have to have survived the initial test, and they are now producing some pretty amazing products. So the growth in the capabilities is actually amazing, both in terms of speed and quantity, and the level of capability and capacity.

So in China there isn’t just one area, as I mentioned, there are several areas with multiple EV makers; battery makers, electric motor manufacturer. And the internal combustion engine, I guess it would be premature to say it’s not a focus, but certainly the money, the expectations are all in EVs. And the Chinese automotive industry I think as a whole has taken that leap into EVs. So internal combustion engine is something that really it’s a reality, it’s still there, you know, for heavier loads and things like that. For currently lower costs it’s still there and will continue to be there for quite a while, but the percentage of EVs, the number of EVs in all segments, including commercial, including heavier capacity, that is already in some special purpose vehicle, commercial vehicle already see the beginning, or you can say, momentum starting.

There are just a whole bunch of thing going on. And a lot of the barriers were internal combustion engines that 10 years ago these Chinese automakers were working on, they are literally just keeping it run. They are no longer putting the R&D dollars in there. They no longer updating their manufacturing facility. They are putting their focus on the new technology. And certainly at this point it look like we’re pretty well at the tipping point. It tipped in China, now it’s ready to tip globally.

Chris: I’d like to hear what’s your sense of these incumbents that were maybe not international standard level internal combustion engine makers are now sort of shifting to EVs and you have sort of new companies like NIO, XPeng. How do you feel about the competition between those? I know in the U.S., GM had a EV I think it was in the 1980s, but really there’s studies sort of when you have commitment to one technology, it’s really, really hard to introduce some new disruptive technology, so you need new entrants to come in, like Tesla, to really sort of shake things up. That’s happened in many industries. In China, do you think maybe the incumbents are going to be able to make that shift in a more, I don’t know, quick way, maybe because the government has placed some emphasis on it? I’m curious what your thoughts are of legacy incumbents versus newly founded firms.

Robert: That’s going to be an interesting situation that remains to be played out. My personal opinion is that there are going to be winners and losers. I see certain traditional automakers in China, I see they were sort of left behind but then in the last three years they really put a lot of effort and they are catching up rapidly.

In my mind one of the best success example is actually BYD. Most people don’t realize BYD have been building traditional vehicles, they still do right now, but they were actually a completely internal combustion engine manufacturer for over 10 years now. Of course they have electronics and electrical DNA in their competency. So they were one of the earlier people that went inside, but they didn’t put all sorts of money in there initially, they sort of took a steady approach. So they are an example that a successful switch because of the DNA.

But then you also look at Shanghai Automotive. SGMW is partially owned. I believe Shanghai Automotive owns around 30% and I think GM owns around a little over 30%. They are roughly equal ownership. They are the two big stakeholder of SGMW, Shanghai Motor Wuling. I believe that’s sort of the structure. That’s a company that people kind of didn’t give them a lot of chance. State-owned company, they didn’t seem to put a lot of effort in it, they are too slow, but Shanghai Automotive and SGMW, I think collectively they sold around 500,000 or 600,000 EVs last year.

Obviously there’s a big part, 400,000 is the SGMW Mini, but Shanghai Automotive themselves sold around 200,000 EVs. You don’t hear about it. And they have a slew of new EVs coming out. So I think all of the traditional ICE automakers…

Basically you got two groups. You got the state-owned group, much more massive. They are slower. And I think there are going to be some of them that certainly not going to do well because they clearly are too slow and they haven’t built up sufficient technical competency to go in there. Now that doesn’t mean that they won’t survive but they certainly have lost on getting onto first base. But there are several others such as SAIC, such as Guangzhou Automotive, they have put a lot of effort. Guangzhou Automotive sold I think around 200,000 EVs also last year.

So there’s a few SOE, state-owned enterprise, automakers, large, a bit slow, but they sort of woke up. They are now getting onto first base. I will say a larger portion of them are struggling, the large ones. FAW seems to be just having problem getting good EV product introduced and so on and so forth.

And then there’s the other group of traditional ICE automaker that are privately owned, and out of those I see some players that clearly they will succeed as well. They are just not getting as much limelight. And then there are others that it’s questionable, in my opinion at least. You know, Great Wall, it’s a joint venture of BMW by the way, they’ve been selling the ORA Cat, and it’s just recently introduced. I think it was only introduced about a year ago. Last time I looked at their stats I think they already sold like almost 70,000 of those products. Geely as an example, their brand is a little bit more fractured, but I think collectively Geely they sold around 300,000 EVs too. They are under Lynk & Co. brand. They are under Zeekr brands. They are under GD brands.

So I think there are going to be winners and losers, and certainly the ability to actually develop the product, which means sufficient competency in the technology area, as well as actually marketing and selling a proper electric vehicle, because at the end of the day, it’s still the second largest purchase for most people. And to produce a product they want, not simply because it runs on batteries or electricity. There’s still a art and science to that.

So I think basically in the next year or two, I think there’s going to be some pretty major shakeouts. The 450, 460 companies, I think in the next year or two, it will probably be about one third of them that survives, and there’s probably going to be, I’m going to guess, maybe 30 active players, and then you go through some additional attritions going through that. It doesn’t have a very clear pattern of just categorizing; if they stay on, they will succeed, if it’s large traditional, they won’t succeed. It really has a lot to do I think with the leadership, with the ability to build competency. Still have that core competency of knowing what the customer want and how to produce a product that’s now both technologically and value wise what the customer wants.

Chris: Great. Well, I think with that you gave sort of a really interesting sort of landscape view of what’s going to likely happen with the next few years. That was actually what my next question was, so I think we’ve come to conclusion. Robert, really so much appreciate you taking the time to talk with us today on China Corner Office.

Robert: Oh, it’s wonderful. I really appreciate, Chris, you inviting me to this discussion. Thank you.

Chris: Great. Thank you.