Future of mobility, a deep dive into the forces driving the Chinese EV revolution with Tu Le

Hi all, I’m really scared to even share this episode because the last time I recorded an episode with Kyle Chan and mentioned cars, I got ripped online. So I just want to emphasize again that for car enthusiasts, I AM NOT A CAR person. I am here to learn.

Haha, ok now that I’ve made that disclaimer…

Joining me today is the ever-so-knowledgeable Tu Le. He is the founder and managing director of Sino Auto Insights, author of the SAI Weekly Substack, and co-host of the China EVs and More & At The Wheel podcasts.

He has worked across Detroit, Silicon Valley, and China, so he views the industry from the inside, through the traditional auto industry, the tech industry, and the Chinese market.

I wanted to do this episode almost as an educational primer, not just for you all but for myself as well. Most people now understand that Chinese EVs are competitive. But very few people understand why and how that is translating into the Physical AI space.

We talked through the Chinese EV landscape, why traditional OEMs struggled to make good EVs, how autonomous driving fits in, how these carmakers are integrating AI, and why home appliance and smartphone companies like Huawei, Xiaomi, and Dreame are suddenly making cars.

Follow Sino Auto Insights here: https://x.com/SinoAutoInsight

For consulting inquiries, go DM Tu Le on LinkedIn!

Website: https://www.sinoautoinsights.com/

Btw, I’m rebranding Differentiated Understanding to AI Proem Podcast.

To find the previous episodes of Differentiated Understanding, see here.

Every episode, I bring in a guest with a unique point of view on a critical matter, phenomenon, or business trend—someone who can help us see things differently.

Season two will host a series of guests from early-stage investing, as well as builders, researchers, founders, and product managers. For more information on the podcast series, see here.

Chapters

00:00 Introduction to Tu Le and Sino Auto Insights

04:28 Mapping the Chinese EV Industry

09:19 The Rise of Xiaomi in the EV Market

14:17 Understanding BYD’s Market Position

17:54 Challenges for Traditional OEMs in EV Production

31:29 The Role of Government Subsidies and Policies

36:12 AI Integration in EVs and the Future of Mobility

45:13 The Evolution of Brand Experience in EVs

46:53 The Future of Manufacturing and Market Dynamics

50:46 Safety Concerns in Rapid Development

52:51 Current Landscape of Autonomous Driving in China

57:51 Challenges in Deploying Autonomous Vehicles

01:05:00 The Future of Mobility and Urban Planning

AI-generated transcript (for reference only)

Grace Shao (00:00)

Hi Tu. Thank you so much for joining us today. I’m really excited to have you on.

Tu Le - Sino Auto Insights (00:04)

Thanks for having me on, Grace.

Grace Shao (00:06)

Yeah, to start, why don’t you tell us a bit about yourself? We were just having this conversation right before recording. I find your background really fascinating.You know, you can talk to a very diverse group of kind of people. You run a successful consulting gig, a consulting company. Tell us about everything that you do.

Tu Le - Sino Auto Insights (00:24)

So name is Tu Le I’m the managing director at Sino Auto Insights. I also create content. I run or I co-host two podcasts, China EVs and more, and at the wheel with my co-hosts that are very, very good at what they do as well. And then I write a weekly newsletter, almost weekly anyways, called Sino Auto Insights Weekly that just kind of goes over my thoughts on what’s happening in the industry now globally every week. And I’m actually not Chinese. I’m Vietnamese. And I was born in Vietnam and moved to the United States when I was a year old and grew up right outside of Detroit. My whole family, youngest of eight, whole family’s automotive. So grew up car kid and did that for a few years before going back to grad school and moving to Silicon Valley to work for seven years. So that’s where the knowledge of the tech comes in, especially the hard tech, where hardware software integration is such an important part of creating a great user experience. And then I met a girl and in San Francisco. my girlfriend, who’s now my wife, was transferred by her company over to Beijing, where she was born. And I decided to pull the ripcord and and follow her over. And what we thought was going to be a three- or four-year assignment ended up being thirteen. And during this time I worked in automotive; I worked at a few Chinese EV e-commerce startups. And so that’s when I learned and experienced nine nine six myself for about two years. And yeah, it’s not fun, super intense, but again I wouldn’t trade those experiences for the world because it gives me the perspective that I have now. about eight years ago I saw this huge disconnect because EVs were becoming a thing because of Tesla. Companies like NIO and XPeng had just been founded.

And you know, in Beijing, as you know, Grace, there’s a lot of the German OEMs, and so there was a bit of arrogance about how hard or how simple they thought software was and really, really being consumer focused as opposed to product focused. So I saw this opportunity, and I started this consultancy, Sino Auto Insights, and you know we’ve been growing since we’ve done traditional work. We’ve worked with the UK government, US government on things. And then also when I moved back four years ago from Beijing, I left during COVID. So August of 2022 and then November, December timeframe, China opens its border and says, What COVID? Come on in. So we didn’t know that was going to be the case. so we decided to move back. And we opened an office here in just outside of Detroit. And we’ve been helping more on the investment side, looking for investment opportunities, what’s around the corner, but also giving our clients a better understanding of the Chinese EV players and the battery players and what they’re doing outside of China. So it’s a very, very interesting time. The mobility space, as you know, Grace, involves now AI, silicon, data centers, data privacy, data security, batteries. So it’s just, just a tremendously unique sector that I get to be a part of.

Grace Shao (03:55)

Thank you so much for sharing your life story. First of all, kudos to your mother. Eight kids. Like, I don’t know how she did that. Like I have two and I’m already dying. And also, I love your personal touch, you know, why you moved to Beijing and just learning about your background. I think it’s super fascinating. You pointed one thing out. Like when I was living in Beijing in Shanghai as well, I met a lot of German OEM like employees and people kind of low key don’t know this, that there’s a huge German community i it in the huge like and and French as well. A lot of Europeans are actually working in China for these, especially like luxury vehicle companies. and a lot of them did relocate out of China during COVID times. And a lot of them I’ve even heard anecdotally from two friends who say they’re dying to get back because they were born in Munich or Frankfurt. just because they’re so bored.

Tu Le - Sino Auto Insights (04:23)

Huge. We hear those stories a lot, don’t we, Grace? We hear those stories a lot.

Grace Shao (04:48)

it’s just because it’s just the fast-paced energy in China. However, okay, COVID was crazy. China’s fast paced. Let’s get to that actual topic today. I wanna talk about EVs. I wanna learn everything from you. so before we get started, when we think of Chinese EVs, most people outside of China think of BYD. think of maybe like the few other ones you mentioned, like NIO X Peng. Now Xiaomi Dreame, which is crazy; essentially, these home appliance companies are going into the space as well. they are there are state-owned companies, there are old independent automakers, there are startups that we just talked about. And then some of them also produce batteries; some of them are, like I said, home appliance and phone companies. Basically, all of these different moving parts, they’re all coming into the same arena. Help us map out the industry first. Like to start with, who are the main players? What are the buckets? what does each group bring to the table or what’s their differentiating kind of offering? I know this is a very big question, but start with a big picture.

Tu Le - Sino Auto Insights (05:45)

So well, let me press rewind and kind of frame it and create more context as opposed to just we’ll we’ll zoom out and then we’ll zoom into the China market. So last year, twenty twenty-five, Toyota was the number one global automaker, eleven million units, around eleven, just over eleven million units. Volkswagen was number two at eight million. To give you a sense of scale, Tesla was one point six. million units and BYD was about 4.6, which makes them a top 10 automaker. The other top 10 automaker for the Chinese was Geely. Geely and everybody else outside of BYD and Tesla build ICEs and EVs. Or in China, they call them NEVs, new energy vehicles, which means that they’re battery electric vehicles plus plug-in hybrids, E Revs, and then fuel cells. So fuel cells, for our intents and purposes, are rounding error. So when we talk NEVs, we’re talking battery electric and plug-in hybrids and extended range electric vehicles. So Toyota’s been number one for a long, long time. And you know, the China market has been the number one passenger vehicle market since 2009, overtaking the United States. And now the China market is almost twice as big as the US market. If we add the European market, which is around 12 and a half, 13 million units, and the US market, which is around 15 and a half, 16 million units, it’s almost the same as China. And so the scale of the China market is enormous. And so to talk about EV specifically, I would create different sets of buckets. And I would look at BYD, Chery, Geely, Great Wall as separate companies, SAIC because they produce in the millions of units. Okay. And then this lower tier, I won’t say lower, but this other tier of EV makers, the NIO, the XPengs, the Li Autos, the Zekers, these are companies specifically that Western investors pay attention to because they’re traded publicly in the US. They’re in the hundreds of thousands of units. Go ahead. Yep.

Grace Shao (07:58)

I want to comment on this. So you’re actually separating them by the number of units versus their technology, because it seems like, just not like SAIC, they’re actually a traditional OEM company, but they’re also producing EVs, whatnot. So you’re actually categorized by number of sales versus, I guess, I don’t know, EV native like NIO and XPeng. Just help us understand what why that industry does that.

Tu Le - Sino Auto Insights (08:18)

so the automotive industry is very capital intensive. And so scale creates cost efficiencies. Okay, so if I buy 10 of something versus one of something, I’m gonna get a better price, generally speaking. And that’s why it’s so important that BYD has this enormous scale of 4.6 million units. And that’s through the traditional lens. Now It’s multi-layered as you’d mentioned. You know, they’re they’re EV only companies that we can talk about. But from the standpoint of scale and global reach, that’s where I’m really creating these separations because scale also creates flexibility because it’s gonna be harder for a company that only sells 300,000 units of anything to go global as opposed to someone that sells four point six million units of something.

Because these companies, the BYDs, the Geelys, the Leap Motors, they all already ship and build and manufacture outside of China. Big, big steps. And so those are really kind of the uniqueness to some of those top-level guys that have the sales volume. They have the ability to go abroad. Because think of it just from a number standpoint, Grace, if we have capacity of half a million units. You and I run a car company. Building a hundred and fifty thousand unit factory is a huge consideration for us because we have to find demand somewhere for that hundred and fifty thousand units. Whereas if you have millions of units, 150,000 units isn’t that huge in a grand s in the grand scheme of things of sales and distribution. And so that’s where it’s a little bit easier for these larger companies to really command, you know, the pricing scale that they can negotiate over some of those smaller players.

But you know, back to kind of how I would look at this. You know, the NIOs, the XPeng, the Leottos, they’re publicly traded in the US. That’s why there’s a lot of attention paid to them. But they’re still puppies. And you know, all of them shipped less than half a million units last year. Now Xiaomi is one of the newer players, but it is making a huge, huge impact because their automotive division, and you and I, I think, were there when Xiaomi first was founded in 2010 in Beijing. But their automotive division is less than six years old. And this year they’ll ship over half a million units. Contrast that with the NIO and XPeng, who’ve been around since 2014, 2015. They are barely shipping 500,000 units. So that tells you kind of the impact Xiaomi has had. Xiaomi only has two products. NIO and XPeng have four, five, six products. And so, now with Huawei, I would pull them into a very unique budget because they don’t build any cars. What they do is partner with other OEMs, whether they’re state-owned or non-state-owned, and offer the hardware and software stack. Okay. They call it HEMA, which is the Harmony in Mobility Alliance. And so there are companies like when you hear about Ito, Micstro, Stelato, Luxe; I won’t talk about who their partners are, but these are all using Huawei technology. And more and more, there are foreign companies that are using Huawei technology. So, Audi, I think Mercedes is using some of the Huawei technology in the China market. So we get into a lot of crossover when it comes to Huawei, because in order for Huawei to really, really legitimize their tech stack, they probably need more foreign automakers to sign up to it. And they’re really, really, really aggressive on trying to scale that part of the business because, you know, once they lost some of that handset business from North America. They try they’re trying to quickly find revenues to replace that. And I think focusing on the automotive sector was one of the ways they were thinking of doing that.

Grace Shao (12:33)

That’s super, super helpful just to get an understanding of the different buckets. so why is Xiaomi doing so well then actually? Because, you know, I saw a Xiaomi car, I think, maybe last year when I visited Beijing. It’s very sleek. It feels very nice, but just in comparison to Li Auto, XPeng, and NIO, which, as you said, they’ve been around for like more than a decade. They’re very, very they’re actually beautiful cars. I was quite like shocked when I first saw some of them during COVID time. Yeah, why is it that they’re just outbeating them? Is it because of the ecosystem? Is it because of what people are talking about with the control, the operating system? Because Xiaomi’s operating system is just significantly better because their software is better? Or what is it that’s driving consumers by them over others?

Tu Le - Sino Auto Insights (13:20)

So there’s a few things going on with Xiaomi. So the Su 7, which is their Sedan, if you squint, it kind of looks like a Porsche Cayenne. And then the U7, which is the yeah, so that helps, I think. And then the U7, which if you squint, looks a little bit like a Ferrari Purosangue, which is their Ferrari UV or FUV. So they

Tu Le - Sino Auto Insights (13:46)

Have borrowed design language from these two amazing automotive brands, and that’s helped them. But they have offered these vehicles at less than $40,000, starting at $40,000, with features that are very, very technology-forward. And one of the big reasons they’re successful is I bet. Grace, if I looked around your apartment, I would probably see a Xiaomi product, one or two at least. And in China, I didn’t know anyone who did not have some sort of Xiaomi air purifier, rice cooker, TV, computer, mobile phone. So the brand is ubiquitous in China. And that really helped Xiaomi when the vehicles launched, create this automatic instant demand because the brand is there: complete awareness of the brand, and there’s a lot of trust amongst Chinese consumers. And one of the important things about the China market versus the rest of the world is that anyone born after 1990 in China is a digital native. So they grew up with WeChat, Didi, Meituan, and Alibaba, you know, and Xiaomi. So, and these are all Chinese brands. So, they trust Chinese brands, not like their parents who only bought foreign brands.

And I think that’s the larger shift in the Chinese Chinese market across sectors, consumers goods, you know, technology, high, you know, consumers products, now automotive. But also Xiaomi is very well connected across different, you know, product segments. They have an app that controls everything; it extends into the vehicle, and you would call that a consumer-focused product company. I think that resonates with a lot of Chinese consumers. So the impact that they’ve made is enormous. I haven’t even talked about how cool the cars are or what they can do. They’re breaking records at one of the most historic racetracks in Germany, the Nürburg Ring, and they’re beating the pants off of Porsche. So if I am Porsche and I know that Xiaomi is entering the European markets, Germany in 2027, I’m pretty worried. Because Porsche’s not doing well in the China market. And I think that’s the canary in the coal mine for a lot of companies in Europe, that Xiaomi’s gonna be a major player as long as they can continue to build these cool cars.

Grace Shao (16:17)

Super interesting. I would wanna look I wanna talk about Chinese vehicles, Chinese EV companies going global and going to Europe later. But to start, I wanna talk about the hype that BYD gets as well. Some of them cost less than even a hundred thousand RMB. You know, what is it about BYD, and how to understand them from a business perspective as well? Like they create their own batteries. They are getting into semis. They have their, you know, their whole whole integrated industrial platform. Like help us understand BYD.

Tu Le - Sino Auto Insights (16:51)

BYD’s story is amazing. In 2009, my first day in Beijing, there were BYDs. I got into a I I want to say a BYD cab, and it wasn’t great. It was not good. You could hear the exterior, the outside world, pretty, pretty clearly. And I I wasn’t feeling that safe in the vehicle, to be honest with you. But fast-forward to 2026, and Let’s just look at the last seven or eight years. Before COVID, BYD was shipping less than a million units. They’re at four point six in twenty twenty five. We’ll likely get to five million. They’re gonna be exporting about a million of those, a little over a million of those. So they’re currently in over 100 markets. So they are uber aggressive. And to your point, they’re very vertically integrated. BYD started out as a technology company that supplied batteries and other components to companies like Apple, and I want to say like Intel, but they got their experience and their scar tissue from working with some of the toughest technology companies. And that’s really kind of created s this resilience and ability to grow and scale and stay aggressive. Now they created a monster because companies like Geely and companies like Leap Motor are right on their heels, and they’re actually not doing that well. Their growth is flattening out, and the competition in China is super, super intense, hence the importance of them to export. Wang Chuang Fu is the founder CEO, and Stella Lee is the head of international. They’ve made it clear that they’re targeting Toyota to become the largest automaker in the world. And three years ago, they were going to be number one with a bullet, but now we’re seeing, as they scale and that denominator gets much bigger, double-digit growth is much harder to come by. Competition is catching up. They created the competition. They really, really were catalysts for all these other companies to build these sub $100,000 or sub-100 RB cars that are. Pretty amazing. Now, you make a great point because in China, BYD is the mass-market value car. Okay. But it creates an entry point for Chinese consumers that wouldn’t otherwise be able to purchase a vehicle, especially in big cities like Beijing and and Shanghai, where it’s, you know, getting a license plate is a challenge. And then finding parking and being able to pay for that is also very challenging, especially if you live right in the city center. And BYD has really, I think, in 10 years, 15 years, we’ll point to BYD as a democratizer of many, many, many things, not just mass market clean energy vehicles. And their focus on going international really, really put them behind a little bit on the technology curve. And Companies like XPeng are leaning into the technology. And Wang Chuang Fu has acknowledged that they’re a little bit behind on some of the features that other Chinese automakers are providing in the China market. But he’s determined, with his over a hundred thousand engineers, to really push that envelope to catch up and surpass some of their domestic competitors. Examples, recent examples of that. They’re launching a megawatt charger, or they’ve launched a megawatt charger in the China market. And that’s basically charging as fast as gas. You can charge fully within six, seven, eight minutes. And then also recently, just last week, I want to say, their intelligent driving system is called God’s Eye. And they are now providing a year’s worth of insurance. If there are any accidents while you’re using God’s Eye in China. So they’re putting their money where their mouth is. You don’t see Tesla doing that. And so they are willing to take that next step that everyone else begrudgingly has to follow them on. And, you know, one of the important things in, you know, I’d mentioned ten years ago that in 10 years we’ll say they’ve democratized things. The other thing is they’re offering God’s Eye as standard on many of their vehicles. And so think of it from the standpoint of not only in China, but to your point, now in Hong Kong, in Thailand, in Latin America, these people that have a 10,000, 12,000, 15,000 US dollar car, they might be able to drive themselves or at least have portions of the road where the vehicle has intelligent driving capabilities. And if BYD doesn’t do that. Intelligent driving doesn’t happen in those emerging markets for 10, 15 years at least. So they’re really, really pulling, I think begrudgingly, a lot of their competitors forward on that technology curve. And I applaud them for that. Now, at 4.6 million to get to 11 million, I think Wang Chuang Fu and Stella Lee appreciate more the level of management capability and the operational efficiency needed, like by a Toyota, to get to eleven million units. And so, but they’ve doubled down, and it sounds like they’re still determined to be a top two, top three player in the next five to seven years.

Grace Shao (22:32)

That’s really interesting that you pointed something out, which I didn’t notice at all. It’s the fact that they’re democratizing the technology, so it’ll be very interesting that they will actually introduce the kind of next-generation technology to these markets. So I guess bringing down their price right now is a long term strategy because once you capture that. you know, mind share, then they could always increase their prices later on.

Tu Le - Sino Auto Insights (22:53)

One of the most important things, Grace, is that there are two emotional buys in a person’s life generally, and that’s a house and a car. And in China, I think there’s around 60 hours, I wanna say, of research being done online, at the retailer, test driving, before you actually pull the trigger and buy something. And so

Grace Shao (23:02) Yeah.

Tu Le - Sino Auto Insights (23:17)

If you and I- I don’t know if you have an iPhone or an Android phone, but if you lost your iPhone tomorrow, you’d be upset, but you’d walk into an Apple store and buy another one right away. But, you know, a car, people take consideration because it’s a reflection of who you are, who you want to be, you know, and really outside of your home and office, you spend most of your time in the car, especially if you live in Asia. And so That’s why it’s so important for them to be in these markets as a first mover. They create that awareness first, they build that trust first, and it helps them elbow out other players that might have equally impressive products, but because they came two or three years later, BYD already is in the mindset of a lot of these international consumers, especially in the emerging markets where a lot of times they’ll enter and six or seven months later, they’re the number one brand. In this segment, in that segment, or these segments that they enter.

Grace Shao (24:19) Definitely.

So let’s bring it back to traditional OEMs. You worked with some of them or you worked at some of them. Why did traditional automakers struggle to build compelling EVs now? Especially, you know, in China. The factories were there, the people were there. As you said in the beginning, you said some of them became a little bit complacent about the idea that, you know, Chinese consumers maybe just really liked luxury cars from Europe; you know, the default was buying Japanese cars for families. Why is it that almost every traditional OEM has produced a kind of crappy EV version?

Tu Le - Sino Auto Insights (24:55)

A lot of it has to do with, so let me first qualify this by saying if you ever talk to someone that tells you they predicted that the market was gonna move quickly over to clean energy vehicles in China, do not believe them because no one could have predicted how fast the market moved over in twenty twenty. We were in 2019, we’re at like one point two million units of NEVs relative to a twenty-two million unit base. Okay. And then in twenty twenty we were like one point three. Then we got to three point five, we got to six point five, we got to nine million, and last year we were close to eleven and a half, twelve, thirteen million units. And so we are currently over one of the inflection points, over 50 percent. So every one of every two cars is an NEV sold in China. Okay. And no one could have predicted that. So everyone was caught flat-footed if you’re a foreign automaker. Now let’s add in the fact that they’re analog companies, right? They’re not software companies. They’re not technology companies. And I bet today if you and I were to go into a boardroom or any meeting room in Detroit or Dearborn or Auburn Hills or Stuttgart, They’re still talking about the product. Okay. If we look at NIO, XPeng, Li Auto, their founders come from tech. Okay. They iterate. You know, they don’t, they, they ship product that’s good enough, and then they figure out what the bugs are, and then they create over there updates to fix those bugs. And whereas traditional automakers, they try to wring out as much profit as they can over a five-year period. And that’s because traditional product development cycles are a five-year period or a four-year period. The best company on the legacy side is Toyota, and they’re at around 30 months. Most good Chinese EV companies, like BYD or Zeekr, can go from clean sheet to job one. And job one means the first sellable vehicle off the production line. They can do that in about 15 months, which is absolutely insane. Now they don’t have the blinders on that say we can only do it a certain way. They’ve challenged everything all the way through. Simple things like where you might be you know a product engineer or component engineer and you you throw it over to me as a manufacturing engineer. Everything’s in serial. That’s why it takes so long sometimes. The Chinese EV makers, they do a lot of things in parallel; they simulate. A lot of safety tests, you know, validation to engineering validation tests, you know, manufacturing validation tests. They simulate a lot of that stuff, and it shrinks the timelines. And they treat manufacturing like a technology as opposed to, you know, an analog product. And if I’m being frank and honest, and I know that you want me to be that, the Volkswagens, the GMs, the Mercedes, the BM, they’re busy back in their home markets counting their money for a long time. You know, these narratives that they they steal IP. You know, is there IP theft? I think you and I would agree yes there is IP theft in China. But let’s qualify that: if there was IP theft in this instance, the Chinese automakers would make great ICE engines, right? Like gas engines, you would think. Exactly. So in this particular case, it it wasn’t because they stole this IP and it wasn’t because of subsidies. Because there have been subsidies since 2009, and it has been a substantial dollar figure, right? Tens of billions of dollars, if not hundreds. But if we look at Tesla, Tesla has not sold a vehicle.

Tu Le - Sino Auto Insights (28:59)

Globally without some form of subsidy. Okay. Full stop. They got their factory in Fremont for next to nothing. Shanghai Giga, tons of incentives by the local government. Li Chiang put that deal together. Guess what? He’s now the vice premier of China. So that was probably one of the reasons he got that promotion. So the idea that Chinese subsidies are bad, US subsidies are good, European subsidies are good. That needs to just stop. And at the end of the day, if you have those subsidies, it doesn’t automatically mean that you’re going to win. Because you probably remember this, Grace. X Peng Li Auto NIO in 2016, 2017, 2018, they were struggling. They’re almost bankrupt. And it wasn’t until December of 2019 that the first Model 3 rolled off the line in Shanghai Giga. That you really saw that hockey stick inflection point. Okay. So despite all the subsidies, despite all these promising EV startups, it took Tesla to really bring excitement to that market. And so you can credit Tesla for being the catalyst for EVs globally, not only in the United States, but China. I think we should acknowledge that they’re a huge part of why EVs became a thing in China. Now, because of the competition, all these competitors came in because of the subsidies, because of the the the RB that was being given out by local governments, you had a ton of players come in. And last year it got so competitive that the Chinese government was like, no mass, no mass, no involution. And so we have to acknowledge that the China market acr across a number of sectors, not just automotive, is likely the most brutal automotive market in the world. And if you’re able to survive out of this mess, you’re gonna be a very, very formidable competitor outside of the China market.

Grace Shao (31:15)

Definitely there’s the Musk effect, I think, on you know, Tesla bringing out EVs, and now we’re seeing that with humanoids again. Cause with Elon Musk obsessing with humanoids, we’re seeing the world obsessing with humanoids. We’ll talk a bit about that later. I appreciate you giving kind of the backdrop of the history of China’s EV space. Tell us about the industrial policy push though, because you mentioned subsidies as a very vague term. But what kind of subsidies or industrial push do you think China actually gave this industry to bolster it?

Tu Le - Sino Auto Insights (31:48)

The Chinese government has the ability to long-term plan. That doesn’t happen in the United States. Unfortunately, and it’s really costing us in a lot of areas and sectors. And we’re seeing these sectors that would normally be pretty strong be a pretty competitive struggle against the Chinese. But l let’s say in 2009, the Chinese government looked at manufacturing as a pillar industry. That supported jobs. And within the manufacturing sector, they wanted to become number one in batteries, number one in silicon. And silicon fabrication. Not only silicon design, but silicon fabrication, automotive EV manufacturing, and then, you know, and that all supports this notion that they’re the world’s factory. Okay. And they doubled down on that. Now The types of subsidies, whether it’s tax abatements for land, whether it’s discounts on building factories, whether it’s purchase subsidies or you know, tax abatements for the consumer who don’t have to pay taxes on buying EVs. To your point, in Hong Kong, same thing, right? Similar things going on. I I wanna I wanna stress that anywhere in the world, emerging technologies, in order for them to become really ubiquitous and blossom, governments need to put their thumbs on the scale. Okay. So it’s not just a Chinese thing. The United States was ready to give consumers $7,500 for every car, every EV that they bought. Okay. So it’s not just a China thing. Norway, which has a ton of oil money, used that oil money to subsidize EVs. And now the take rate in Norway is over 90%. Now their market is tiny, 400, 500,000, 600,000 units a year, but nonetheless, it’s another example of the government putting the thumb on the scale. In Germany and other parts of Europe, there are also subsidies for EV purchases. And that’s also when you saw growth rates a little bit higher than they are now because they’ve taken away a lot of those subsidies. So again, emerging technologies need help. And normally the governments in any one of these countries need to step in. The exception is kind of the UK, which has done pretty well on EV adoption, the growth of EV adoption, despite not having a ton of subsidies on the consumer side. But that being said, it these subsidies, this focus, this diligence, this perseverance, this investment over time. It didn’t look like, let’s say, 2010, 2012, 2014; it didn’t look like it was going to really, really work out that well. And then all of a sudden COVID happens, and you get this huge spike in demand for electric vehicles or clean energy vehicles or new energy vehicles. Now, my quick story. You know, it’s it’s a

Grace Shao (34:51)

Why is that?

It’s like we’re locked in our homes. So why do we need EVs?

Tu Le - Sino Auto Insights (34:58)

It’s a weird phenomenon and and I haven’t read anything or talked to anyone that can I you know, I th we can try to theorize. For me, it’s like, yes, we’re locked in. I wouldn’t say we’re locked in our homes, but we’re locked in the country, and we don’t travel, so maybe, you know, we spend money on something that we think might make us happy or something like that, right? Like, I can’t tell you why outside of, okay, Tesla starts building in 2020. And and and a quick story about my COVID experience. My family went back to Michigan. So I was sending my kids to a local school. So they had basically the month of January off in 2020. We were going to go back to the United States for three weeks to visit family. And the return flight was canceled. After two weeks in the US because China was starting to have COVID. And we bought two two one-way plane tickets that were canceled. And then a third one where we finally got to fly into Narita, stay there a night, fly to Shanghai, and then to Beijing, and then quarantine for two weeks. And we didn’t leave China for two and a half years at that point. The day we got back, the day after we got back, the Chinese government closed the border. And during that time, Grace, you saw more and more and more of these green plates. And I I was just amazed because think of all of the things that need to happen for demand and supply to work together. Because it’s not just, okay, we can produce these things, no problem. There needs to be charging infrastructure; batteries need to be scaled up to support, you know, the EVs. And then creating this awareness, creating this excitement. The NIOs and XPengs and Li Autos weren’t able to do it on their own. The BYDs weren’t able to do it on their own. But on the backs of the the the Chinese consumers really, really trusting the Tesla brand. And we’ve seen that the Tesla brand in the China market is extremely resilient because they’re still selling quite a few, despite not upgrading their vehicle or updating their vehicle in a number of years. And so it is a strange phenomenon that I can’t definitively tell you why. I just know I saw more and more green plates when I was in Beijing and Shanghai over twenty-twenty through twenty-twenty-four or twenty-twenty-two, so.

Grace Shao (37:41)

Yeah, it’s an interesting phenomenon. And like every single tech founder or AI founder I’ve ever met basically says they drive a Tesla. So contrary to what you were saying earlier, you’re like, a lot of Chinese younger generation actually prefer the Chinese consumer brands. There’s something about Elon Musk and his brand in China. People like love it, worship it, wanna become him, whatever. So all of all the founders and tech people still drive Tesla. I I wanna bring it to the next point, which is on AI and tech, actually. So we talked about EVs, and I know I can ask you like 3,000 more questions on this, but I wanna understand the AI element to all of this now, because essentially EVs are not like old cars; they are tech-first cars, right? Like you said. But because they're tech-first cars, they seem to have integrated. AI or hardware plus software much more seamlessly. We’re seeing like Li Xiang push out like even wearables like glasses that can control their cars. we all know all the mentioned brands just now have voice control. They all have some sort of AI already embedded in them. Now it’s just like giving them a more formalized name. Autonomous driving obviously is a form of AI. We can talk about that as well, but help us understand: for people, for these cars, are these kind of like software-hardware integrated really that seamlessly, or are they struggling as well? And then on top of that, you’ve said something I think in one of the podcasts before is that you push back on the phrase software-defined vehicle.

Tu Le - Sino Auto Insights (39:22)

So the terms mobile phone on wheels and software-defined vehicles, to me, and I would love your opinion on this, Grace. That tells me that these people don’t know technology or understand technology or have worked in the technology space because software doesn’t define anything. Software, AI, you know, silicon, these are all tools that create a compelling user experience. Now, you put them together, you design them well, you combine them with the right hardware and the software that instructs the hardware what to do, when to do it, how fast to do it, that creates the user experience. And I’m an Apple alum, so I learned that early on. It was really, really drilled in my head that the user experience, the stickiness, that creates the brand, that creates the brand loyalty. Okay. And what the Chinese automakers are doing right now is like throwing spaghetti on the wall to see what sticks. And because of the enormous pressure from competition, they just try to be first. Okay. What they likely need to do, and I don’t know if they’re going to be able to do this in the next 18, 24 months, just because I don’t see competition really, really slowing down in the China market. Is to take a step back, you know, I had a conversation with Sam Livingstone and Matt Mechelvoigue talking about the Ferrari Luce and some of the missteps. And part of that is, what does this mean to the NIO brand? What does this mean to the XPeng brand? Because that is what creates the awareness, the trust, and the loyalty; like everything just kind of makes sense. Simple design is really, really, really hard. Johnny I’ve has said that many, many times. In I’m sure. I would again love your opinion because I’m a Westerner, so I’m not used to Chinese apps that have a million things popping up at me or Chinese websites that have all these windows and all these lights blinking and stuff like that. It’s it’s a little intimidating to me. And I feel like front consoles of Chinese EVs are still a little bit overwhelming. Now, if we look at Xiaomi, I think they do it pretty well. They could They can improve, but they have years and years of experience among their teams to build out consumer experiences. Okay. And to me, like the reason I don’t like mobile phone on wheels is because a mobile phone can’t run you over and kill you. Okay. So anything automotive grade is a completely next level thing. So a big thing on the battery side is energy storage systems. Okay. A battery for an energy storage system is not automotive grade. It needs to be bulletproof if it’s automotive grade. So the level of engineering and manufacturing quality needs to be much, much higher. That’s why when we oversimplify it like that, I don’t think people appreciate the amount of effort and level of detail that needs to be had for putting something on automotive grade. And then software-defined again, it just tells me that these guys. think software is the end-all, be-all. Software, if software, AI, and hardware is running great, you don’t notice it. You just experience, you just have a great experience. If I have to say this hardware is not working or that hardware is not hard, then the automotive designers and engineers need to go back to the drawing board because something’s wrong. and and that’s what I want to emphasize being an Apple alum, that that hardware and software integration is is is what is going to create and differentiate you in the market long term. And one thing I will point out about Apple is that because they have a closed system and they don’t have to Frankenstein a bunch of disparate, you know, firmware together because they control the design of the hardware and the software and integrating, well. They might integrate third-party AI now because they’re super behind. But that’s kind of the only third-party thing that they’re doing. but eventually I’m sure they’re gonna look to to create a native AI support system for their ecosystem. But I I think that’s the huge differentiator. Now, is it realistic for an automaker to have a closed system and control so much? If you’re Tesla, maybe, but you started. on day one as a closed system. Okay. It’s gonna be extremely difficult, extremely, extremely difficult for most other automakers to do this. Now, you know, one of the areas I think you wanted to talk about was partnerships. And this is where the Chinese automakers are getting a lot of credit through the announcements of all these partnerships with their Western counterparts. And the important thing is that there’ve always been partnerships in the China market. You know, it’s been a requirement of the Chinese government historically, you know, with the exception of the the the Tesla factory in Shanghai recently. But now these partnerships are bleeding into Europe, they’re bleeding into North America, and we’ll continue to see that as long as the Chinese are pushing the envelope on innovation. But again, Grace, can the legacy automakers use somebody else’s tools? Again, they’re tools. Can they use somebody else’s tools? To create a Volkswagen experience, a Volkswagen brand experience that you know historically is this way or that way. Okay, like you trust Volvo, right? You don’t like their new cars, but can if Volvo is using Geely software, Geely AI, Geely hardware, or you know, like Geely qualified hardware, is it still gonna feel like a Volvo to you? And I think those are kind of the important things moving forward. that’s gonna differentiate some of the legacy automakers and some of the better Chinese EV makers from the rest of the field.

Grace Shao (45:28)

I feel like listening to you explain this actually makes me feel like there’s gonna be two fragments of the market where the hardware people, like the people who still want the best hardware experience, will still go with a traditional OEM because you will still get the best craftsmanship, get the best kind of hardware experience, right? But if you are gonna go for an AI-native experience as we go forward with this, you know, you want the best voice control, you want the best. Whatever interaction with your AI agent within your car, then it would make, as you said, it would be extremely hard for a Volvo to use someone else’s software. So wouldn’t a company with their own software actually have the advantage of building that? So like a Xiaomi or Tesla, right? Like your point, you have your closed ecosystem, you have your existing s software, you have everything you need to make the experience better. But that said, the car might not be as sleek as an Audi, Mercedes, whatnot, right? I don’t. What do you think?

Tu Le - Sino Auto Insights (46:32)

Well, I think that when you get to clean energy vehicles, so especially battery electric vehicles, manufacturing is is simplified by orders of magnitude. So the GMs, the Volkswagens, the Porsche’s, they all Mercedes, they all have entire powertrain divisions that only work on the engine. Imagine those entire departments effectively going away. Okay. Electric motors I’m oversimplifying this, but they’re fairly commoditized. Okay. They’re super fast, super efficient, generally speaking. Automotive grade is something different than everything else again. But that is really going to be the differentiator moving forward. Grace, if I told you that in 15 to 17 years, maybe less than that, building a car is going to be commoditized. So there’s no value in that aspect or part of it. Now, with the world being as bifurcated as it is, especially in North America, that doesn’t want Chinese battery cells in North American vehicles for now. Maybe it’s a longer timeline, but effectively China is really, really creating or forcing other companies to rethink how they manufacture things, how they develop things in the spaghetti on the wall. There will be some spaghetti that sticks for the Chinese automakers. And you better believe that that copycatting is gonna be reversed now. The Europeans and the North American car companies are really, really going to create their own versions of X, Y, and Z. Now, can we say that it was innovated and perfected in the China market? Probably moving forward in the next three, five, seven years, but we also need to look at the demo. Right? Because you had mentioned some people want performance, some people want the digital experience. And I think a lot of that is gonna be is gonna correlate to what the demographic is, because a BMW or Mercedes owner in China is around twenty, twenty-five years old, younger than in Europe and North America. As a you know, as an old man, I have different needs than you do, as a as a young woman. So What I like in a car is going to be different than what you like, than what your husband likes, than what my wife likes. And I think that’s where the Chinese are gonna have to play the global game. Okay. Now they need a solid foundation of extremely high sales in their domestic market to create the flexibility to sell abroad and to sell at a premium abroad. But are all these digital features And technological advancements going to resonate with a 60 year old year old European man in Germany who is used to driving a BMW? Probably not. Okay. But one of the other big advantages is that the Chinese have is, and I’ll give you a quick example. Friend Nick Carey, who writes for Reuters, last year he wrote an article about Chery taking six weeks to change the suspension and steering system in an Omata 5 because they were shipping the China-spec version of the Omata 5 to Europe and the Europeans were like, yeah, this steering is way too mushy and the feel isn’t there. The Europeans will not like this. And so over six weeks they qualified new parts, they updated the software through OTAs and firmware and then shipped the new product And that would take a year in in at least a year at most legacy automakers because of the layers of bureaucracy, the approvals needed. But this was done in six weeks. Now that’s also a reflection of the nine-six in China.

Grace Shao (50:24)

Does that not frighten you a little though? Because like how fast, like you mentioned, how fast they ship, w I wanna ask something slightly sensitive. Then what about the safety of these cars, right?

Tu Le - Sino Auto Insights (50:36)

Well, if you asked the Chinese automakers, they will assure you that they’re not cutting corners. Okay. And I have driven many of these Chinese cars. Now I d I haven’t owned one for 10 years. So long-term efficiency and safety, I don’t know. Most people don’t, because a lot of these cars have been on the road for less than five years. But you know, when you talk to the automakers, and again, a lot of these people come from the automotive space. A lot of the leadership of some of these Chinese companies, they come from the Mercedes, the Volkswagen groups. And so they do have some visibility into how things are being done differently. But I would also counter what you just said with yes, there’s a little bit of risk with cutting so quickly the product development and so severely the product development cycle, but Also, how things traditionally work at large conglomerates and in even governments is there’s something new that’s happening. We’ll add a layer. There’s something new happening; we’ll add a layer. Technology changes, we’ll add a layer. So no one ever takes a step back and says, These 15 layers, does this still make sense? Because I mean, that’s kind of the definition of bureaucracy, right? So time will tell. I do I feel not safe in these cars? No. you know, and I’ve driven dozens of them, so

Grace Shao (52:01) No, I was playing devil’s advocate. Like

I’ve been in so many of these in China, and you know, especially across Asia. But I just think the it’s just people tend to ask questions like, it’s so short then. If you’re shipping them out within a year, what kind of corners are you cutting? And then thus the question is easy to say. The next question is, is it safe? Right. But I think I I I kind of feel you on the point. If it’s completely new, we treat it like a startup; it’s innovative. There’s a lack of bureaucracy, there’s a lack of this is how we do things. Then you actually can just get things done much faster. I’m mindful of time. I want to ask you some questions beyond the traditional car makers and whatnot. Help us understand where China is with autonomous driving right now. Who are the main players and just roughly understand, you know, who are the ones kind of competing with Waymo, who’s Pony AI, right? Like who’s We Ride? I know again, it’s a super big question, but let me just throw this to you like open-ended.

Tu Le - Sino Auto Insights (52:57)

Let me kind of close out that last topic that we were talking about with food for thought in something that I know you know as well, but maybe your audience isn’t quite aware of. If any Chinese company is found to be cutting corners in the China market, the Chinese government would not look kindly on that. And there would be severe consequences, right? So I think there’s this healthy fear of If we are cutting corners and we’re found out, we’re gonna be in a lot of trouble. There’s not gonna be years of litigation, there’s gonna be severe penalties right away. And I think that healthy fear motivates many of these Chinese automaker leaders to stay on the right path. Right now, again, time will tell, but to pivot towards your question about autonomous vehicles, so Waymo is the global standard. I think most people would acknowledge that. They’re in many, many markets. They’re entering foreign markets. But there to your point, there is WeRide, there’s Pony, and then there’s Baidu. These are the three largest players in China currently. But then in Apollo Go, yep. And and and unfortunately, when I was in Beijing last month.

Grace Shao (54:13) I do is call Apollo, right? Or yeah.

Tu Le - Sino Auto Insights (54:22)

Or two months ago, Apollo Go was not running because in Wuhan about a thousand of them or a hundred of them were on the roads and they just turned into bricks, right? On the roads. And so they had stopped the pilot programs. I don’t know if they’re running again, but I normally when I’m back in China will try out all these systems for the latest software to make sure to just kind of see, feel, understand, what’s going on and and what’s unique about China is that the feel is a little bit different in each of these cities just because how people drive is so different in in different cities.

Grace Shao (55:02)

This is something I feel like no one understand if you don’t live if you haven’t lived in China. Like people in Beijing are just aggressively wild. Like people don’t realize this.

Tu Le - Sino Auto Insights (55:11)

What? Aggressive? man. So I’ve driven in like Changsha, I’ve driven in these tier two cities, and you’re like,

Grace Shao (55:17)

Okay, I haven’t driven into your two cities. I just haha I usually just get a car there. Like, I I I already think Beijing is so terrifying. Like, I I start driving 16 years old in, and I refuse to drive in Beijing, and because you stop the car for someone to pass. Next thing you know, like 10 cars have passed, like 20 bikes passed you, 30 pedestrians, and you’re still there, and then there’s like 20 people behind you honking you, and you’re just like, yeah.

Tu Le - Sino Auto Insights (55:33)

my goodness. Yeah, so a fun, quick funny story. My wife used to be very worried because I would get super fired up when I’m driving in China. For some reason, I learned to compartmentalize it because I would get super upset. And then when I got out of the car, I would just not be upset. I don’t know how I did it, but because my wife didn’t want me to take yeah, I it was just.

Grace Shao (56:04)

Like you have to. Because you’re like constantly road raging. Anyway.

Tu Le - Sino Auto Insights (56:10)

And so what you’re talking about is called cutting in. And if you have a meter of space between you and the car ahead of you, someone will cut in. Someone will cut in for sure. And if you’re not used to that, someone will cut in, and then there will be a San Luncha delivery vehicle turning the opposite way. And your head needs to be on a swivel. And it is quite an experience. It’s similar, and I won’t say similar, but it has a similar feel as Southeast Asia because it’s so crazy. And it just kind of works in Southeast Asia. And it doesn’t work super well in China because there’s traffic jams all over the place. But Pony and WeRide are trying to help some of that stuff. Let me segue to that.

Grace Shao (56:57)

Yeah, so how does it work though? Like that’s my point. Like how do these autonomous driving cars work if, you know, people are so unpredictable? The whole idea is they’re supposed to predict what the car is gonna do, but you know, they just like zigzag and people just pop out of nowhere. Like i is it safe? Like what’s really a holding up, like what’s a bottleneck of deploying these at scale right now? Is it regulation, is technology, or is it just the craziness of the roads?

Tu Le - Sino Auto Insights (57:28)

Again, let’s do a 30,000-foot level. We ride, pony. They’re both publicly traded in the West. And so I think there are Western investors that know who they are. They’re not as large as Baidu Apollo Go, which has, I want to say, well over a few thousand cars on the road in China pilot programs in a dozen cities. But Pony and WeRide are also moving aggressively outside of China, partnering with Uber, partnering with other companies, ride-hailing companies, and there’s pressure because they’re publicly traded to really scale and create some profitability. Whereas Waymo is still owned by Alphabet. So I think they have pr internal pressure, but not pressure from external markets. in the difference between China and the US, because at the end of the day, these are really the only two players that have multiple horses in this race. Now in the UK, there’s a company called Wave. And I think there would be other European players that would argue that, hey, we’re also a major player, but let’s, for the intents and purposes, oversimplify this by saying there’s the US and the Chinese players. In China, there is this first wave of A V companies: the Werides, the Pony AIs, the Baidus, and then there’s this other wave, and we’re only talking about robotaxis. Because on the commercial trucking side, on the slow-moving delivery vehicles, we also have autonomous vehicle players. But for robotaxis, there’s this second wave. And they’re more of an asset-light company, autonomous vehicle startup. So like DeepRoute, Momenta, QCraft, you know, they’re what they’re doing is partnering with traditional OEMs in China to get their stacks onto these vehicles. DeepRoute, for instance, is working directly with Great Wall to integrate their hardware and software stack into the design of the vehicle. So even before, because what we normally see right now, Grace, is a car with lidar, sonar, radar bolted on as, you know, an afterthought. But once these companies are working with the traditional OEMs, they can design them, and it looks like part of the form of the vehicle as opposed to like this bolt-on after the fact. And the convergence between RoboTaxi Company and traditional OEM is blurring. And I’d mentioned earlier that Huawei also has a significant stack. So they’re a player as well. But Huawei, as far as I know, is not getting into the RoboTaxi space. But they’re going to move into level three intelligent driving, and they’re hoping to be in millions of vehicles in China within the next few years. And that’s where it’s very different in China because there’s not a lot of convergence going on in the US market. Now we know about Neuro, we know about Zoox, we know about Waymo, and with the exception of Neuro, who’s working with Lucid to put their stack on the Gravity for a premium experience. Most of these companies are not working with OEMs. And then the OEMs have their own systems as well. And that’s the big difference between the China market and the US market. And what we’ll likely see is a bifurcation of the US market being primarily North American autonomous vehicle providers working with the Ubers and the Lyfts to create that larger install base to try to reach a broader audience. And That’s one of the big reasons why these companies are working with the ride-hailing companies, because it’s gonna be hard for Pony to attract 100 million users. Whereas if I partner with Uber, my install base is 160 million global users. And so that creates an opportunity. And I think long term, Uber sees Robotaxis and Evital as their profit drivers. And you know, the delivery services and all these ancillary mobility services as a way to increase their install base but not make a ton of money. And and so

Grace Shao (1:01:45)

Wouldn’t that cannibalize our own business, existing business a little bit?

Tu Le - Sino Auto Insights (1:01:51)

Yeah, and you know that’s that’s the that’s that’s the million-dollar question because Uber is now also buying its own autonomous vehicles. So not only is it a ride hailing platform, but it’s a fleet manager now. And that changes the economics of their yeah, exactly. So that really changes the economics on their balance sheet. Okay. So I I don’t

Grace Shao (1:02:06)

hedging.

Tu Le - Sino Auto Insights (1:02:17)

To your point, I do think they are kind of hedging their bets a little bit. Because if to answer your question, we should separate autonomous vehicles into those that use lidar and those do not use lidar. Tesla does not use lidar. Wave, which is the UK company based out of London, does not use LIDAR now. We can have, and I’m sure you’re well- I think you’re talking to some expert in a couple of weeks, so maybe you can ask them to use lidar or not to use lidar. they are using lidar, so I’m sure he’ll he’ll say that lidar is necessary, but it’s more philosophical now, right? It’s more philosophical because Tesla can’t all of a sudden put lidar because it changes their whole system. Okay. But to me, LIDAR.

Tu Le - Sino Auto Insights (1:03:06)

Prices have gone down so significantly that creating another redundancy and, you know, kind of creating that sensor fusion with multiple sensors and lidar creates a safer environment, I would think. but again, it it it it’s an interesting thing that I don’t think a lot of people definitively can answer. I’m sorry?

Grace Shao (1:03:29)

It’s a philosophical choice. Or is it actually a design choice because the vehicle already can- like, you cannot put a LIDAR on top of it because Teslas cannot use LiDAR. Like, is there a reason?

Tu Le - Sino Auto Insights (1:03:42)

So, to me, it was an engineering choice at first, but now it’s more philosophical because now you’d need to change your system if you all of a sudden incorporate lidar into it. Right. And for Elon, I think it’s also a mienza thing because he’s been so strong against LIDAR that if he turns it around, now don’t get me wrong, he says things sometimes that

Grace Shao (1:04:03) Yeah.

Tu Le - Sino Auto Insights (1:04:09)

Never come true or haven’t come true yet. So that’s kind of the crazy thing. But I think LiDAR, that’s one of those things where I think he’s willing to die on that that doesn’t need lidar. But anyways, I don’t want to get into this this this discussion about lidar, but but but but to the bifurcation thing. The reason I say bifurcation is because

Grace Shao (1:04:24) Okay. It’s gets getting too technical. All right.

Tu Le - Sino Auto Insights (1:04:34)

We know that Europe has a strong data security, data sovereignty policy, security, privacy, and sovereignty. So will Europe allow the Chinese autonomous vehicle makers to ship European data back to China to the servers to train the models? And/or so the United States, because we have a ton of allies, China has a ton of allies, that’s why. It’s likely that the Chinese allies would use the Chinese systems first, and then the US allies would incorporate the Waymos and the Zoox. That’s kind of, and I’m oversimplifying this, but because the Trump administration has kind of poked the eye of a lot of our traditional allies. So maybe they wouldn’t want our autonomous vehicles on their roads. But I’ve ridden in all of these systems.

Grace Shao (1:05:08) I see.

Yeah, like Canada might be saying no these days. Sorry, I’m just going. It’s like really late for me and I’m just thinking about yes, but like now Canada’s gonna have eight Chinese EVs. Now American cars aren’t gonna sell there now; American Waymo’s not gonna be in Canada.

Tu Le - Sino Auto Insights (1:05:28)

Yeah, yeah. No, you’re well, we could do an entire episode about all of that stuff just between North America, right? So I think that would be an interesting conversation. But you know, that’s exactly my point, right? Like, traditionally, prior to Trump, I think Waymo was going to rely on our allies to launch its services. And if we look at the Middle East and India, they

Tu Le - Sino Auto Insights (1:06:06)

kind of want to be Switzerland a little bit. So because they they they they don’t want to take one side over another. India’s the same thing. And these are potential markets where both of them will compete. Famously, in London by the end of this year, early next year, Waymo and Do will all be testing and rolling out pilots. So next time you’re in London, if it’s early next year, you might be able to try all three systems in the same place on the same streets, which I think is gonna be a very, very, very unique experience. because I don’t think there’s gonna be many cities that you’re gonna be able to do that in over the next three, four, five years. And, you know, at the end of the day, is it a data thing? Is it

Grace Shao (1:06:47) That’s pretty crazy.

Tu Le - Sino Auto Insights (1:07:02)

Who has the most data? Who has the most robust edge case data? Is that ultimately who wins? Or does AI really change the game? Because if it’s about data, if it’s about kind of real-world miles, then you would think the Toyotas and the Volkswagens would have a distinct advantage because guess what? They put 11 million cars a year on the road. Okay. So a company like a deep route, a company like a wave would love to work with these companies that high have high sales volume. But what is the great equalizer? If you talk to Elon, it’s his system because again, everything is closed, everything is native to the Tesla system. FSD is the best intelligent driving system. Is it better than Waymo? And will there ultimately be a convergence between level three and then level four? You know, can a Waymo system compete directly versus a Tesla because and and I don’t have answers to that. And that’s what makes the industry so interesting because the politics of things change, the technology changes, and then the commercialization opportunities change as well. And what I do know is that Waymo is backed by one of the most valuable companies in the world, which means that they have

Grace Shao (1:08:09) Mm-hmm.

Tu Le - Sino Auto Insights (1:08:28)

A huge check to help them get to scaling. And one th other differentiator with Waymo and the rest of the players is that they’re really moving into a lot of four-season cities, like Detroit. So next year, Waymo is going to be launching a service. And what we’ve seen so far is that a lot of these autonomous vehicle companies are launching in Arizona in the Middle East, where guess what?

Grace Shao (1:08:29) Resources.

Tu Le - Sino Auto Insights (1:08:55)

Weather is super predictable, and it’s pretty one-note. And where the edge cases are, you can look at it like an inverse normal distribution curve, and I’m oversimplifying this, Grace, but the edge cases- so they happen few and far between- but they’re likely where the most severe accidents happen. Okay. So so it’s like there’s the least amount of data available. Exactly.

Tu Le - Sino Auto Insights (1:09:21)

Right. Severe storms, blizzards, snow, whiteouts. And so what we’ll likely see the final frontier being Robotaxis, because we’ll see commercial trucking from companies like Kodak. Remember that company like Too Simple? Those competitors. We’ll see those Aurora. We’ll see commercial trucking happen sooner. And likely highway to highway. I I divide commercial trucking into like three segments, and that’s

Tu Le - Sino Auto Insights (1:09:49)

You know, intra-city, city to highway, and then highway to highway as three separate use cases. Yeah. And you know, robotaxis, I think it’ll be phased; it’ll be geofenced for a long period of time. There’ll be certain use cases that it makes a ton of sense for robotaxis, you know, but ultimately, in order for this service to become ubiquitous, there probably needs to be

Grace Shao (1:09:54) It’s just much more predictable. Yeah.

Tu Le - Sino Auto Insights (1:10:16)

More services that have multiple people than one person in a car. And so that’s where it’s interesting because Waymo just launched the OHI, which is the Zeker contract manufactured vehicle, which has multiple seats. And I think that’s how Waymo looks towards profitability to get more than one person in an autonomous vehicle and almost looking at it like a bus, you know, a smaller bus to get

Grace Shao (1:10:41)

I was just gonna ask actually, like, are we gonna see a redesign of what robotaxis should look like? Because you, you, I tried out Waymo in San Fran, and it’s kind of creepy because you still have the driver’s seat, but like no one’s sitting there, so you’re constantly freaked out, like, what, you know, if you’re not used to it. So, like, will we see more like these little boxes or something that will signal to other drivers as well? More obviously, this is a robotaxi versus like a normal car.

Tu Le - Sino Auto Insights (1:11:10)

For sure, for sure. Right now there are policies in place that say you have to have a steering wheel, you have to have brakes. But as the autonomous vehicle landscape evolves, we’ll probably start to see, and I have a theory, Grace, that more and more cities will limit private passenger vehicles coming into the city center. Okay. If we look at Paris, they’re investing 300 million euros to make all the boulevards that lead into the Champs-Élysées bike-friendly, and they’re gonna limit private passenger vehicles. And so especially in Asia, I could see that being, you know, maybe you park, or you take the train into the fourth ring road, and then you take an autonomous vehicle into the city center. And then to get to your office, you take a scooter. Right. So there are these scenarios where I think more and more cities will try to take back some of the streets, some of the roads that bleed into the city center in order to lighten up traffic and take back some of the land. Because if we think about, and we’re getting getting off topic here, but I think these are important kind of secondary and tertiary effects of autonomous vehicles. Look at these parking structures and like these parking lots. We use them from like 7 a.m. to 5 p.m. And then they’re not used for the entire rest of the day. It’s kind of a waste, to be honest with you. And then and I’ll right. And so if we can take that back, you know, ideally make more housing affordable, make more office buildings, or whatever, right? Like round out, make more green space as opposed to having so much so many parking structures. Hong Kong could use more green space because all they can do is build up. And so there’s a lot of opportunity.

Grace Shao (1:12:36)

Hong Kong has, like, only I think like less than ten percent of the population even have a car because the public transit is so good. To your point, like there’s minibus, there’s a double-decker bus, there’s like the T MTR. Everything is walkable. you it’s and it’s c really, really, really well planned. And I think a lot of Asian megacities are like that. Actually, like think of Singapore, think about like Shenzhen, obviously obvious Shenzhen where you have like

Tu Le - Sino Auto Insights (1:13:05) All right. Yes.

Grace Shao (1:13:26)

EV buses to EV cars to EV scooters, all for rent, all for access for the like average person on the street, right? So yeah, that does make sense.

Tu Le - Sino Auto Insights (1:13:34) I’m gonna drill down on that.

I’m gonna drill down on that because when I was living in Beijing, I was a mobility practitioner. I walked, I rode share bikes, I rode subways, I rode high-speed rail.

Tu Le - Sino Auto Insights (1:13:53) Yeah.

Yeah, well, I mean, rings around a road is a little weird, but now that I live in the United States, I’m just an advocate ’cause all I do is get in my car and drive everywhere I go. And on the weekends yeah, yeah, well

Grace Shao (1:14:07) But it’s also because they’re in Detroit. It it makes

a difference, right? If you’re in suburbia versus like the middle of like ring three Beijing.

Tu Le - Sino Auto Insights (1:14:14)

Yeah, and I think that’s a big difference between like North America and Asia. And I would lump North America and Europe a little bit into that because a lot of these cities aren’t very big. So to invest in subways and things like that would probably be dis a disproportionate expense for the city’s budget. Where when you’re in China, there are dozens of cities with over a million people, you know, hundreds of cities over a million people.

Grace Shao (1:14:41)

Over like twenty million people, like a couple cities are over, yeah.

Tu Le - Sino Auto Insights (1:14:43)

That’s why I think, and what’s important about China or distinct about China as well, is that the automotive sector didn’t build out this transportation system because there’s a balance of high-speed rail, to your point. There’s a balance of subways, intracity transportation. But I’m off topic.

Tu Le - Sino Auto Insights (1:15:07) The autonomous vehicle space is

gonna be very interesting because our is the US government going to restrict silicon? you know, does because right now NVIDIA basically supplies every automaker with a a high-end transport or intelligent driving feature. Okay. But you and I know that the Chinese government is really pushing for companies like Horizon and and and

Tu Le - Sino Auto Insights (1:15:35) Black Sesame and XPeng, NIO, their

Huawei, they’re all silicon design companies now, too. And eventually NVIDIA is gonna get pushed out. And that’s also another bifurcation point as well. So if the Chinese can’t catch up to NVIDIA and Qualcomm and some of these other silicon design, Western, more established Western. Silicon design companies, does that mean their AI is not as good? Does that mean it’s not as robust? I think these are really open ended questions that you probably have conversations with your other guests on. So, and and I listen to you because that’s important to me of about understanding other perspectives on that stuff, because although I understand the chip sector, not to the level where I’m not an AI expert. And so I, like I said, I use it. as a tool as opposed to the end-all be-all. But but yeah, so

Grace Shao (1:16:32)

No, appreciate your insights. Really, really appreciate your time. I’ve definitely taken up more than, you know, I asked for. So, to end, I wanna ask a question. what is one differentiative view or you think a misunderstanding the the world might have of on the topic of China EVs, mobility?

Tu Le - Sino Auto Insights (1:16:51)

I think in twenty, twenty-five years, we’re gonna look back at this time as a renaissance in mobility because of everything that’s happening so quickly and being driven by the competitiveness of the China market. And we’re gonna see BYD is definitely gonna be a player. And you know, the other thing that I think is really, really important is that. I don’t believe traditional automotive folks can think outside of their normal way of seeing how the world works through transportation. And the top 10 mobility providers, to me, in 15 years, there might be a handful of traditional automakers, but I see an Uber maybe being a top 10 player. I see a Baidu or a Waymo being a top 10 player, and they don’t. build cars, but we’re the the importance of building vehicles is not going to be it is going to be reduced over time very quickly because of China. And so if you’re not providing a value added service in the mobility space, which I think which I think China is going to be able to do at at a much more affordable price point, especially in the emerging markets. I think that’s where the important thing is because in the Western markets, the BYDs and the Geely’s still have challenges and customer acquisition costs are much higher in in those emerging or those established markets. But in the emerging markets, the Chinese are going to try to roll out not only passenger vehicle buy-sell and their brand, but they’ll probably try to sell a lot of services once they have that sale. And I think that’s really going to be that opportunity for the Chinese to really make a name for themselves. Because you know this, Grace. One of the coolest things about the United States for me as an American is that anywhere I go, and you can not like the food, you can not like the coffee, but it’s consistent. If I go to a Starbucks in Munich or Vancouver or Toronto, and that’s soft power. That’s American soft power, right? The Chinese would love to have four Chinese brands. Creating soft power for them, creating aspirational desires to have their products. And and so that is gonna be the priority for a lot of these entrepreneurs that you and I speak with because, you know, they’re as ambitious as Elon, you know, maybe maybe they don’t get covered as much by Western media because their English might not be fluent or whatever, but they shouldn’t be underestimated just because they’re in China and they’re not in the rest of the world yet. And and I think that we’re gonna look back at this time and point to a few Chinese people at the level of being close to Elon. So

Grace Shao (1:19:47)

Very interesting. Yeah, I think I think to your point, a lot of the entrepreneurs I speak to these days, they set their eyes on the global market in the first day and they want to set the industry standard. Like that is their goal. And it’s no longer about shipping out something cheaper, shipping out something just to make that quick buck anymore. So there’s definitely like a a sentiment shift and that confidence is different as well. to it Yeah. Well yeah. Thank you so much for your time today.

Tu Le - Sino Auto Insights (1:20:09)

It’s off the charts. Confidence is off the charts.

Grace Shao (1:20:15)

Really appreciate your time. I feel like I need to invite you back for another conversation because, you know, for what I prepared, we can go on for another two hours, I feel like. But it is late tonight, for me. So I’m gonna call it a day. Thank you so much.

Tu Le - Sino Auto Insights (1:20:30) Thanks for having me, Grace.

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