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  • Hello and welcome to another episode of CNBC s Beyond the Valley, I m Arjun Kharpal in

  • Guangzhou China

  • Ralph how are you, thanks for joining us on CNBC s Beyond the Valley.

  • RALPH: Happy to be with you.

  • ARJ Q1: So let's kick off the conversation.

  • In a recent report, you guys noted that the electric vehicle market will start rapidly

  • scaling around the year 2024.

  • So what's happening now and until then, what's going to be driving that?

  • RALPH A1: now a lot of plans that have been issued, the years before are materializing.

  • The products are coming to the market.

  • is the number of vehicles electric vehicles, which are available for customers are quickly

  • racing in between 2022 and 2025, from 100 to 200.

  • And there are more plans to come.

  • And we see that also on the very top.

  • Mercedes, for example, just launched the EQ s, the electric s class we saw from Porsche

  • they take on Audi is launching.

  • So as cars, GM is coming.

  • The Japanese Nissan is strengthening their plans, Toyota is doing a lot QIA has introduced

  • an entire verity of electric cars.

  • Car producers, car manufacturers, you have now a bundle of different cars to be purchased.

  • So that we have, let's say, first time, a situation where we are not just discussing

  • electromobility.

  • it is reality.

  • ARJ Q2: And are consumers ready for electric vehicles at this point, and has the COVID

  • pandemic accelerated that in any way?

  • RALPH A2: Yeah, we do believe they are ready.

  • in the beginning, there was a lot of uncertainty in terms of mileage, of battery costs, recycling

  • topics, charging, etc.

  • It's getting now more and more clear to customers how to deal with these things, we see that

  • leverage ranges 300 to 400 kilometers, you can drive those cars with a high level of

  • reliability, you can charge them, it's not a significant problem anymore.

  • And we see that during the COVID pandemic, there was a lot of stimulation programs being

  • issued by different governments, for example, in Europe, if you take Germany, it's 10 or

  • more 1000 euros, direct subsidization for purchasing an electric car and hybrid plug

  • in hybrid.

  • So that this is a simulation, for sure.

  • And this is helping the car manufacturers introduce those electric cars, despite the

  • fact that the cost for those cars are still higher than for producing combustion engine

  • cars.

  • ARJ Q3: Let's talk about the position of traditional automakers in this market at the moment, because

  • one thing we have seen is a number of technology companies jump into the electric vehicle market

  • in the smart car market, or should the automakers the traditional automakers be worried?

  • RALPH A3: if a fundamental transformation is happening, this is less not less than a

  • disruption to the industry, which has been in stability for 100 plus years.

  • You need to be careful.

  • And for the moment, we do believe that traditional automakers have understood that they need

  • to change and transforms themselves fundamentally.

  • Volkswagen, for example, they have separated the abilities of software competence center,

  • they've separated it, they are aiming for 10,000 software engineers.

  • They have introduced plans to build a range of six battery factories across the world,

  • etc.

  • So they have understood what does it take to really be successful and come up with totally

  • independent electric vehicle architectures for those new cars.

  • It's not compromise.

  • So put all in and have sent finally something.

  • They have learned their lessons they have understood, what does it take, and they can

  • now play their strengths.

  • And their fundamental strengths are they have a big customer base, they have a solid, aftermarket

  • business contributing cash wise, they have access to a lot of customers effort, they

  • have a brand which normally gives them reputation in front of customers, they have a financing

  • branch, which allows them to make, let's say, cost affordable by putting together the right

  • deals.

  • So there is a lot on the other end, there's heritage, there's a lot of infrastructure

  • plants, you may not need it in the future anymore.

  • So this is a challenge for them.

  • ARJ Q5: Let's talk a bit about electric vehicle adoption, what would you say are the biggest

  • challenges at this point to electric vehicle adoption.

  • RALPH A5: And we see that they are out of the studies we made is four or five criteria

  • that drives customer decisions.

  • First, it's uncertainty about, let's say the reliability and let's say usability of those

  • cars.

  • I think you said it earlier as this could be solved or is already solved as a problem.

  • Second is charging.

  • So he says sufficient opportunity to charge my car in my surrounding in my environment.

  • So governments and industry have understood that they need to speed up and ramp it up

  • quickly and initiatives are underway.

  • So we do not see that this is on the long run.

  • Because significant hurdle.

  • So that is the cost of cars compared to traditional offers.

  • So as I said earlier, as your subsidy programs in place, making up let's say for the price

  • difference, you normally have those This is for the moment, not a big deal.

  • And behind this price difference, the major impact is created by battery cost.

  • And we see that cost of batteries are coming down very quickly.

  • And the concepts of let's say, putting, let's say the right size of battery in the cars

  • is advancing so that we see that in 2425, there will be a cost parity.

  • And finally, it's a cost of ownership.

  • And there we also see that, let's say electric cars impacted by the cost of purchasing the

  • car, make up and finally it would be in favor of electric cars and there's Also, let's say

  • from governments, co2 fines, etc, the taxation of combustion engines is handled in a way

  • that it's getting more expensive.

  • a lot of arguments are playing in favor of EVs.

  • ARJ Q6: Let's talk a little bit or look a little bit further into the future and talk

  • about autonomous driving, because this, of course, is something that the automakers are

  • getting very excited about.

  • But there's also a discrepancy in terms of which markets are ahead in the development

  • of that, you know, we know the US is pushing quite aggressively in this area in China,

  • of course, as well.

  • But you know, mass adoption of autonomous driving still feels like a long way off.

  • I mean, in your view, what are the steps to get there, and how far off might we be?

  • RALPH A6: First, we also thought that autonomous driving would come much earlier, because we

  • underestimated the complexity of this technology.

  • And it is not about making a car and driving straight in an autonomous mode on motorways,

  • without cross traffic.

  • The problem is coming if you have free flow system, in a in a crowded city, for example,

  • with a lot of unexpected events happening.

  • So this was underestimated.

  • And there's consensus in the industry, that in such situations, we will be able from maybe

  • 2028 onwards, to have this technology in an affordable way.

  • the different story is Robo caps, where you have, let's say, an autonomous driving mode

  • in a fenced and defined area so that you can make it part of a public transportation system

  • in the city etc.

  • And not just for people but also for for goods delivery.

  • And we do believe that because technological challenges, not as high as in this free flow

  • mode.

  • And the regulator situation is a different one, this can come earlier.

  • And say we see that up to mid of this tick 2025, we will have, let's say situations,

  • especially in China, where you have, let's say the government driving this and pushing

  • this significantly.

  • Then we will see and certain areas in US because regulatory situations are different to European

  • Union and European Union will be quite often a bit behind because complexity of regulation

  • is higher than in other areas, because we need to link, let's say the cross country

  • traffic, also in an autonomous way.

  • And there you have, let's say was 28 European countries a different situation.

  • ARJ Q7: Now, Ralph, if you then looked on a global landscape about electric vehicles,

  • and you were to use a metaphor of a race to electric vehicle adoption, between the US

  • between Europe and China, I mean, who's ahead right now, then who's going to win?

  • RALPH A7: We have a bit different perspective.

  • It is not, let's say having a complete country, being front running or running behind, we

  • have a situation where we need to compare urban areas, for example, New York can be

  • compared to Shanghai.

  • Because the problems everywhere is the same.

  • So we see that from an regulatory aspect.

  • The government need to influence mobility in a way that there's no traffic collapse

  • happening and you need to come up with different solutions for public transportation systems

  • etc.

  • Despite this, China in the in the urban dense areas will be first in us and then we have

  • in Europe or certain areas like Amsterdam, we have let's say half of The population of

  • the Netherlands commuting around this area or Berlin or something Paris, London has those

  • big areas.

  • And then you have, let's say the more rural areas, we will see compression engines, quite

  • long as it's the same in China, we will see that in India, Delhi, Mumbai, Bangalore, Chennai,

  • etc will have a significant level of electric mobility, but the rest of India will be still

  • on combustion engines.

  • ARJ: Ralph, great conversation.

  • Thanks so much for joining me.

  • RALPH: Appreciate.

  • Thank you.

  • ARJUN LINKS 2

  • ARJUN: Let s just turn our attention to China I m pleased to introduce brian Gu, whos the

  • president of the company.

  • Good to see you

  • Brian how are you?

  • GUEST 2- Brian Gu

  • BRIAN: Great to see you Arjun

  • ARJUN: So let's kick off the conversation.

  • Of course with the China market.

  • This is where you're operating quite heavily So, as you look forward now, and what we've

  • seen the start of 2021, what's your outlook for the China market over the coming years?

  • BRIAN: Well, I think the China Evie market continue to have a very robust growth momentum.

  • So I think the growth in the next few years, will probably be ahead of the government's

  • prediction of 20% by 2025.

  • So that's very exciting for all of us.

  • ARJUN: One thing that's been really interesting in the China market is the increasing number

  • of players of course, in the electric vehicle space from from startups to the traditional

  • automakers.

  • But more recently, we've seen a number of large technology giants also enter this this

  • automotive space.

  • Does that concern you at all in terms of competition?

  • And how do you plan to navigate that?

  • BRIAN: Yeah, I think you're right.

  • I mean, I think the waves of competitors are now changing, right?

  • So I think it would be actually quite interesting at that time to see, you know, the competitive

  • dynamic shift towards technology players.

  • And I think we really welcome that.

  • ARJUN: Now you have your own autonomous driving system as well called x pilot, which has some,

  • you know, autonomous assisted features for the drivers as well How do you see this playing

  • out in China?

  • And what what do you see as the road to to where we get full autonomy for these cars?

  • BRIAN: Well, I think China is probably one of the more advanced and aggressive countries

  • that to experiment, autonomous driving And with that data, we can actually continue to

  • progress towards full autonomy.

  • I think that gradual sort of approach is what we think is more practical.

  • ARJUN: Brian, I just want to get back to the competition again, because you know, when

  • a lot of people perhaps hear about expert motors, they read about it on new sites but

  • also in terms of Tesla, you know, they have, of course, been around for longer, they're

  • delivering more cars than you guys in China, and what are your plans to catch up in this

  • space?

  • BRIAN: Yeah, I think Tesla is a name that you can avoid talking

  • about when you do EV, right?

  • So we actually learn from all these different players to really form our own strategy.

  • ARJUN: You mentioned, of course, your focus on the China driving scenario, but also you

  • have begun to lay the groundwork for for global expansion as well.

  • So I What are your plans in terms of the international markets?

  • I think you've looked at Europe first, but what are some of the markets you see is ripe

  • for disruption as it were, and ripe for electric vehicle products that you're bringing into

  • the market?

  • BRIAN: Well, I think, at the end of the day, a smart Eevee is going to be a global product.

  • I think we want to make sure that we have international growth strategy place where

  • we actually have our third, fourth fifth models ready.

  • And those models will be designed with international market in mind as well.

  • ARJUN: So Brian, just as we wrap up this conversation, you're sat there at the XPeng headquarters

  • in Guangzhou, with your design team the regulations, everything like that?

  • BRIAN : Well, I think this market will grow faster and

  • more transforming than people's expected.

  • I think there are a few reasons for that, So

  • it will be a very interesting network of autonomous

  • transportation grid in a three dimensional space.

  • ARJUN: great, Brian, thanks so much for taking the time to chat to me on beyond the valley.

  • It was great to catch up with

  • you again.

  • BRIAN: Great to see

  • you again.

  • Thank you.

  • Arjun: So what next?

  • Clearly

  • there s going to be big growth ahead as

  • we ve heard from our guest Thanks for listening and

  • I ll catch you next time.

Hello and welcome to another episode of CNBC s Beyond the Valley, I m Arjun Kharpal in

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? The electric vehicle boom is real — but the road won't be easy | Beyond The Valley

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