(#50) EVs have reached the 'chasm'; Huawei and Xiaomi are paving the way for an Apple EV; Shein goes public

Transsion, a Chinese company, sells most of the smartphones in Africa

Nov 30, 2023

The electric vehicle (EV) industry faces a critical juncture as it experiences a decline in sales. This downturn is particularly significant as the industry approaches the metaphorical 'chasm'—a concept popularized by Geoffrey Moore in his work on the technology adoption lifecycle. Crossing this chasm is essential for transitioning from the early adopter stage to the early majority, which represents the larger mainstream market. Failure to cross it could mean that EVs remain a niche offering, failing to achieve the scale necessary for widespread adoption and the attendant benefits of reduced emissions and sustainable growth. This is a pivotal moment for the industry, as it must not only innovate to attract a broader customer base but also overcome barriers related to infrastructure, cost, and consumer perceptions to ensure a sustainable future for EVs in the global market.

Onto the update:

Strategy

Shein files for IPO
I have followed closely with Shein in the last few years due to their unique go-to-market strategy. However, I’m surprised with their approach to IPOs having in mind China’s government actions to de-list and de-risk its main companies from the NYSE. LINK

That being said, let’s see what makes Shein so unique:

Ultra-fast supply chain. Shein's supply chain is incredibly fast, allowing for rapid production and distribution of new styles, faster than competitors like Zara and H&M.( = 14 days from design to production)
Data-driven design. Shein relies heavily on data analytics to predict trends and consumer preferences, which helps in creating highly demanded products. They order batches of 50-100 items based on search behavior. In comparison, Zara and H&M order batches of 100k items.
Vast product range (ie. SKUs) - around 5-10k new SKUs per month vs. year at Zara and H&M
Agile manufacturing network. The company works with a network of agile with 400k manufacturers in a way that their ERP systems are interconnected and Shein knows in real time if a plant can make the order or not. On top of that, if the manufacturer loses these bids from Shein (on price) it gets lower classified and afterward expelled from the bidding process.
Cost-Effectiveness. Each SKU costs between 1-5 Yuan to produce, forced due to slave labor in Xinjiang.
Targeting younger demographics. Shein has a strong focus on younger consumers, tailoring its marketing and product designs to appeal to Gen Z and younger millennials. It’s already Top of mind in the USA.

Strong online presence. Unlike Zara and H&M which also rely on physical stores, Shein is primarily an online retailer, which reduces overhead costs and allocates all this money to ads (ie. customer acquisition costs)
Effective use of Social Media. Shein excels in leveraging social media for marketing, using platforms like Instagram and TikTok effectively. Actually, their app is now copying TikTok in many regards.
Responsive to fashion trends. The brand is quick to respond to global fashion trends, often introducing new styles faster than Zara and H&M. They use vocational educators to conduct online and on-the-phone research/interviews instead of sending the designers to Milano/Paris Fashion Week. This is a big deal because it shortens the production time.
Catering to niche markets. Shein offers products for niche markets and specific fashion subcultures, which are not always addressed by Zara and H&M.

Huawei and Xiaomi looking to build EV cars
The only key two takeaways from this headline are:

1/ EVs are much simpler to make: they have 5-10x moving parts and entertainment plays a key role. Huawei and Xiami, two of the most important smartphone maker, are looking to launch their EVs. Or at least to share their infotainment system as the operating system with EV automakers. LINK

2/ Apple is following closely how these things will unfold because has the same interest. Now, it is known by now that Apple hasn’t launched the first product in the category and that it doesn’t ship MVPs. So, when you think about the $9 trillion automotive market everything is possible.

Source: Luxeed S7, the first intelligent pure electric vehicle, at Huawei’s flagship store in Shanghai, China (Photo by Costfoto/NurPhoto via Getty Images)

EV sales are plunging in the USA
EV sales are dropping in the most developed market (ie. the USA) and some blame the consumer for not being willing to make this transition. LINK

The consumers after a point (= Innovators and Early adopters) look at "What in it for me?"

I'd guess that their worry is related to the downsides of electric batteries: cost, aging, temperature sensitivity, safety, environmental impact, transportation restrictions, charge and discharge rates, maintenance, and others.

Probably these reasons and others related to software transition are at the core of the largest automotive company - Toyota. LINK

If we look at the graph below proposed by Everett Rogers we might assume that EVs have reached the chasm. What you don’t see in this graph is also their willingness to pay, which once it enters the “Pragmatists” (i.e early majority) territory starts to decrease until eventually reaches zero at the end of the “Skeptics”. So, EV manufacturers need a new strategy.

Source: Everett Rogers, Crossing the Chasm

Tesla vs. the Chinese EVs
It is no secret that BYD and other Chinese EVs will eventually overtake Tesla in EV sales, but we had this story copy-paste in the smartphone market. Tesla will be iOS (Apple) and Chinese EVs (Android), so probably most of the profits will remain with Tesla.

Every app can be a dating app
People are reluctant to use Tinder & co, but are ok using Duolingo or Strava for…dating. Seems logic. LINK

Youtube “Playables”
Another company goes for your attention. Many forget how large is the gaming market:

But what’s the twist? Network effects and a fragmented market. LINK

Open AI
Two key takeaways:

1/ Sam Altman is back at the helm of Open AI, but the problems remain. The initial board of directors was restructured and Altman lost his place in that board. So, from this point of view, the board’s main mission might have been accomplished.

2/ Microsoft learned from the press or prior with a couple of minutes before the Open AI’s board announced Altman’s firing which is sad for a company that invested +$10 bn in it. So, Microsoft needs a place on that board. LINK

Artificial Intelligence

How Large Language Models (LLMs) work
Intro to Large Language Models, by Andrej Karpathy. You will learn how LLMs work, are trained, can be adapted and how will evolve. LINK

Text to video
Create and edit your videos with AI. LINK

GPT-4 for architects and interior designers

AI influencers are making real money. LINK

Things happen

Transsion is another Chinese smartphone company that nobody heard of and that sells most of the phones in Africa. LINK

The current global financial technology is running on a code from the 1960s. (ie. COBOL) LINK

Yuval Noah Harari explains why we have more wars than 10-20 years ago. LINK

It’s amazingly hard to make iPhones in India, due to local culture and costumes. I am optimistic and think that things will change for the better. LINK

Deloitte and KPMG ask staff to use burner phones for Hong Kong trips. LINK

How to build a better Social Network. Too late, there are too many, but an interesting proposal. LINK

How is it to have worked for 18 years at Google? LINK

The truth about open offices. LINK

LinkedIn Newsletter

Data

IMF outlook for EU
Romania and Poland are projected to be the fastest-growing economies in Europe until 2028. The real shock in 2028 (or sooner) will be the GDP per capita in terms of Purchasing Power Parity (PPP). I am bullish on all Eastern European countries, not only Romania and Poland. LINK