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January 14, 2022

VinFast invests in StoreDot; China EV subsidies cut analysis; Thailand ZEV plans – the week

Graeme Roberts reviews the week's most-read analysis and news.

By Graeme Roberts

StoreDot plans to manufacture extreme fast charge battery cells at scale by 2024 and has attracted investment from VinFast. As we asked this week: Could VinFast’s bet on next-gen StoreDot EV batteries catapult it to EV leadership? VinFast vehicles may not be a common sight in western countries but the company has been carving out market share in its home market of Vietnam since it began production of BMW-based models in 2019. The company secured more than 31,000 sales in 2020, up 62.4% on the previous year and, in 2021, clarified its plans for electrifying its lineup. This will begin with a three-model offensive featuring the VF e34, VF e35 and VF e36, with the former arriving with customers at the end of 2021. However, with new players such as Tesla, Rivian and Lucid all further along in their EV strategies, and legacy auto players such as Mercedes, Volkswagen and Ford now rolling out their own electrified models, VinFast risks arriving on the scene too late to make much of an impact, especially in export markets beyond Vietnam. To help mitigate this risk, VinFast has made a number of investments in advanced EV battery technology. Batteries have emerged as the key technological differentiator among EVs and are the single largest factor in determining a vehicle’s range, performance, longevity and purchase price.

Beijing is withdrawing subsidies for EVs. Another question we asked this week: Does it threaten future market growth? China’s success in vehicle electrification has been highly attributable to conducive government policies both at the central and regional level that subsidised electric vehicle (EV) manufacturing and sales. It was due to the government’s support that EV costs were brought on a par with ICE vehicles that has put China on the path to the mass adoption of the technology. However, with the local EV market getting more established by the day, the government has been phasing out subsidies on the new energy vehicles. The latest developments suggest that the government could completely stop EV subsidies by the end of 2022. As per the announcement made by the country’s Finance Ministry, China will cut subsidies on EVs by 30% this year and will eliminate all subsidies by the end of the year. In 2020, the government announced it would cut subsidies for private NEVs by 10% in 2020, 20% in 2021 and 30% in 2022. For public transport, the plan was to cut by 10% in 2021 and 20% in 2022. However, nothing went to plan with the advent of the COVID-19 virus in the country. Now, in a similar move, the government recently announced the replacement of its green car credit system with a new carbon emission trading scheme (ETS) that has a larger vision of carbon neutrality than just individually boosting EV production/sales.

Thailand has stepped up its efforts in recent months to establish itself as a major production hub for zero emission vehicles (ZEVs), as it looks to play a key part in the electric vehicle (EV) revolution that is already underway in the more advanced economies of the world. Like other developing economies across Asia, Thailand has so far struggled to establish a significant domestic ZEV market, which is seen as key to attracting serious investment in this sector. Affordability will be the main problem to overcome in the short and medium term, while other issues such as range and recharging networks are being addressed. Electric vehicles are typically far more expensive than their internal combustion engine (ICE) counterparts, due mainly the high cost of lithium-ion batteries which can account for as much as 40% of the total cost of an EV. This year, sales of zero-emission light passenger vehicles in Thailand will likely struggle to reach a few hundred units. Similar levels of ZEV market penetration (or lack of) can also be seen in most major automotive markets in the ASEAN region, where governments have been unable to match the generous incentives and subsidies that are available to buyers in more affluent economies.

Aptiv has announced a definitive agreement to acquire Wind River from TPG Capital, the private equity platform of global alternative asset management firm, TPG, for US$4.3bn in cash. Used on 2bn edge devices across more than 1,700 customers globally, Wind River’s software enables the development, deployment, operations and servicing of intelligent systems. The edge-to-cloud software portfolio spans the aerospace, defence, telecommunications, industrial and automotive markets and is anchored by Wind River Studio, a cloud-native intelligent systems software platform that enables full product lifecycle management for edge-to-cloud use cases. Wind River generated around US$400m in revenues in 2021. “The automotive industry is undergoing its largest transformation in over a century, as connected, software-defined vehicles increasingly become critical elements of the broader intelligent ecosystem,” said Aptiv president and CEO, Kevin Clark. “Fully capitalising on this opportunity requires comprehensive solutions that enable software to be developed faster, deployed seamlessly and optimised throughout the vehicle lifecycle by leveraging data-driven insights. These same needs are driving the growth of the intelligent edge across multiple end markets. With Aptiv and Wind River’s synergistic technologies and decades of experience delivering safety-critical systems, we will accelerate this journey to a software-defined future of the automotive industry.”

China’s technology giant Baidu is stepping up its efforts to expand in the autonomous vehicle segment with the commercial launch of a car model with Level-2 self-driving technology next year. CEO Robin Li confirmed Jidu Auto, Baidu’s joint venture with local automaker Zhejiang Geely Holding Group, plans to begin mass production of its first electric vehicle (EV) with Level-2 autonomous driving technologies in 2023. The vehicle’s self-driving system is powered by Nvidia chips and is scheduled to be unveiled at the Beijing Auto Show in April 2022. Baidu, known widely as an internet search engine and artificial intelligence company, is targeting the autonomous vehicle segment as a key growth industry and is in the process of rolling out autonomous taxi services across China. With its Jidu Auto joint venture Baidu is set to join a number of Chinese tech giants including Huawei, Alibaba and Tencent and also Apple Inc in the global EV frenzy, as global demand continues to soar.

At CES BMW showed the iX Flow concept featuring E Ink, which it says offers the prospect of a future technology that uses digitisation to also adapt the exterior of a vehicle to different situations and individual wishes. The surface of the car featuring E Ink can vary its shade according to the driver’s preference. The fluid colour changes are made possible by a specially developed body wrap. When stimulated by electrical signals, the electrophoretic technology brings different colour pigments to the surface. BMW claims the E Ink technology opens completely new ways of changing the vehicle’s appearance in line with the driver’s aesthetic preferences, the environmental conditions or even functional requirements. It says the technology offers unprecedented potential for personalisation in exterior design as well as the possibility of a new form of personalisation both on the outside and in the inside of future production vehicles.

VUCA, an acronym that stands for volatility, uncertainty, complexity, and ambiguity, is likely to be the next big buzzword for the automotive industry as a result of Covid, according to the market analysts at Cox Automotive. VUCA is used to describe the situation of constant, unpredictable change that is now the norm throughout several industries as businesses gear up for a new year that continues to provide challenges to all organisations. Cox analysts say we will have to get used to a VUCA trading climate for some time yet. Given the industry’s outlook in a post-pandemic world, Cox says ‘we expect VUCA to continue’.

Hyundai Motor announced at the Consumer electronics Show (CES) in Las Vegas it had partnered with New York-listed Unity Software Inc to jointly design a metaverse-based digital twin of a vehicle plant to help it optimise its operations and allow virtual problem solving. The South Korean automaker said Unity is a global leader in providing a platform for creating and operating real-time 3D (RT3D) content. The two companies “virtually” signed a broad-based memorandum of understanding (MoU) this week, covering smart manufacturing, artificial intelligence (AI) training and autonomous driving simulation. Hyundai said it expects Unity will support its vision of becoming the leader in future mobility solutions. It is looking to become the first automaker to build a “Meta-Factory” – a digital-twin of an actual factory, supported by a metaverse platform. The ‘Meta-Factory’ will allow Hyundai to test-run a factory virtually in order to calculate the optimised plant operations and enable plant managers to solve problems remotely. Hyundai said the partnership also aims to develop a real-time 3D virtual platform to be targeted at a broad group of Hyundai customers, offering a more comprehensive range of services across sales, marketing and customer experiences. It will allow consumers to trial, test and engage with various auto related solutions digitally before choosing their vehicles. The first Meta-Factory concept is scheduled to be completed by the end of 2022 at the Hyundai Mobility Global Innovation Center (HMGICS) in Singapore, where the company is building an open innovation R&D hub.

Despite the pandemic and a global semiconductors supply crisis, BMW Group reported year-on-year sales growth of 8.4% last year, with a total of 2,521,525 BMW, MINI and Rolls-Royce vehicles delivered. BMW sales reached a new all-time high of 2,213,795 units (+9.1%) last year. BMW Group more than doubled its sales of fully-electric vehicles in 2021 to 103,855 units (+133.2%).

Jaguar Land Rover said retail sales for the three month period to 31 December 2021 – the automaker’s fiscal third quarter – continued to be constrained by the global semiconductor shortage though it “started to see some improvement in chip supply and wholesale volumes compared to the preceding quarter”. “Underlying demand for [our] products remains strong and [we have] proactively managed semiconductor supplies to maximise production of higher margin products,” the automaker said in a statement. Fiscal Q3 retail sales down 13.6% quarter on quarter to 80,126 vehicles and 37.6% year on year. Retail volume was lower across all regions compared to the preceding quarter, including China (-6.9%), Europe (-6.8%), North America (-11.8%), UK (-24.3%), and ‘overseas’ (-25.4%). However, wholesale volume was 69,182 units and production volume was 72,184 units in the period (both excluding the China JV), up 8% and 41% respectively quarter on quarter. “The increase in production in particular reflects a start in improved chip supply,” JLR noted.

Have a good weekend.

Graeme Roberts, Deputy Editor, Just Auto

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