Tag: Business

Oh Tesla Q1 delivery number looks really bad

Read previous post on a $360 billion Tesla.

Although production number is flattish, Tesla q1 delivery number is worse than expected.

China reported wholesale number for Tesla is 89,064 for March (+0.2% yoy) and YTD is -3.7% yoy.

However, this wholesale number from China doesn’t mean cars have been delivered to customers.

Europe’s reported monthly number points to yoy growth of 40% for the first two month, but March was disrupted so won’t keep up the growth.

US customers are still facing super high interest rate on auto loan.

Tesla recently hiked the price, which indicates a change in strategy to protect profits, in-line with Tesla’s move to drop volume guidance for the year.

As price competition is fierce in China, lower some price for volume won’t help Tesla’s China profit much. Some target/core customers also won’t go away if Tesla raised some price (low price elasticity).

Nike China grew, DTC grew less

For the quarter ended Feb 2024, Nike brand sales in China grew 4.5% yoy (overall company sales grew 6% yoy) and Nike brand EBIT in China grew 2.8% yoy.

Not that impressive – as last year’s result should still be impacted by surging covid cases after reopen.

Meanwhile, Nike said it’s growing share, which I believe is true (holding some ground), but also indicates that the overall market is not strong (<6% growth).

Looking at channels, it’s wholesale that’s driving the growth. “Wholesale grew 12%” & “retail sales with our partners grew double digits in Q3 versus the prior year” & “seeing incredibly strong weekly sell-through on these franchises (wholesale partners)” from earnings call.

Another important observation – “physical retail channel in China is stronger than digital.”

Nike will be on Douyin. Not yet on Douyin. However, how should Nike balance gross margin? Live-streaming e-commerce is famous for heavy discounts.

Weijian Shan’s book & the SDB story – very interesting

I didn’t live that era so really appreciate the story.

Some key takeaway so far:

  • in early 2000s: “The market consensus was that China’s banking system was technically insolvent and badly in need of wholesale reforms. The main issue was nonperforming loans (NPLs).”
  • It’s easy to hide NPLs by offering bigger loans; the best practice of “forward looking” was not used in early 2000s
  • Gov will insist on a “good-looking” multiple
  • There was an jokingly bet for a tennis match between Zhou and Summers – “the winner would get to set the exchange rate between the dollar and the Chinese yuan”
  • Much more ups and downs than I imagined
  • “Fortress Besieged” is a really good metaphor..

Notes on CATL 2023

`1/ shareholder return is real

annual dividend of 22bn rmb, out of net income of ~44bn net income -> ~50% payout ratio.

this is also due to scaling back of capex (down 30% yoy in FY23)

 

2/ growth has slowed to almost zero

q4 gross profit is up only +2% yoy

q4 net income is -1% yoy

however, with utilization up, 2024H2 and beyond should return to growth

 

3/ barrier in internationalization

both EU and US want to localize the whole value chain, which seems to be a big investment, and involves upstream & downstream companies.

CATL doesn’t see good return and hasn’t done massive capital-heavy investments.

Licensing model is what clients are happy about, which is capital-light for CATL, but growth in net income would be less.

 

Tesla Shanghai export – not looking great

Global EV demand is weak; Tesla Shanghai’s export also seems to be under pressure.

Tesla Shanghai Jan+Feb export number is down 22.5% yoy.

Overall (export+domestic) Tesla Shanghai Jan+Feb is down 6% yoy.

Looks to be a flattish or small growth year for Tesla SH in 2024.

Btw, looks like Elon Musk is really focusing on Grok, SpaceX, and Twitter.

McDonald’s China menu price / China CPI

There was this “oh麦” membership offered by McDonald’s China.

If you buy the membership, you can purchase several “4件套” for a bigger discount.

It was rmb 29 for [Big Mac combo meal + 5 Chicken Nuggets] back in 2021.

The price increased by 1 rmb generally in July 2022, when the membership was upgraded to “O麦金” membership. [https://www.zhihu.com/question/543192349]

[Big Mac combo meal + 4 Chicken Nuggets] -> 30 rmb, or 3.4% increase

The cheaper grilled chicken combo + 4 chicken nuggets also increased by 1 rmb to 26 rmb, or 4%; considering the number chicken nuggets decreased by 1, price hike here is more than 4%.

In Dec 2023, “4件套” price hiked by another 1 rmb.

[Big Mac combo meal + 4 Chicken Nuggets] -> 31, or 3.3% increase

The cheaper grilled chicken combo + 4 chicken nuggets also increased by 1 rmb to 27 rmb.

Another interesting thing is the price before discount.

Here is the table to summarize the modest price increase in China.

 

Nio real net cash position (21q4 – 23q4)

Interest charting…

if we exclude restricted cash, and cash borrowed from WC, and recent equity injection, here is Nio’s quarterly end net cash position.

What’s the problem?

  • declining/pressure gross profit level (GP per car x volume) due to fierce competition & macro backdrop doesn’t support strong demand
  • increasing opex & capex (autonomous driving, chips, international expansion, new sub-brand, battery swap stations etc.) with a limited gross profit level.

Meta’s growth potential?

Meta’s bottom-line looks amazing – diluted EPS almost tripled from a year ago (+168% yoy).

How?

  • Headcount shrunk 25%
  • Revenue grew 25%
  • $20bn+ buyback in the past 4 quarters

Cheers to Susan Li, the new CFO announced back in 2022q2 earnings. Delivering numbers that investors needed.

Efficiency has improved dramatically – quarterly operating income per full-time employee more than tripled from $65k to $208k.

AI story is impressive; and Metaverse is not dead.

What are the concerns?

1) two-year cagr not impressive: at the midpoint of 2023q4 guidance, two year revenue cagr (vs 2021q4) is <7%.

Two year ads revenue carg for US, Canada and Europe is 6.7% in 2023q3.

Remember, most of Meta’s revenue is ads in US, Canada and Europe (2/3 in 2023q3). User growth obviously is not meaningful. It needs ARPU to grow. While ads pricing won’t be strong given macro uncertainties, it will then rely on showing more ads to users, which won’t be something people would enjoy.

2) operating cost would be higher: infrastructure cost would rise due to AI investments. Reality Lab operating cost would be higher. Two large layoffs were done; hard to cut further. More importantly, new revenue streams are less lucrative than ads (which has over 80% gross margin).

2) regulation, fine: Meta was sued – that has hit the headline. Meanwhile, EU’s DMA would take effect next year. Plus, AI is very data-driven. However, can companies easily get data this time around?

Will EPS continue to grow at 15% or above for 2024, 2025 and beyond? I think doable, but is AI an easily profitable business? Let’s see.

Perfect Diary or YSG? The dilemma for brand advertising

Following up on the previous blog, Perfect Diary seems to be at the perfect stage to do more brand advertising.

Two problems tho –

1/ what is the core message? Compared with 花西子, perfect diary seems to be less special in terms of message it sends.

2/ YSG wants to be the pipe or the platform. To do so, it needs resources to diversify, which inherently means the lower importance of perfect diary.

It seems to me that the conflict is also due to the short time frame the management has. To go for the ultimate J-curve of perfect diary and to become the holding group with successful tiered brands in a few years = a extremely tough goal.

If we draw a matrix – categories on the x-axis and premium level on the y axis, plus female/male on the z-axis.. long way to go.

Brand advertising in 新国货时代

Many new consumer brands in China are at the inflection point now. While they are often good at initial traffic generation and use of KOLs, brand advertising seems still an effective and a necessary step to go mainstream. It’s also the ultimate battle that can build brand equity into a long-term competitive advantage.

Three takeaways:

1/ buying traffic is cost-effective and useful in early stage to test and improve the product. But it seems to have a decreasing marginal return after certain level – this is also where brand advertising should kick in.

2/ brand advertising may take time to be “effective” when non-linear growth can be observed. Three key factors to determine whether it will work / how long it’s gonna take: 产品完成度，种草基础，渠道渗透

3/ for new segments, first mover or the current market share leader doesn’t effectively mean it’s the winner – as long as there is no clear leadership in consumers’ mind. The first to establish a strong association or become the cognitive referent is the key.