Forbes: Will Tesla's Battery Investment Win It the Inside Track Against the Germans?

[glenhurst]

For the uninitiated, what is IP?

Intellectual Property

 

[SageBrush]

In this context
IP = Intellectual Property
.

I presume the 'trap' alluded to is requirement in China for foreign businesses to have have local partners who then "acquire/learn" the imported expertise.

 

[RobStark]

The ground is eroding on this massive Chinese Mercantilist conspiracy theory.

The Chinese have loosened the rules for battery cell makers, and makers of automotive battery packs including controllers,software , and their need for JV partnerships and their IP.

Now China is on the verge of loosening JV and other requirements for EV makers as a whole.

Here is one article but you can google for more.


China to loosen electric-car rules for foreign makers, because they didn't work

 

[jbcarioca]

The ground is eroding on this massive Chinese Mercantilist conspiracy theory...

Many people who have not recently been in a major Chinese city forget, if they ever knew, the massive consequence of pollution on Chinese cities. The EV programs, extensive as they are, are intended to combat that problem. Government officials have been outspoken on the gaming of the system by some Chinese BEV manufacturers. That is one reason why Tesla, specifically, is being allowed in on it's own. The big Chinese BEV builders are learning quickly, but they're still tiny. We've not heard the last of the changes...

 

[SageBrush]

I'm not about to defend the Chinese appropriation games of international IP, but I wonder if they are any better at it than the Americans. Looking at you, Microsoft.

And it seems fair to add that the Chinese often have willing partners. Looking at you, Walmart

 

[nativewolf]

@jbcarioca you make some good points about the Chinese. The Chinese approach is bottom up and the Tesla approach is top down. Both are probably the best approaches for their home markets. In China car ownership is growing at a fantastic rate and owning a car, any car, is a big status symbol. Because there are fewer young women, they can afford to be picky in choosing their mate and a guy owning his own car is a big plus. China has a big market for inexpensive cars and they don't even need to be that good. India has a similar market.

In developed countries car ownership rates are pretty flat. Most new car sales are replacing older cars. Car buyers tend to be more choosy and conservative in their choices. The place to sell a totally new idea for a car first is to the richest segment of the market who can afford to have several cars. Many of the buyers of unusual and uncommon cars are collectors who have an oversized garage full of cars. Tesla sold many of it's first cars to enthusiasts, then word started getting around and now they have a long waiting list for their next, cheaper car.

BYD and some other Chinese car companies are making small forays into foreign markets, but their domestic market is so strong right now they are mostly just laying groundwork for the future. Getting small quantities of their cars in the hands of westerners educates them on the differences between the Chinese market and what westerners expect. They can slowly work those ideas into their cars while making their bread and butter on car sales at home.

Tesla and Chinese car makers will probably eventually end up as competitors, but it will be a while. Tesla may end up the dominant player in the upper half of the global market and, at least initially, the Chinese car makers may end up the bargain car makers at the bottom.

I think when the dust settles after the shake up, the world's car industry may look very different. I think LG is thinking about getting into the car market and they are learning how to do it on GM's dime with the Bolt. People have talked about Apple becoming a car maker and other American tech companies have played with the idea, but what if Apple just sits back and waits for GM, Ford, or Chrysler to get weak enough, then swoop in and buy them? They could afford to buy a weakened major auto maker, then rebuild the company into an EV maker.

Some other tech companies have enough capital to be able to do something similar, though Apple has the most cash.

Instead of GM, Ford, and Chrysler, they could emerge from the crisis as Apple, Microsoft, and Google. Or Amazon, or some other tech company.

They may retain some of the old nameplates, but the parent corporation would be different.

I'm not sure things would play out the same in many other countries. Governments would probably step in to marge and support the home companies. So Nissan, Toyota, and other Japanese car makers might survive as their own companies, but who knows, we might see Sony-Nissan or something.

I do think at least some of the bigger car brands in a decade from now will probably be companies we haven't heard of today, or they aren't in the car business today.

Frankly I don't think Tesla is ignoring them. I think Tesla is doing everything it can as fast as it can, not much more they can do to be honest and given all circumstances they are focusing on the right market with Elon explicitly moving to EV for the masses. The folks that are ignoring this huge secondary market (Brazil, Mexico, etc) are the other entrepreneurs in America. What are they thinking? If I had a few billion I'd start with batteries and build little cars that were cheap, it's a different market but it's huge. In fact, I'd just do a mini Tesla and get solar roofs too. In India, Brazil, Mexico, Nigeria, etc that would be a killer combo

 

[bhzmark]

Amazon didn't turn profit for over 20 years so does the author mean "soon" just as the same timeline as Amazon?

Exactly. Enterprise value is the relevant metric for some companies instead of gaap Profit or EBITDA

 

[McRat]

The ground is eroding on this massive Chinese Mercantilist conspiracy theory.

The Chinese have loosened the rules for battery cell makers, and makers of automotive battery packs including controllers,software , and their need for JV partnerships and their IP.

Now China is on the verge of loosening JV and other requirements for EV makers as a whole.

Here is one article but you can google for more.


China to loosen electric-car rules for foreign makers, because they didn't work

Actually China is on the verge of starting a war against NATO so they can secure better supplies of petroleum and kickstart their imperialistic goals.

In China, EV's run on coal, which helps them.

 

[techmaven]

Actually China is on the verge of starting a war against NATO so they can secure better supplies of petroleum and kickstart their imperialistic goals.

Such western thinking. The Chinese don't want the kind of war that is with armed forces. They have very little offensive capability. Instead, they don't want to be invaded and become the vassal of an imperial power given their recent history.

On the other hand, the non-lethal wars are already underway. They don't need force when the companies of other countries are glad to give them knowledge and expertise, including trade secrets to access the Chinese market. They already win by becoming an economic powerhouse and are already on the rise. Why would they want to stop this gravy train?

In China, EV's run on coal, which helps them.

And the marginal increase in power production is nuclear and renewables. They are rapidly replacing their older, more polluting coal plants with newer ones that emit far less pollutants. Further, displacing the location of emissions alone is a win. They play a much smarter long game.

 

[jbcarioca]

Actually China is on the verge of starting a war against NATO so they can secure better supplies of petroleum and kickstart their imperialistic goals.

In China, EV's run on coal, which helps them.

Very funny post. If I thought you were serious I'd be appalled. But luckily I don't think you're either stupid or ignorant, so I just think the joke might be a bit over the top.

 

[McRat]

Very funny post. If I thought you were serious I'd be appalled. But luckily I don't think you're either stupid or ignorant, so I just think the joke might be a bit over the top.

Read the news. While nothing is surprising to those paying attention to global news, it certainly is escalating. China is not Norway. Do not assume they are friendlies. They are not.

China’s ‘devastating consequences’ threat

China has deployed a modern fast aircraft carrier to the China Sea and is saying that if NATO interferes with their China Sea expansion there will be military consequences.

How would you interpret that statement by their government? They have been on a rapid military expansion program for over 15 years now. They have "air carrier killers", ICBM's and cruise missiles with stolen W80 warhead clones on them, silent nuclear attack submarines, a very modern air superiority fighter ($110m J-20), etc.

China has had imperialistic desires they could not act upon since the 1960's. Remember Taiwan?

Why the US Navy Should Fear China's New 093B Nuclear Attack Submarine


EDIT - Why do so many countries hate/fear the US Military? A large component of that is their aircraft carrier fleet. Aircraft carriers are portable extension of your country. An imperialist dream. Go anywhere you want and pretend you own the place.

China desires the same ability, it will have it in under 10 years unless they cut spending. 5 years if they continue to accelerate spending.

China is in a similar situation to Japan in the 1930's. They need resources, especially oil, and are not above using military spending to acquire it, through saber-rattling or armed conflict.

We laughed at the Japanese in the 1930's. They are friendlies and not a credible threat. Opps.

 

[SageBrush]

Enterprise value is the relevant metric

Is that the new-age term for eyeballs ?

 

[jbcarioca]

Read the news. While nothing is surprising to those paying attention to global news, it certainly is escalating. China is not Norway. Do not assume they are friendlies. They are not.

.

When I was first in China back in 1977 the world was bigger than it is now. I understand now as then that people who view the world with rigid ideological views make regular mistakes.

Most countries neither hate nor fear the US Military. Most respect it. It takes a US-centric view to think everyone else in the world is that narrow.

Aircraft carriers are, in the modern military context, mostly irrelevant.
As for China and territorial ambitions one would do well to study history. They are tactical, yes, but most Chinese leaders take a quite long term view.
It is not so simple as "friendly" or any other monolithic description.

That is why Tesla is well received and GM is having some special challenges. Tesla is good in protecting itself.

Don't begin with vaunted GM technological prowess. They have had it since Charles Kettering and had it with the Oldsmobile Toronado and the Pontiac Tempest (how many people know why? Few, they were marketing messes). Their situation in China, although with good market shares and short term earnings, actually positions them for longer term challenge.

 

[Tam]

...if NATO interferes with their China Sea...

I just wonder whether the term NATO, North Atlantic Treaty Organization, is a correct term for South China Sea conflict.

China is not a member, nor do others in the conflict: Brunei, Indonesia, Malaysia, Philippines, Taiwan and Vietnam.

The only member of NATO that got into the conflict is the US whose submarine drone was fished out of the sea and taken to China.

It is questionable that NATO is trying to recruit membership from South China Sea.

It is also questionable that the US is acting under the NATO directives when the submarine drone was impounded by China.

Most likely the US is acting on its own and not under any directions from NATO for the current South China Sea Conflict.

By the way, it is questionable that those nations in the conflict want the US to intervene: The Philippines announced that it wants the US out of the region.

 

[McRat]

I just wonder whether the term NATO, North Atlantic Treaty Organization, is a correct term for South China Sea conflict....

My bad, SEATO.

Right now the Phillipine's claim is supported by a recent UN arbitration decision. China has said it will not abide by UN directives. No negotiation possible. They will fight over it according to the Chinese.

The US has no dog in the hunt other than to halt China from intimidating their neighbors and to maintain commerce in the region.

About as unslanted of a view would be the BBC News summary: Why is the South China Sea contentious? - BBC News

 

[Tam]

...SEATO...

Ah! It makes more sense now!

By the way, SEATO was made up of:

Australia, Bangladesh, France, New Zealand, Philippines, Thailand, the United Kingdom and the United States.

Of those, only 2: Philippines and Thailand are actually located in the Southeast Asia region.

It existed because of China threat during Vietnam war.

SEATO was dissolved in 6/30/1977 after a few years when the US President Nixon visited China in 1972 and started the steps to normalize relations with China.

If the US is serious about China's threat, it should resurrect SEATO again, and this time, with more countries that are actual located in the area.

 

[KD5MDK]

But there is solid evidence to the steps Chinese BEV manufacturers are taking to develop BEV markets where they did not exist, developments that are totally ignored because they happen in disreputable poorer places in odd countries like irrelevant Brazil (6th largest auto market globally by some measures).

The Chinese are beginning with those and working up.

I think you should read the writing of Horace Dediu Asymco
He writes a lot about disruption in business, which is mostly about the exact model you're talking about. Also, he has built his own EV and has a podcast called asymcar because he likes cars as a hobby.

 

[jbcarioca]

I think you should read the writing of Horace Dediu Asymco
He writes a lot about disruption in business, which is mostly about the exact model you're talking about. Also, he has built his own EV and has a podcast called asymcar because he likes cars as a hobby.

Interesting you mention him. His intellectual guru is Clayton Christensen, whose work strongly influenced my thinking. The innovator's Dilemma is the seminal work on the subject. Dediu has an interesting view himself because of Nokia, among other things. I know Christensen's work well, but had not heard of Dediu. Fifteen minutes reading convinced me I want to read him regularly. Thanks!