Posts Tagged ‘growth’

Growing Pains

Tesla stock dropped more than 5% after hours as Musk explained what had gone wrong in the making of the new Model 3, the company’s first affordably priced electric car. Investors had sensed something was awry a month earlier, when Tesla said it had only made 260 of the Model 3 last quarter, well below the nearly 2,000 it had forecasted; some reports said the bottleneck was due to the carmaker assembling the vehicle by hand.

Elon Musk Says This Is Tesla’s ‘Biggest Problem’


“Nine levels of production hell” are not unusual when you launch a new product. Especially if it is a product of such a scale never produced by the company before.

"Comply or Die" for Uber in China

Uber is usually not afraid to go on the offensive with regulators all over the world in order to facilitate its rapid growth and expansion. Be it by filing complaints against several governments in Europe at the beginning of 2015, or using it’s large venture cash pool to hand out aggressive cash incentives to drivers in India in order to go against opposing “old-economy” taxi monopolies.

In Uber’s most important growth market China, however, Uber’s management is much more cautious and obedient, knowing that their usual strategy of disrupting the market could possible come to a dead stop at anytime at will of the strong central government. Additionally, Uber is still only the minor player in China, competing with the extremely strong local competitor Didi Kuiadi that has around 80% of the market and gets significant invest from sources close to the Chinese government.

Uber therefore seems to go now for a strict compliance strategy in China. After China’s Ministry of Transport has published a draft of a new rule set for private e-hailing services, bringing in far-reaching regulatory demands on licenses, drivers and IT infrastructure, Uber is happy to comply with any new rule. Unlike Uber’s usual way of ‘acting first and (maybe) asking for permission later’, Uber has already announced that “the company is in close communication with Chinese regulators and would follow all new rules”.

Additionally, Uber will fully separate its China business from its other business by setting up an own Uber China company, and is trying to work more closely with local partners in order to get a better standing in the Chinese market. It is a “comply or die” situation, and Uber is likely to go for the survival option.


Uber said that to localize its Chinese business, Uber China has officially registered in Shanghai as a separate entity called Shanghai Wubo Information Technology, run by Chinese managers. It has obtained the requisite licenses and qualifications as an Internet company and placed its servers in China, the company added.
China Tightens Oversight of Private Car-Hailing Services


Uber CEO Travis Kalanick speaks during the Baidu and Uber strategic cooperation and investment signing ceremony at Baidu's headquarters in Beijing December 17, 2014. REUTERS/Kim Kyung-Hoon)

Uber CEO Travis Kalanick speaks during the Baidu and Uber strategic cooperation and investment signing ceremony at Baidu’s headquarters in Beijing December 17, 2014.
REUTERS/Kim Kyung-Hoon)

China Light Vehicle Production YTD July 2015 – weak Sedan segment further slows down growth

July has been an especially challenging month for the Automotive industry in China. The latest CAAM data shows a YoY decrease in production in July 2015 compared to July 2014 by -12.1%, mainly driven by the slow sedan segment with -27% YoY growth.

This weak monthly development brings down the overall growth in Passenger Vehicle segment to 4.0% YTD, 11.63 million produced cars compared to the 11.18 million of same time frame in the previous year. Combined with the weak LCV segment (-8.5% YTD growth), the total Light Vehicle production in China thus only grew by 2.4%, from 12.78 million units to 13.10 million units YTD July.


Light Vehicle Production China YTD July 2015 - Source: CAAM

Light Vehicle Production China YTD July 2015 – million units – Source: CAAM


Passenger Vehicle Production China YTD July 2015 - Source: CAAM

Passenger Vehicle Production China YTD July 2015 – million units – Source: CAAM

The Tesla Approach to Sales And Distribution

Have you bought a Tesla car yet? If not – which is actually quite a high probability given the car price – you haven’t seen how easy it is to buy a car with just a few clicks.

You go to Tesla’s site and click the prominent red order button. It is directly on the frontage:

The big red button -

The big red button –


You get some options in the design studio for configuration, but basically you can as well just simply click on order…


Press the red button -

Press the red button –


… and the only thing you do is to pay the 2,500 USD  (for the Model S) down payment. You can even do that by paypal! Your car will then be delivered to your door later this year.


Deliver my new car -

Deliver my new car –


(By the way: their process is standardized world wide. So if you are in China and want to order your Tesla, it looks and feels the same. You can simply 订购 and get your car delivered. Of course Alipay is supported as well.)

Sounds and looks familiar? Looks like online shopping for books or DVDs? Exactly! Tesla is a car manufacturer, but in its processes it incorporates a lot of ideas from the tech industry. It is not just for the order process, though. There whole sales and distribution is optimized to be different from classic car OEMs. This is partly due to their (still) low volume of car production, which makes it difficult to attract dealers without getting lost and compete in a sea of gasoline cars around them.

A more important aspect for Tesla is to be able to control the product experience from build to customer service. Elon Musk, Tesla’s Chairman, wrote a blog post a while ago on this topic. They want to educate customers about the product and use outlets such as own stores and gallery locations with high foot traffic for that. The product specialists at those outlets are not on commission though, and thus will never have to pressure for customers for sales. As Elon wrote: “Their goal and the sole metric of their success is to have you enjoy the experience of visiting so much that you look forward to returning again”.

With their “build-to-order” approach they enjoy advantages such as low inventories and being able to build the right product-market-fit close to their customers. With their order-and-pre-payment model they generate additional cashflow from the deposits they get from the customers several months in advance before delivering (or even building) the car. Their tight control of the service chain allows them to offer compelling after-sales packages for customers for more customer retention. In fact, they even integrate loyalty / affiliate programs such as the newly announced referral program. “For every referral that current owners generate, they’ll get $1,000 — and the new buyers will get $1,000 off their purchase. (…) The referrals will be made through a custom link offered to current owners, which makes it sound a lot like any other referral program on the internet”.

However, Tesla does have to battle other challenges in their existing model, especially if their car volumes are continuing to grow. They have to deal with a potential logistics nightmare of direct selling and delivering more and more cars to end consumers, they still have to invest in their showrooms and outlets, and they still have to provide service for the cars somewhere. For customers it means that they cannot simply walk into a Tesla outfit and buy one on the spot, which might harm their sales in markets, such as China, which appreciate the instant availability.

Time will tell how much benefit Tesla and their customers will get. One thing is for sure: for Tesla those different approaches to sales and distribution could be a long-term differentiator to other “classic” OEMs, as a lot the things Tesla does you can only do if you do not have a legacy structure of existing dealerships and service locations.

The Importance of China for Apple

Apple® today announced financial results for its fiscal 2015 third quarter ended June 27, 2015. The Company posted quarterly revenue of $49.6 billion and quarterly net profit of $10.7 billion, or $1.85 per diluted share. These results compare to revenue of $37.4 billion and net profit of $7.7 billion, or $1.28 per diluted share, in the year-ago quarter. Gross margin was 39.7 percent compared to 39.4 percent in the year-ago quarter. International sales accounted for 64 percent of the quarter’s revenue.


Apple Q3 2015

Looking at the detail numbers the importance of China gets more and more obvious: An overall YoY growth of 33% for Apple, fueled by a 112% growth coming from China. At Apple, China has already surpassed Europe as second largest market after the US. And with a very high chance, it might not stop at being Number 2.

China Car Production June 2015 – weak Sedan segment slows down growth rate to 4.4% YTD

June 2015 was the first month in years to show a negative growth rate of -0.7% compared to the same month in 2014. This brings down the overall YTD growth to around 4.4%, with 10.33 mn vehicles produced until end of June 2015. The market again suffered due to the weaker demand on Sedan models and Minivans. On the positive side we still see a very strong SUV demand.


in mn units. China Light Vehicle Production - YTD June 2015. Source: CAAM

In mn units. China Light Vehicle Production – YTD June 2015. Source: CAAM

Intelligent Transportation Systems (ITS) Market Value to grow over 38 bn US$ by 2020

ITS Overview. Source:

ITS Overview. Source:


Growing number of vehicles and increasing population has led to the need for effective traffic management. An Intelligent Transportation System (ITS) integrates the transportation network with ICT (Information and Communications Technology) to improve performance, enable multimodal transport and help alleviate road accidents and optimize fuel consumption.


The global intelligent transportation systems market was estimated to be valued at USD 14.59 billion in 2012 which is expected to reach USD 38.68 billion by 2020, growing at a CAGR of 13.0% from 2014 to 2020.

Grandview Research


The car – and other modes of transport – are just at the beginning of their digitalisation. It is not just about to make transport safer and more efficient, but the prospects of having a bright future in selling software, hardware, and services, which attract the various companies into the market. Classic automotive players such as OEMs and suppliers will have to face serious competition from the non-automotive tech companies such as Apple, Google, Alibaba, Huawei, etc. in the future.

Production of New Energy Vehicles on the rise in China

Subsidies seem to have their effect on sales of electric cars in China. Buyers of pure electric, plug-in hybrid electric, and fuel-cell electric vehicles enjoy significant incentives for their car purchase (for respective cars produced in China). Subsidies range from around 30,000 RMB for simple pure electric vehicles up to 180,000 RMB for fuel-cell electric vehicles.

This significant monetary incentives led to a production of over 50,000 vehicles in China until end of May 2015. The growth trend is rapid, yet still at low level in regards to overall production.

Subsidies are expected to continue as well next year in 2016, so the growth trend is unlikely to stop in the short-term.


Production of new energy vehicles in China until end of May 2015

Production of new energy vehicles in China until end of May 2015. Units


Source: CAAM

China Light Vehicle Production January till May 2015 – further slow down towards the 'new normal'

Based on the production figures of the first 5 months we can observe a further slow down in car production in the Chinese market. Overall growth just around 5% compared to the same time frame of last year. A big part in this development is due to the very slow growth in the Sedan market, even shrinking by -3% in this segment.

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