Looking Out - The Podcast

EP12 - Why China has the most exciting car market right now. Joe reports from Shanghai.

November 27, 2023 Drew Smith Season 1 Episode 12
EP12 - Why China has the most exciting car market right now. Joe reports from Shanghai.
Looking Out - The Podcast
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Looking Out - The Podcast
EP12 - Why China has the most exciting car market right now. Joe reports from Shanghai.
Nov 27, 2023 Season 1 Episode 12
Drew Smith

For two decades, China has been the goose that laid the golden egg for Western automakers.

Now, it might just be the market that screws the pooch.

Joe heads to Shanghai after a few years away to see just how far the Chinese manufacturers have come. 

We explore how automotive culture is developing, and paint a picture of the challenges ahead for both Chinese and Western automotive manufacturers in this critical market.

That's it for this episode! Thanks for listening.

If you like what you hear, please leave a review for us on your favourite podcasting platform. It helps other folk like you find us!

And you can sign up for Looking Out - The Newsletter, the sidekick to our podcast, here: automobility.substack.com

Show Notes Transcript Chapter Markers

For two decades, China has been the goose that laid the golden egg for Western automakers.

Now, it might just be the market that screws the pooch.

Joe heads to Shanghai after a few years away to see just how far the Chinese manufacturers have come. 

We explore how automotive culture is developing, and paint a picture of the challenges ahead for both Chinese and Western automotive manufacturers in this critical market.

That's it for this episode! Thanks for listening.

If you like what you hear, please leave a review for us on your favourite podcasting platform. It helps other folk like you find us!

And you can sign up for Looking Out - The Newsletter, the sidekick to our podcast, here: automobility.substack.com

[00:00:00] Joe Simpson: It's very easy to think, 'Oh, China is that thing over there.' But actually, once you get there and you start to understand the differences in how consumers are relating to cars, it opens up vastly more opportunities to do interesting stuff. It is probably the most interesting market to design for.

[00:00:22] ​

[00:00:23] Joe Simpson: Hello, I'm Joe Simpson.

[00:00:25] Drew Smith: And I'm Drew Smith.

[00:00:26] Joe Simpson: And welcome to 'Looking Out: The Podcast,' the auditory side to the newsletter in which we connect the dots across mobility design and culture.​

[00:00:35] Drew Smith: And coming up in this, our 12th episode of Looking Out The Podcast, Joe is going to be a tour guide. He's gonna,walk us down the street of Shanghai. Aren't you? Looks like Shanghai.

[00:00:51] Joe Simpson: It is Shanghai. Well observed!

[00:00:53] Drew Smith: tell us a little bit about the trip, Joe. what's going on?

Joe's Shanghai Trip

[00:00:56] Joe Simpson: Yeah, so I'm here in Shanghai for a few days. It's my first time in China since 2017. There's obviously been a global pandemic in between that time. And I think it's fascinating to just go for a bit of a walk through Shanghai, the car park here, and what's going on.

[00:01:12] Because, obviously... Shanghai and China generally is a very fast-moving, fast-changing place. But as we've observed in a few of the podcasts, the last few episodes, I think earlier this year at the Shanghai auto show, it was a really big shock for a lot of Western auto execs when they walked onto that show floor and saw the progress being made by the local brands.

[00:01:35] Drew Smith: why don't you take us for a walk down a street in central Shanghai? last time I was there in 2019, so just prior to the pandemic breaking out. I'm just really curious to hear your observations around how the city has changed. in that time and what you're now seeing on the street, because obviously China is a bit of an obsession for the auto industry.

[00:02:02] It has been the golden goose for Western manufacturers, certainly European manufacturers for a number of years, that dynamic is starting to shift quite dramatically. And I think the reliance of Western manufacturers on China as a market is starting to come unstuck a little bit. So, what is the evidence that you can see on the street there?

[00:02:29] Joe Simpson: It is important to be careful not to conflate Shanghai with China. I'm only going to give you observations on Shanghai here. I haven't been to any other parts of China since 2016. And I think there's a mistake that a lot of Westerners make, which is that they go to a place in China and they think that is China, and China's obviously 16 provinces, it's a hugely diverse place.​ 

[00:02:52] I've been to Beijing quite a bit too, and just the difference between Beijing and Shanghai is quite stark. 

Shanghai's continued rapid development

[00:02:58] Joe Simpson: So let's talk about this as a kind of Shanghai perspective, which is maybe a bit like a kind of a London compared to the rest of the UK; it's not the same place.​

[00:03:07] Nonetheless, change here, wow, it's really moving at a rip roaring pace. Obviously, you can see the skyline behind me. There are simply skyscrapers for as far as I can see. and the other thing to note about that is that I can actually see quite a long way. So I think that's one of the main things that I observed from the last time I was here. 

There's a change in the air (quality)

[00:03:28] Joe Simpson: The last time I was here, you could taste the air. Yes.

[00:03:37] Drew Smith: there was a metallic tang that did not leave my mouth the entire time and you could see it and I'm looking at the skyline behind you and it's, it seems remarkably clear.

[00:03:47] Joe Simpson: And I think we've got lucky with the weather on this trip, I have to say. And, it's November, so it's probably a kind of a fortuitous time of year. but nonetheless, I think there has been a huge change in a lot of the contributors to that kind of pollution and that taste and that sort of smell we both experienced was, a lot of the kind of, a lot of the scooters, two stroke scooters, a lot of the cars and a lot of the kind of heavy trucks and things. 

[00:04:13] Now, I think that has changed. All of the scooters now are electric. And, at various times of the week, various times of the day, heavy trucks are not allowed into central Shanghai. They have to go around the edge. A lot of the buses are now on either a trolley wire system or electric. But I think one of the main differences is the cars.

[00:04:34] And, I think people who know a bit about China will know there's this kind of green plate system. You have to buy a number plate to buy and own a car here. And if you want to buy a regular kind of gasoline powered car, the number plates, if you don't already own one, are very expensive to get hold of. 

[00:04:53] But, if you buy a so called new energy vehicle, you can have a green plate at a much cheaper cost. And what strikes me walking down the street here, is just the number of green plate cars there are. 

[00:05:05] It feels like every other car has a green plate on it. Which means it's either fully electric, or it's basically a long range hybrid, what we might call a range extender hybrid, where there's a very big battery in it, so most of the time it's running on electricity.

[00:05:19] Drew Smith: Now, the last time I was in Shanghai, electrification of the vehicle fleet was certainly starting to take hold, but it felt by and large, like it was still like an EV was still a premium proposition. And one of the things that I'm curious about is, are we starting to see mid market and entry level vehicles proliferate on 

[00:05:47] Joe Simpson: Oh, God. Oh, God, yes. 

[00:05:49] Drew Smith: talk us through that a bit.

[00:05:50] Joe Simpson: I would actually say, I wonder whether that's slipped a little bit. Whereby... I actually, and this is just an anecdotal observation, I haven't checked the data, but I haven't seen, leagues of, let's say, BMW IXs or, Mercedes EQEs and EQSs. In fact, I don't think I've seen a single Mercedes EQ model that I can think of here.

[00:06:13] Drew Smith: It's a bit like America then.

[00:06:15] Joe Simpson: And the, what's interesting is that there's still a car park of, those, as they call it in China, ABB, Audi, Benz, BMW, there's still a car park that's of those cars. 

[00:06:25] They seem to be predominantly like petrol and actually here more high end. It's more of the, your M4s and your C63 AMGs and your, E class coupes and things like that. 

[00:06:37] So that leaves us with everybody else and then yeah, it's very much the mid market and even the lower market, which seems to be electrifying. 

[00:06:46] And if you've not ever been to China, Shanghai before your typical streetscape, you will be absolutely as a car person enthralled to brands that you just don't recognize that you just don't see yet in Europe. Oh, and certainly not in America. And it's extremely diverse. 

[00:07:06] And my main reflection from not coming here for six years is that car park now, to my eyes is predominantly Chinese brands, predominantly startup brands, most of the, many of them brands that weren't here a few years ago. And there's less of the kind of Western brands. The number of Volkswagens, which were huge brand in China seems to have gone down massively. As I say: it's anecdotal, just central Shanghai, but it does seem to be a vast change.

Micromobility in Shanghai

[00:07:33] Drew Smith: Before we get into the Chinese brands, I want to stay on the street for a second, because one of the things that I picked up on last time I was in Shanghai, and it was a reinforcement of a bunch of stuff that I've been reading about in the micromobility space is that beyond the electrification of the moped or the scooter.

[00:07:55] Joe Simpson: Yeah. 

[00:07:55] Drew Smith: I did notice that there was, what gets referred to in the world of micro mobility is this Cambrian explosion of different types of sub car vehicle. and I'm curious to know how that has evolved and how the streetscape sort of works between, your traditional sort of car and because, before the car came along, China was a country that ran on the bicycle, 

[00:08:25] Joe Simpson: Yes. Yeah. Yeah. 

[00:08:26] Drew Smith: and it feels like there was a moment if you're a, if you're a micromobility devotee, where you put your head in your hands and you think, Oh God, like you actually had it, 

[00:08:35] Joe Simpson: Yeah. 

[00:08:35] Drew Smith: to the car, like how does the balance now play out? on, on the street in Shanghai.

[00:08:40] Joe Simpson: This is interesting because we actually went for a 20km bike ride around Shanghai yesterday, which is, as some people might say, it's taking your life in your hands. I actually found it much more, sanitized and easy going than I expected. There was only one life or death moment. my colleague got taken by a bus. but no, I think the Cambrian explosion of different vehicle types maybe hasn't happened so much.

[00:09:11] Push bikes, pedal bikes: that's a huge thing. I think what's interesting is the traffic here is so bad. It's like a kind of like Chinese LA. that actually the quickest way to get around the center of this city now is on a bike.

[00:09:26] There's the moped scooters, a typical sort of electric moped kind of Vespa type, vehicle. What was interesting to me or what's interesting I think to us as designers is the amount of customization you get on that. The amount of people with like fairings, with kind of almost duvets that they or quilts that they could put their hands in. to keep them warm.

[00:09:45] but then the most interesting ones are probably the kind of, almost like the trikes, which I think have been very much you've seen if you've been to China for a long time, where there's a kind of like a box on the back. And of various different things being, being carried. 

[00:09:58] And then, of course, I think the thing that's exploded since the last time I was here was the kind of world of, food delivery and online delivery. And really, if you're riding a bike around the city, the riders you've got to watch are the Meituan, food delivery riders who literally will take their life into their own hands and squeeze through gaps you would not... make any attempt to get through yourself and really are taking their prisoners. But they're getting food from any part of the center of the city to any other part in about 20 minutes guaranteed.

[00:10:26] And they were apparently the lifeblood of the, the city during lockdown.

[00:10:29] Uh, really, uh, there's still that huge population of bikes and scooters, but not so much the kind of diversity of micro vehicles that you perhaps might have expected here if you'd come here2015, 2016.

Shanghai's car malls

[00:10:45] Speaking of diversity, you have taken a trip to a car retail mall. Walk us through that experience,

[00:10:54] Joe Simpson: So car retail is a fascinating space. I think we should actually do a future episode dedicated to it. Cause different brands have different approaches, different countries have got different things. what I went to on Friday was this kind of mall, which is, yeah, it's a kind of a high end shopping mall, but on one floor of it, it's almost, I would say dedicated brand spaces that are. I'm trying to describe it to people so they might be able to get it if they've not been here before, but the way that I suppose, Brands like, Polestar have taken spaces in, in places like the UK, in places like Sweden, in places like the Netherlands, in shopping centers or shopping districts, and it's like a store. So stores are pretty much like a kind of mini Apple store, in the shopping center. 

[00:11:39] They typically have maybe two or three cars in it rather than that array of, ten vehicles. Quite small spaces and then they have, a few brand advocates hanging around. dressed out in the corporate gear, but with a very light touch, not trying to hard sell you just there to support and demonstrate things to you. and then varying degrees of quite nicely branded up, sort of spaces and a wider experience, which extends beyond the car. 

[00:12:09] And I think the one to really, highlight here, which people might be aware of because it's come to Europe or come to certain markets in Europe is Nio, and Nio's houses, Nio taking on, at least to my eyes, a very Scandinavian aesthetic. Very pared down, very minimal, a lot of white, a lot of wood. 

[00:12:31] But the most interesting thing about Nio is that their houses are almost experience centres. So there's as much space in the one we went to in this mall dedicated to the coffee shop as there is to the cars. And the coffee shop is actually only accessible to people who own a Nio. or if you're planning to buy a Nio. And what was interesting to me was that this mall, which definitely wasn't central Shanghai, it was a good hour's drive out of the centre,um, quite full on a Friday afternoon of Nio owners sat and saying their kids are getting bubble tea, having a actually very high quality flat white, people working, people taking phone calls, people using it as a kind of rest stop while they're obviously doing their other shopping. And I think this is the thing that building experiences that move far beyond the car and are very much about a community of owners

[00:13:35] And, the value that can deliver.

[00:13:36] So 

[00:13:40] Drew Smith: in the West, if I think about my experience of brand spaces, say Tesla in, Tesla in Sydneyuh, when they used to be on Martin Place,the Polestar spaces, Nio's space in, Gothenburg,

[00:13:57] Joe Simpson: yeah.

[00:14:02] Drew Smith: little bit desperate in a way it, you can tell that there is this desire to open the brand up and to invite people into experience it.

[00:14:14] But very rarely, if ever, have I seen those spaces being used the way the design teams intended them to be used. And as a result, they just feel like small showrooms of the old school, or at the other extreme, you get the, like the Bentley experiences or the Aston Martin experiences, which goes so far over the top in trying to express Bentley ness or Aston Martin ness that it all feels a bit sort of fur coat, no knickers.

[00:14:46] Joe Simpson: I feel, I wonder if there's a mental modeling thing here. Like I know there were traditional car dealers, in Shanghai and in China, but I wonder whether there's a thing for us in the West and in Europe where any of those spaces, you immediately like that's cars, that's a car dealer. Oh, I'm going to be sold at. Or some of them the spaces feel so almost art gallery like that you feel, trepidation about actually going in like to go in like. I have this in Gothenburg where I'm like, God, if I take my kids in there, they're gonna wreck something. So I won't go in. Here, I think there was a lot more, what I observed, chilled out approach.

[00:15:27] we went to Hi Fi's store. Hi Fi is this very old, Human Horizons, but the base of the cars, the Hi Fi, the Hi Fi X, the Hi Fi Y, and the Hi Fi Z. if you don't know this brand, by the way, check it out. It's wild. The things that they are doing design and technology wise, but a very small store. It felt more like one of those mobile phone stores. There were people just hanging around and there was this thing where I was like, are you a Hi Fi person or are you just a member of the public? And it was just a member of the public. Sat on her phone while her son was like in the car, playing with the tech, looking at things. And there was just like really chilled out, the kind of guys in there, who were the brand ambassadors or whatever they're called, just, I don't care, they're fine. happy to give you information, happy to help, happy to show you how things are, but not like getting in don't touch that

[00:16:24] sort of, 

[00:16:24] Drew Smith: But no pressure.

[00:16:25] Joe Simpson: Exactly.

Automotive brand advocacy and community building

[00:16:26] Joe Simpson: I think there's something else though here around the community of owners and how people have I don't really know why and how this has happened, but it's an interesting one to contemplate and dig into how people have taken brands to their heart, become kind of brand advocates. There's this whole world that sits around it in the digital space, the world on WeChat and Bilibili, which is like the kind of, Chinese YouTube where people are either sharing their experience, advocating for the brand, saying what a great time they've had. 

[00:17:02] And apparently this is what Nio owners do. there's a kind of crowdsourced kind of information which in Nio's case is now going back into the cars. So when you talk about something like charging or you talk about something like parking, people being able to say, yeah there's always charging available here. Or there's always parking available here and the infotainment systems sucking in that sort of, wisdom of crowds knowledge so that people are like, okay, this one will be better than that one. I talked to one of my colleagues yesterday who said, yeah, we've got a friend who's, really advocating for the brand Zeekr , um, and they bought a Zeekr 001 when that arrived and they've now bought the recently launched Zeekr 009 and the Zeekr X, and they're doing and going to events at the weekend for free advocating for Zeekr. And trying to, if you like, sell or show off the benefits of the cars. 

[00:18:00] And just to come back to the street briefly, the most interesting thing that happened yesterday was when we rented the bikes, we went to this little boutique bike shop in the French concession, And when we arrived outside, there was a Nio ET5 touring. So Nio's new, station wagon version of the ET5. Trunk lid open, Brompton folded up on the inside. And when we went in, we were not accosted, but I thought that the person who turned out to be a Nio advocate was actually the person from the bike shop giving me the bike, and she was like, oh, just scan this code. And then she gave me a Nio mug, and then she was like, oh, the WeChat scan code couldn't take my phone number because I don't have a, Chinese phone number and she was like, Oh no, I can't send you the information. There was, do you want to test drive the car? And I was like, I'm not allowed to drive here I'm from the West. 

[00:18:46] But it was, it's basically this kind of as my colleague described, like these flash mobs appear in places. The brands are like: that's a space, that's a store, that's a location where we should be. We should be seen. And then doing kind of ad hoc, marketing, brand building, flash mobbing around that brand and taking people and getting them to drive the cars or getting their information. This stuff is fascinating and it was an absolute dead hit in terms of that brand, that car, that store, that location. It was a very good match. Right.

[00:19:24] Drew Smith: um, perhaps Tesla, the only time you see this sort of advocacy for brands tends to be at like classic car meets. 

[00:19:37] Joe Simpson: It's back to the old men with beards

[00:19:40] Drew Smith: It's people turning up with the greatest hits, and people coalescing around what was, rather than what is.

[00:19:48] Joe Simpson: Yeah.

[00:19:50] Drew Smith: And that's fascinating to 

[00:19:51] Joe Simpson: It is fascinating because here. If you think about it, there isn't really that hundred years history and culture that sits around the car. I think there's a fundamentally different relationship with the car. I think in the West. We have this idea, particularly as men, of this idea of mastering the car, being a great driver. the car is my servant and I will master it and become an amazing wheelsmith. and, I just don't

[00:20:23] Drew Smith: Behold my stringbacks.

[00:20:25] Joe Simpson: Okay, oh! There's just none of that BS here. But, what there is... Is a car park, which is very modern, very new. Very difficult, borderline illegal to own a classic car here.

[00:20:40] The test, process to actually keep a really old car on the road. very stringent. Ironically, the oldest things I think I've seen here, I've seen two Ferrari 458s. And I was like, Oh, how old is the 458 these days? I was like, that must be knocking on for 10 years old. I was like, Oh, that's actually quite, that's literally like the oldest thing.

[00:20:59] So I think you've got people then actually advocating for modern brands, the tech and the brand and the wildness of the design, something they actually really buy into that's really making their life better. and it's really interesting to see that because I tend to think we've got a bit like all modern cars are rubbish in, in Europe and the US.

Chinese attitudes towards cars

[00:21:21] Joe Simpson: And I think genuinely there's not that sense here. It's a completely different attitude and different relationship to car, actually. And there's a real newfound pride in these new energy Chinese brands. And that's, I think, the other thing that's driving the growth of those and that becoming the mainstay of the car park here.

[00:21:40] Drew Smith: I bet if those legacy automakers could bottle that up. they'd be very pleased. 

The different approach to car design in China

[00:21:46] Drew Smith: I want to get into the cars themselves now because something that we've talked about a lot, in Looking Out is how there is a fundamentally different approach to how cars are put together, at a conceptual level and the role that technology plays, which is very different from how we see Western legacy automakers

[00:22:12] creating new energy vehicles. So talk us through that.

[00:22:17] Joe Simpson: A few things on this one. 

The Chinese preference for sedans

[00:22:19] Joe Simpson: first of all, I think that what's fascinating is that the Chinese are still very much into sedans. So the thing I observe here, which is actually quite a shock to my European eyes, is that there are, seem to be far fewer SUVs in Shanghai than there are in my hometown now as it is of Gothenburg. 

[00:22:37] So the dominant vehicle on the road is still the sedan or the fastback or the kind of the low car, broadly. I think then the other thing that you see is just this. variety of 

Boldness in Chinese car design

[00:22:49] Joe Simpson: form factor, variety of form language, the boldness of execution I would observe that the main difference between when I was here last time and when I'm here now is that last time you still could see cars where it felt like this brand, this team, really have never designed a car before. There's just stuff that is fundamentally mistakes, looks terrible, everything's off. 

[00:23:17] Now, clearly understood car design, clearly get it. And it's that quote of almost like Chris Bangle. Understood car design, understood what the rules are. now once you've understood those, you can go and break them with like with knowledgeand that's why you're getting this kind of diversity and actually quite striking, visual expressions.

Examples of new approaches to car design

[00:23:37] Drew Smith: so make this concrete for us, give us some examples of how this new approach to form factor, this new approach to, surface or graphics or whatever might be playing out. What are the most striking examples?

Avatr, a fascinating Chinese start-up

[00:23:53] Joe Simpson: talk about the Avatr. fairly new brand. it's a brand that is a, it's, no, I'm going to get these wrong, but I think it's a joint, collaboration between, Chang An. And I think it's either Huawei or Foxconn that are involved. But these feel very high end. the, the SUV feels a bit like a, a really good version of the Aston Martin SUV.

[00:24:21] What's it called again, the Aston Martin?

[00:24:22] Drew Smith: The DBX.

[00:24:24] Joe Simpson: Yeah, that's right. Yeah.

[00:24:25] It's got this really fascinating rear end where it's got almost like a flat, upright rear screen. And then the C pillars come out like pair of flying buttresses. And then there's a kind of decklid. So it's almost like Jaguar XJ esque. And then

[00:24:42] Drew Smith: Can't go wrong with an XJS.

[00:24:44] Joe Simpson: really bold. just full width signature, which kind of then emphasizes the deck lid and then a really bold C shaped graphic, super slim C shaped graphic DRL, but actually really really nicely done form language. 

[00:24:58] And then there, there are 12, which is a newly launched sort of fastback.

[00:25:02] Again, feels a bit like maybe a modern take on, the Aston Martin Rapide, like the Polestar 4, no rear window. so the rear window's gone, even though it's fastback, so you have this, this very large trunk, which is self contained, but then you have a fastback form, and, the exteriors are really nicely executed, the interiors are wild, it's like being in a, in a disco, just the way that the door cards are treated, the way that the speaker system is integrated into the IP with this kind of central column and floating elements. 

[00:25:36] And then, yeah, I forgot on the outside they have, they have visual displays. So at the bottom of the cowl, the top of the hood, there's a visual display, which shows you. Yeah, the car is charging or I'm parking here or please go ahead and things like that. Same on the HiFis, they have customizable front and side displays in the case of the Zed.

[00:25:58] we'll post in, we'll post in the video like one of it strobing my name along the side. and stuff like this is cheesy to us. But they're just moving at such a rapidly fast rate and bringing the cost of technology down they're going Yeah, why not bring this stuff in?

[00:26:16] Drew Smith: I saw a video the other day of the, what is it, the new Zeekr 007, it has this LED, um, 

[00:26:24] Joe Simpson: Yeah full with 

[00:26:26] Drew Smith: eyebrow stretched across the front of the car, probably with a few thousand LEDs in 

[00:26:31] Joe Simpson: thousand LEDs

[00:26:32] Drew Smith: that can, display Dynamic graphics. And I'm just like, to, to a Western designers and design strategist mind, I'm just like, why?

[00:26:44] Joe Simpson: Yeah, there is a, there is always a bit of a why question here. I think one of the interesting things to reflect on is the way that again the digital world and the influences on, TikTok and, within the WeChat forums on Bilibili, are looking at these cars and how it's interesting to reflect for us as strategists how trends evolve, where apparently... They're walking through new cars and saying, Oh yeah, and it's got an exterior display. And it's got a deployable rear spoiler. And it uses X 1000 LEDs in this area. And, the kind of, the door is openable via the phone. Or touch openable. All the doors on these things are basically self opening and then you just grab it or wave it and it closes. And this is driving a kind of... trend in the higher end of these vehicles of expectation of technology based convenience, technology based sort of expression that I think that all the brands are moving and reacting to and there's becoming this level of hygiene factor of things you need to qualify.

[00:27:52] Now, as you say, we can question why and you can say and you can use some of these things and say is it generally better than just pulling a door handle? Arguably no, but as you and I know Drew some of these things take hold and then they become things that customers get an expectation of their next car having and then if you don't have them You're not on the shopping list or you perceived as old or you perceived as not at the races

[00:28:22] Drew Smith: And what's, it's reminding me of my days working in the Apple retail channel. so when I was at university, studying industrial design, I worked in, an Apple reseller. this was in the days before Apple stores, the in house Apple stores existed. And back in those days, as a brand, Apple could not sell on a spec sheet.

[00:28:44] And we were trained to sell on stories. We were trained to sell essentially through fostering community around creative output 

[00:28:56] Joe Simpson: Yeah. 

[00:28:56] Drew Smith: A little bit like the brand stores you described, people would come in and just hang out. We would run training seminars and, it was totally fine for people just to just hang out and do their work and chat about the product, whereas PCs in those days, and I think to a large extent still are, they're sold on a spec sheet and what we're saying here, what you're describing is there is absolutely this brand experience element to all of this sense of community and the sense of belonging, yet so much of the development of the product is being driven by, 'Does it have an exterior display on its spec sheet?'

[00:29:33] Can I pump the brake pedal and have the doors close? there's this sort of, this Nio, is it Niophilia? This like always driving for something new?

[00:29:43] Joe Simpson: Yeah. Yeah. Yeah. Exactly. And I think this is where it becomes a one two knockout punch for some of the Western or legacy OEMs. You've got both. So you've got this spec sheet led speed of development, which I don't think many legacy brands can keep up with. 

[00:30:01] Because the other thing is they've got R& D team so clearly like with this can do, Oh, you want to do that fricking mental thing? Yeah, let's try it. We'd try and develop that in a handful of months and we can get, we can find us a local supplier who can do it at next to no cost. 

[00:30:13] But then you've got this kind of brand building world in the malls, this advocacy happening online. And yes, I know there are brands from the West who have done this. BMW have done it quite successfully here in, in some spaces, but really it's this kind of incredible sort of, two step brand plus a spec sheet thing, which is, I think is really driving, these brands forward. 

The price factor in the Chinese EV market

[00:30:40] Joe Simpson: I think the other thing is price. 

[00:30:46] Drew Smith: Because, because here's the thing, like a lot of this technology, you look at it and you think, Christ on a bike, this is gonna be expensive.

[00:30:54] Joe Simpson: I think for either of us, the strategists and people who've worked in their work in the industry, you're like, okay, what's happening here? How are you able to get this level of content in? How are you able to spend this money on these spaces in really expensive, real estate locations with all these people and staff and the experience you're giving customers. And then sell the car for below 300, 000 RMB, which is about, let's have a look. I think it's, 300, 000 RMB is maybe sort of 40, 000 euros. So just for people who don't know, Drew, I think it's worth talking about how much some things cost here. 

[00:31:39] So if we look at the Tesla Model 3 Highland, Tesla is still very popular here. New Model 3 Highland is about 265, 000 RMB. that equates to about 33, 000 Euros. Now that car in Germany starts at 42, 000 Euros. So you say, okay, that's not miles off, but it's a bit cheaper. 

[00:31:59] But then you talk about something like a Volkswagen ID. 3. Now Volkswagen have been, I think it's fair to say, hit a bit by the price bloodbath and by, perhaps a somewhat lack of popularity of the ID models here. So just recently, you've been able to buy an ID. 3, a fairly high spec ID. 3 it should be said, for 120, 000 RMB. That's 15, 000 Euros.

[00:32:26] Drew Smith: Wow.

[00:32:27] Joe Simpson: In Germany, the ID. 3 starts at 39, 000 euros.

[00:32:33] Drew Smith: They're not making any money on that, are they?

[00:32:35] Joe Simpson: I don't think they are. They're actually selling quite a few now at that price. Surprisingly. the new Zeekr X, which is their kind of small SUV, sister car to the Smart # One and the Volvo EX30. lot of content in that car. the screen that moves to the side, a zero gravity passenger seat, Yamaha stereo. or, 

[00:32:59] a 

[00:32:59] Drew Smith: and a level of fit and finish, at least from the images and the videos that I've seen, which is just wild, like just extremely high level of interior and exterior fit and finish. 

[00:33:13] Joe Simpson: It's very well done, and... It's 189, 000 RMB here, so that's 24, 000 Euros. That car starts at 40, 000 Euros in the Netherlands. 

[00:33:26] Even a Nio ES6, which is like a, sorry EC6, which is like a big... BMW X3 and is fully electric. It's 330, 000 RMB. That's 43, 000 euros. Now you're looking at paying above 60, 000 euros for an electric iX3 in Europe, and it does not have the level of content and it does not have the level of ecosystem and infrastructure that sits around a Nio here, because you've got things like battery swap stations, you've got charges everywhere, and you've got that kind of Nio house exactly, where you can get a damn good flat white, and your online community. 

[00:34:09] So I think the other thing is that the price level is another factor in driving the popularity.

[00:34:17] if you lived here, it's like what you would not, not buy one of these cars for your green plate, and probably not, not buy it from one of these brands.

[00:34:26] Drew Smith: because I'm looking at those prices and the question that's running through my mind is How, first of all, how is it sustainable for Western manufacturers to be operating in that market, but also longer term, how is it sustainable for these Chinese startups?

[00:34:47] Joe Simpson: I don't necessarily have complete answers to those questions. I think for premium brands like Mercedes, Audi and BMW, and certainly Mercedes and BMW, I think there's probably, ironically and paradoxically, a lot of logic around them continuing their internal combustion business here, It's it's notable here how, when you see, something like, Mercedes E63 AMG or a BMW M4 being driven in Europe, it always seems to be driven by, and I'm going to be an awful stereotype here, a fat, balding, older guy who you probably don't want to have any kind of, Interaction with, in a negative way, because they've probably got a baseball bat in the boot. Here, it's cycling around yesterday, yeah all the M4s, all the E60s, C63 AMGs, being driven by... 20 year olds who look exceptionally cool, dressed in extremely cool kind of clothes. it's obviously a bit of a fashion parade. It's obviously a look, a thing, a signifier. And, I think there's as well, this kind of older sort of, group of people who I think for those brands it is still premium. What I don't see is much EV in that space, as I said. It's all of the kind of more, high end luxury or performance orientated stuff. So I think, to some extent, those brands can sustain in that space. I don't think the Chinese brands can really play in that space at the moment. So it'd be interesting to see how that plays out. But obviously that's not the kind of core business. 

[00:36:30] For people like Volkswagen, I don't really know. obviously, how can you, yeah, it's built locally, yes, there's some subsidies from the local, government and stuff, but I don't know how you can sell an ID3 at that price and make money. 

[00:36:43] For the local brands, I think there's an interesting, bigger picture that will play out over the next few years.

[00:36:49] Drew Smith: One, I think we've just seen Nio announce a big round of job cuts, right? They are absolutely hemorrhaging cash on very low volumes. There is an enormous amount of overcapacity in the Chinese manufacturing base. And as we know, car factories only run efficiently when they're running at, 

[00:37:15] Joe Simpson: Full capacity.

[00:37:16] Drew Smith: Yeah.

[00:37:17] Joe Simpson: I think this is why you can see those brands coming to Europe. and they are really now looking to expand outside of China. I think there's big questions. I'm not an economist, but I think there's some big questions around what's happening with the Chinese economy. What's happening with the property market here? What's happening with people's disposable income? Can you continue to grow? As you said, can you churn a factory at full capacity? I think, and I'm not the first person to say it, we're probably heading for a bit of a crunch and a bit of a bloodbath around about 2025, 2026, where I think depending a bit on... What happens to the global economy? How, able some of these Chinese brands are to really push into Europe. How much the government is willing to stand behind and back some of them. I think it's almost certain that we'll see some of them fail. Or some level of consolidation. 

[00:38:14] There will be successes. There will be global brands that are brands that are making money. BYD. Christ, just such a thing, the vertical integration, the ownership of the kind of battery, construction, model, and, from right through from mines to the cars, starting to work in Europe, making money, huge and impressive,product line, they'll, the likes of BYD will be absolutely fine, and I think some of the better, more unique,EV brands will make it.

[00:38:46] I hope Nio make it because I think they're doing a good job. I think Lee Auto is another one to watch. If you don't know Lee Auto, that's L I. really impressive range of products, very kind of calm They have a very interesting product coming in a kind of new MPV called the Mega, which they claim to have many pre orders for it's an MPV, looks wild, but the SUVs are a very, They could almost be from a Western brand and the tech inside them is super, super impressive, screens everywhere, but done in a really logical way to play to kind of kids.

[00:39:16] The whole use case was built around this idea of this kind of young family, the fact that they're going to be spending a lot of time or they're the driver, the main owner spending, two, three hours a day in the car,

[00:39:26] To me, it's almost like this Scandinavian sort of equality to everybody in the car matters.

[00:39:32] Everybody gets an equal good experience, so it's not just about The guy behind the wheel, mastering the vehicle and helmsmithing it round corners on the door handles. that's just BS. And this is really working. They're selling incredibly well, they're very well executed, I wish them very well. design guys, ex BMW i and Porsche. And I think they're a brand that will, that will fly too. But some of the others, yeah, sure. I think they might hit the wall and I think we're heading for a bit of a crunch. So it will be interesting to watch the next three or so years play out for everybody, Chinese brands and Western brands alike.

[00:40:10] Drew Smith: I think coming back to where we started off is a lovely way of wrapping up because what you've described is a market and a consumer mindset that sits distinctly from how we understand the evolution of the automotive industry and its current state in the West and what you are doing there and what you're soaking up and the experiences that you're having and what you've relayed to us on this show is so fundamentally important to to being able to even have a point of view on that market to let alone to be able to design for it, to be able to produce product for it. And, it's very easy to think, Oh, China is that thing over there. But actually, once you get there and you start to understand the differences in how consumers are relating to cars, it opens up vastly more opportunities to, to do interesting stuff. it is probably the most interesting market to, to design for. 

[00:41:17] Joe Simpson: Absolutely. Absolutely. You talk about kind of freedom in automotive design, the possibilities here are fascinating. And I think, just to wrap on that point, My reflection is. 

Making hay while the pandemic raged: China's incredible development

[00:41:28] Joe Simpson: How much I think for us in the West and working for legacy brands that perhaps the pandemic has and will have can be seen to have a long lasting impact because I've been so inspired by being here and it's the first time I visited for six years and I know I'm not the kind of example. Senior people from other brands have probably already visited by now are seeing this, but for two, three years, none of us could. I genuinely think that now that China's reopened, now that travel is possible again, it's super important that, people start to come here again, start to see, start to soak up, start to understand, and really, I often think that the Chinese design studios and R& D operations are used as like this kind of like satellite away from Yeah the kind of hubs, the main kind of motherships in places like Wolfsburg and Munich and Detroit. 

[00:42:28] And I think the brands have really got to lean on them because there's some really incredible people out here doing amazing work and that really understand this stuff and are really inspiring. And yeah. The world is changing. You can't do the same thing for here as you can that will work in Detroit and will work in London and will work in Munich, I don't think anymore. I feel that those days of Oh, the Chinese just doing copycat cars. if you believe that. Come here and have a look because Wow, the car park is just i'm like what the hell is that? It's amazing. 

[00:43:02] Drew Smith: Nice to hear you excited about something, Joe. 

[00:43:04] Joe Simpson: Yeah, rather than being hypercritical. 

[00:43:07] Drew Smith: exactly, exactly. 


[00:43:09] Drew Smith: Look, that's it for this, the 12th episode of 'Looking Out: The Podcast.' Joe, it's been just so good to get this report from on the ground in Shanghai. If you've been watching and you like the show, please feel free to comment. We've been loving the comments. 

[00:43:28] Joe Simpson: Yeah, 

[00:43:29] Drew Smith: We're listening, we're reading 

[00:43:31] Joe Simpson: We're trying to react. 

[00:43:32] Drew Smith: we're trying to react. it's just so lovely to have you watching along with us. do and subscribe to the show. If you're watching on YouTube, leave us a review. If you're listening to this podcast, for more about the topics in this show.

[00:43:43] visit our website at lookingout. io where you can also sign up for Looking Out The Newsletter, 

[00:43:50] Looking Out The Podcast was written and presented by Drew Smith.

[00:43:55] Joe Simpson: I'm Joe Simpson.

[00:43:56] Drew Smith: This is Drew Smith. And thank you for listening.

End note

[00:43:58] Drew Smith: ​It was um, legs day, like 

[00:44:02] Joe Simpson: Oh God, no. 

[00:44:03] Drew Smith: I went seven days this week, that was a bit much. 

[00:44:05] Joe Simpson: Did you fucking hell? That's impressive. I'm doing well if I go three times. 

[00:44:12] Drew Smith: We have children, it's different.

[00:44:13] Joe Simpson: That's true.

[00:44:15] Drew Smith: I have a cat with an automatic feeder.

[00:44:17] ​

Joe's Shanghai Trip
Shanghai's continued rapid development
There's a change in the air (quality)
Micromobility in Shanghai
Shanghai's car malls
Automotive brand advocacy and community building in China
The Chinese preference for sedans
Chinese attitudes towards cars
Boldness in Chinese car design
Examples of new approaches to car design
Avatr, a fascinating Chinese start-up
The price factor in the Chinese EV market
Making hay while the pandemic raged: China's incredible development
End note