Geely: Creative Angles Into America
Volvo, Polestar, Zeekr, Lotus, Waymo, Indonesia Nickel, VinFast, NIO, Fisker
Geely: Creative Angles Into America
Of all the visionary founders I have ever met in China, Li Shufu is easily the most daring and the most creative.
Time and again, I have seen Li size up a situation quickly and then take bold action - often leaving his lieutenants in a blended state of awe and confusion.
Most of the time, Li gets things right. Really right.
The billionaire Geely founder and chairman (who now prefers to go by Eric Li) understands that the US remains the world’s most lucrative car market. He also understands that brands from China may not be welcome in America - at least not right now.
So, Li is drawing on his vast arsenal of global brands and alliances to open new channels into the US market. Here are three compelling examples of how Li thinks - and acts - different.
Renault/Korea/Polestar. In May 2022, Geely surprised the industry when it acquired a 34% stake in Renault Korea. Now it appears likely that Geely will produce its all electric Polestar 4 at the Korean facility for export to the US, thereby averting the 25% tariff on made-in-China vehicles.
Zeekr/Waymo. Geely’s all electric luxury brand - Zeekr - has been working with Waymo to develop a custom-built vehicle for Waymo autonomous fleets in the United States. The vehicles will be designed in Sweden, built in China and shipped to the US where Waymo will add the robotaxi AV technology magic.
Volvo South Carolina-China Trade. Volvo will begin exporting the all-new EX30 compact from China to the US in 2024. Thanks to a centuries-old federal law, the China-made EX30s will get import duty exemptions up the value of what Volvo exports from South Carolina. Put another way, the tariff designed to keep out imports from China goes away on the most promising new Volvo in years.
So What
• Most American consumers will never know that they are driving or riding in Chinese vehicles. And everything that Geely is doing is legal and transparent. So far so good for Mr. Li.
• The question is: How much will Washington DC tolerate these inventive workarounds that are designed to put tens of thousands of Chinese cars on American roads.
Other Chinese automakers are keeping a close eye on how this story develops. Chairman Li, no doubt, has already worked out contingency plans. For now, his inventive set-up looks pretty solid.
(Note: For readers less familiar with Geely, here is a partial list of the company’s impressive array of brands: Geely, Volvo, Polestar, Zeekr, Lotus, Lynk & Co, Proton, Smart).
Future Cars & Markets
Electrics
VinFast Turns to US Dealers. VinFast is pivoting away from a direct sales model to the traditional dealer franchise set-up. The company plans to sign up a total of 125 dealers. People familiar with the company said the direct sales model “got just too expensive in a hurry.”
Fisker’s Darkest Hour. Fisker shares hit an all-time low this week as production was revised down again and the company acknowledged material weaknesses in its financial controls. Link
NIO Is Mortal, Too. After 9 years of breakneck expansion and investments, NIO is now feeling financial gravity. The company will reduce staff by 10% this month. Billionaire founder William Li told employees that competition will be even more fierce in the coming two years - “Our journey is a marathon on a muddy track.” Link
Batteries / Supply Chains
America’s Lithium-Ion Battery Imports. China utterly dominates lithium battery sales to America, accounting for almost 90% of total imports. South Korea limps in a distant second with 6 percent. Link
Indonesia Nickel, Joe & Jokowi. The leaders of the 3rd and 4th most populous countries met this week in San Francisco to talk about how America can secure a larger supply of Indonesian nickel - a sector now largely controlled by Chinese firms. Tricky part here is that the US does not want Chinese miners to use Indonesia as a base to export nickel duty-free to America (See Mineral Laundering below). Link
Advanced Technologies
Nvidia’s China Chips. Jensen Huang & Co. have developed 3 customized chips for China to stay within the new limits on chip computing power coming out of Washington DC. China’s premium EV players source many crucial chips from Nvida and Qualcomm. Nvidia commands a 90% share of China’s advanced AI chip market. Link
New Money / Numbers / Rules
Volvo AB Scoops Proterra. Proterra was trying to build a bus company, a battery powerhouse and a charging enterprise at the same time. The money ran out in September. Last week, Volvo’s Truck and Bus company, Volvo AB, said it would acquire Proterra Power for $210 million. Link
Zeekr IPO. Geely’s newest luxury brand filed plans with the SEC to list on a US exchange in the coming months. The company, which lost $530 million in the first half of 2023, is on track to sell more than 100,000 vehicles this year. Link
Mineral Laundering. Senator Joe Manchin wrote a letter to the US Treasury last week asking them to not award US taxpayer money to companies involved in “mineral laundering.” Manchin fears a loophole where Chinese battery makers use a US front to secure generous incentives from the Inflation Reduction Act. The Ford CATL arrangement is seen as a crucial test case. Link
Higher Cost of Shipping EVs. Trains carry tens of thousands of vehicles across the United States every day. In a recent podcast conversation with Joe Hinrichs, CEO of CSX Transportation, I learned that it costs more to ship EVs than ICE-powered vehicles. Why? Because EVs on average weigh a lot more and freight rates are based on weight x distance.
Xiaomi SU7. A leading smart phone maker in China has unveiled its first-ever electric vehicle, the SU7 all-electric sedan. Xiaomi means “Little Rice” in Chinese. Nota bene: Production will be done by the Beijing Auto Industry Corp. Naming Beijing Auto as a production partner is clever decision to secure political backing/insurance from the Chinese State. Link
Note to readers: This newsletter is coming to you on Friday (instead of the regular Tuesday timing) because I am traveling in SE Asia this week, meeting with investors and clients in Indonesia and Vietnam. More about this eye-opening trip in the next edition of the Dunne Insights newsletter.
China: Sudden Collapse or Slow Crawl?
Leland Miller, CEO, China Beige Book
Listen to the Driving With Dunne podcast via Apple, Spotify, Amazon or wherever you take your podcasts.
The Dunne Insights Newsletter: Future. Electrics. Global.
Follow Dunne Insights on Twitter, LinkedIn and YouTube.
Visit: www.dunneinsights.com