Business – Page 20

Tesla Model 3 Sales in 2018 Q4 – Not so Exciting

Model 3 has Little QoQ Growth

Tesla had very impressive numbers in Q3, when Model 3 delivery (55,840) was almost tripled from Q2 (18,440).

While no one is expecting another jump, the Q4 numbers are kinda lackluster, especially when adding Model 3 delivery and in transit numbers.

Tesla shares fall 9% on Wednesday when those numbers were reported.

$2,000 Price Cut and Phase-out of Tax Credit

Tesla also announced a price cut of $2,000 for Model S, Model X and Model 3 in the US. The move will partially offset the phase-out of the $7,500 federal tax credit for EV.

[Phase-out will start in the second calendar quarter when the manufacturer has 200,000 plug-in registered in US. The credit is reduced to $3,750 for the next 6 months, then to $1,875 for the next 6 months before expiring completely.]

According to InsideEVs’ estimate, Tesla hit the 200,000 first in the second half of 2018, while General Motors was second with a breakout month of sales for the Bolt and Volt in November 2018.

The next four manufacturer in EV are Nissan (126,875), Ford (111,715), Toyota (93,011), BMW (79,679).

A combination of flat delivery + in transit Model 3, and a price reduction, warned people about the actual demand for Model 3.

Good news are: 1) people may just be waiting for the basic Model 3, aka $35,000 version that Elon touted but analysts said money-losing for Tesla; 2) Tesla is still way ahead in the EV market

2018 Monthly Sales Chart

Politics in Airline Boarding Process

Since 2017, three major airlines in US have made changes to their boarding process, in the face of different layers/tiers, ticket types and other privileges.

Here is a description of the mess before – “Under American’s old boarding call, Group 1 actually was the fifth group called for boarding, trailing the carrier’s elite frequent-fliers and first- and business-class customers who were subdivided into five groups of their own that all boarded earlier.”

“Group 1 actually was the fifth group called for boarding”

What are the “new” procedures and how airlines value their customers?

American Airlines – 10 segments

Group	Boarding pass type
ConciergeKey℠ members	ConciergeKey℠
Group 1	First Active duty U.S. military with military I.D. (Business on a 2-class international plane)
Group 2	Executive Platinum oneworld^® Emerald℠ (Business on a 3-class plane)
Group 3	Platinum Pro Platinum oneworld^® Sapphire℠
Group 4	Gold oneworld^® Ruby℠ AirPass Premium Economy Citi^® / AAdvantage^® Executive cardmembers Travelers who bought Priority boarding
Group 5 (Preferred boarding)	Main Cabin Extra (excluding Basic Economy) Eligible AAdvantage^® credit cardmembers* Eligible corporate travelers**
Group 6	Group 6
Group 7	Group 7
Group 8	Group 8 Basic Economy to / from Europe
Group 9	Basic Economy within the U.S., Canada, Central America, Mexico & Caribbean

Delta Airlines – 7 segments

Pre-Boarding	Customers needing assistance or additional time to board, including families with car seats or strollers Active Duty U.S. Military personnel with ID
Premium Boarding Zone	Delta One^® customers First Class customers Delta Premium Select customers Diamond Medallion^® Members
Sky Priority Boarding Zone	Platinum Medallion^® Members Gold Medallion^® Members Delta Comfort+^® customers Flying Blue Platinum and Gold members Virgin Atlantic Flying Club Gold members Virgin Australia Platinum and Gold members GOL Smiles Diamond members SkyTeam^® Elite Plus members
Zone 1	Silver Medallion^® Members Delta Corporate Travelers Priority Boarding Trip Extra customers Gold, Platinum and Reserve Delta SkyMiles® Credit Card Members Flying Blue Silver members Virgin Australia Velocity Silver members GOL Smiles Gold members Sky Team^® Elite
Zone 2	Main Cabin Passengers
Zone 3	Main Cabin Passengers booked in T, X and V fares
Zone 4	Basic Economy Passengers (E)

United Airlines – 6 segments

Pre-boarding

Unaccompanied minors
Customers with disabilities
Active members of the military
United Global Services® members
Families traveling with children age 2 and younger
Premier® 1K® members

Group 1

Premier Platinum members
Premier Gold members
Star Alliance™ Gold members
Customers seated in premium cabins: United Polaris®, United First® and United Business®

Group 2

Premier Silver members
Star Alliance Silver members
Customers who have purchased Premier Access® or Priority Boarding
United℠ Explorer, Club, Presidential Plus℠ and Awards Cardmembers

Groups 3 – 5

Economy Plus®
United Economy®
Basic Economy*

* Customers who have purchased a Basic Economy ticket will be in the last boarding group, except for Premier members, Chase Cardmembers of qualifying cards and Star Alliance Gold members, who will still receive their priority boarding.

Just a reflection on the complicated business development efforts and corporate strategies… think about the internal slides behind the schemes

What Google Can Tell Us (Amazon & Walmart & iPhone)

What Google can tell us

holiday season is king and this year is strong (as expected)
Walmart is living well; and it becomes more competitive in Thanksgiving shopping
Apple’s iPhone in 2018 not as attractive

*Amazon may have lots of volume directly through its own platform

Walmart International Strategies

India

Walmart first announced its acquisition of a 77% stake in Flipkart in May 2018, with a consideration of $16 bn including $2 bn of new equity funding. The deal closed in August.

According to QZ, “in the fiscal year ended March 31, Flipkart had net sales of $4.6 billion, over 50% higher than the previous year, Walmart said. Its gross merchandise value (GMV, or the total value of goods sold from its platform) was $7.5 billion during the period.”

“Amazon India is currently worth $16 billion and has the same 30% marketshare as local competitor Flipkart”, source: Forbes, Citi

Valuation multiple ~4.5x of net sales in FY2017.

China

Walmart chose JD as its partner in China in June 2016 when it used its China business for an initial 5.9% stake in JD (newly issued shares)

Then it doubled the stake in Oct. 2016 to 10.8%; and in Feb. 2017, the ownership level was increased to 12.1% (289.1 mn shares).

Walmart also invested $500mn Aug. 2018 with JD in the Dada-JD JV Daojia, which claimed to have 20 million monthly active users at that time.

Latin America

In June, 2018, Walmart sold 80% of its Brazil business to Advent International, a PE firm and recorded a $4.5 bn loss. In connection with the deal, Advent would also invest 1.9 billion reais ($485.66 million, in three installments; the first two capital raises will total 750 million reais each; the first was already completed in 2018 and the second is expected for 2019; the remaining amount will be invested by 2021, according to Reuters)

Walmart acquired Latin American (Mexico and Chile focused) grocery-delivery marketplace Cornershop for $225 million in Sep. 2018 (WSJ report).

UK

Walmart sold a majority stake in its UK business Asda in Apr. 2018 for $4 bn. Asda was valued at $10 bn (valuing Asda at approximately £7.3 billion on a cash-free, debt-free and pension-free basis, implying an EV / FY17 EBITDA multiple of 5.8x).

China Car Sales Slowdown

China’s passenger vehicle sales has been through 6 month of yoy decline (Jun – November) and will post the first yoy annual decline in 2018, after 26 years of boom

Two sources: CAAM and CPCA, passenger car sales down 16-18% yoy in November.

There are two factors to consider here:

Long-term: the market is reaching maturity.
a. Although there may be another few years before China finds its stable level of car ownership, it has become a fairly high level of – an average Chinese household has around 0.58 cars. (China’s household number has been estimated to be ~455 mn and China has ~310 mn automobiles by the end of 2017, assuming 6/7 of which are passenger cars)
b. The second half of China’s car ownership boom is at the beginning of shared vehicles & an era of transportation-as-a-service. Therefore, China may never reach a stable level of ownership as high as major industrial countries’.
c. China’s cities are more condensed. Population is so centralized that high car ownership rate in cities may not be possible
c. an average US household has 1.968 cars
Short-term: consumer confidence & tariffs
a. The tariff was proposed to be decreased from 25% to 15% in May, but due to trade war the tariff for US produced cars were raised to 40% since July.
b. Consumer confidence is damaged while financing may also be limited

Beyond Cars – Bike & Scooter Sharing in Age of Ride-Hailing

共享自行车已经进入市场很多年，模式上在近年有多方面突破；另一方面，以 Birds 为首的美国 scooter 的热潮从 2017 年开始迅速蔓延，之前的共享自行车公司也找到了美国新的突破口，毕竟相比于中国自行车的普及和流行，美国自行车一直处于出行需求的角落（有安全监管、道路等因素）。

大多数共享自行车和共享 scooter 诞生之初，就内涵了与 uber/lyft 相近的模式和基因，又同时在解决一个大问题的不同局部。它们早晚会相遇是公认的事实。

各自 2019 年 IPO 计划的临近，出于公司定位和战略说明的角度，以及财务角度，uber 和 lyft 的出手之快出乎一些意料（相比于市场的成熟度和发展时间），却也极其合理。这篇 blog 主要关于 lyft 的收购。

2018 年 4 月，uber 率先宣布了第一笔交易，$100 – 200 mn 收购 JUMP Bike。

JUMP Bike | Source: uber.com/ride/uber-bike/

2018 年 6 月，有报道 Lyft 在寻求 $250 mn 收购 Motivate（旗下拥有纽约的 Citi Bike 和加州的 Ford GoBike 等）；uber 也尝试参与，竞价收购，最后 7 月初由 Lyft 拿下。
– Motivate 2017 rev. $100 mn, ~ half coming from sponsorship
– Motivate has ~30k bikes, operating in 8 US cities – Citi Bike (New York), Ford GoBike (San Francisco Bay area), Divvy (Chicago), Blue Bikes (Boston metro area), Capital Bikeshare (Washington, D.C. metro area), BIKETOWN (Portland metro area), CoGo (Columbus, Ohio), and Nice Ride (Minneapolis)
– 纽约的 Citi Bike 用户数约 15 万；For GoBike 17 年6 月与 Ford 达成合作正式 launch，截至 18 年 1 月用户数近 1 万
– Motivate has an advantage of exclusive deal terms with cities including NYC, SF, among others
– Motivate’s bikes are dock-based, which was an old model but fit with cities like NYC
– Unionized workers (~600) are a major issue, which was not included in the acquisition

收购后，Lyft 将投入 $100 mn 发展 Citi Bike，五年内自行车数量增加两倍将达近 4 万。

Citi Bike Pricing Plan_Dec 2018 | Source: citibikenyc.com/pricing

在湾区，尽管开始时 Motivate 有 exclusive 合同，但由于纽约和 SF 有一个区别在于 SF 很多上下坡，在曼哈顿适用的自行车在 SF 的使用场景大幅缩减，电动助力自行车 (e-bike) 的需求凸显。这给了其它 bike-sharing 公司一个绝佳的机会，以 e-bike 的形式抢进 SF 市场，绕开 Motivate 的排他性条款，比如 Social Bicycles。随后 SF 与 Motivate 达成和解，基本算允许了其它电动自行车的试验，尽管有数量限制。

Ford GoBike 在今年 1 月展示了 e-bike 之后，于 4 月在 SF 正式 launch 了电动自行车。

Ford GoBike @ SAP Center, San Jose | Source: fordgobike instagram

Ford GoBike Plus with pedal assist (电动助力)，服务 SF 市场，18 年 4 月正式 launch，首批 250 辆 | Source: fordgobike.com/plus

Ford GoBike Pricing Plan_Dec 2018 | Source: fordgobike.com/pricing

18 年 1 月，SF 的第一个无桩 bike-sharing permit， 250 辆，给了 JUMP (formerly Social Bicycle，见上文)，JUMP 自行车是全电动 (和 scooter，也是电动)。

这也是 uber CEO 后来解释 JUMP 收购时一直强调的每个城市/地区的不同，需要 city-by-city 地考虑。uber 选择从 SF 开始发力。

Lyft 选择了更高的起点。Motivate 确实是体量更大、更成熟的 bike-sharing 公司。加之 e-bike 的额外成本，以及 permit 的数量显示，仅依靠 JUMP 或许会让 uber 在这个局部战场输给 Lyft。

2017 total bike-sharing trips taken in millions | Source: nacto.org

加之 scooter 的起飞（全部为电动），尤其在加州主要城市的流行，不出意外，uber 在寻求另一起收购，一起这个领域决定性的收购，Uber said to be negotiating a multibillion-dollar takeover of scooter-sharing startup。

Consolidation 不仅没有缺席，而且会来得更快。

Ohio Accepting Cryptocurrency for Tax – Pure Personal Interest or A Move to Future?

Ohio is becoming the first state to accept crypto as tax payments on https://ohiocrypto.com/.

The move is made by Ohio State Treasurer Josh Mandel. Born in Sep. 1977, he had made several moves after being elected as Ohio State Treasurer in Dec. 2010, including OhioCheckbook.com that posts all state spending information on the internet for better government transparency.

The current cryptocurrency accepted is Bitcoin, with more to come. A third party cryptocurrency payment processor, BitPay, will serve between taxpayers and Ohio State Treasury, so that the former will pay crypto and the latter will receive dollar.

Although the State Treasurer himself is said to be an enthusiast of cryptocurrencies and blockchain, it might as well be seen as a state-level move to differentiate itself and embrace the future tech world. According to TechCrunch, Ohio has other moves to become tech-friendly including a technology hub forming in Columbus, home to one of the largest venture capital funds in the Midwest, Drive Capital. And Cleveland (the city once called “the mistake on the lake”) is trying to remake itself in cryptocurrency’s image with a new drive to rebrand the city as “Blockland”, etc. Columbus also reported last year that its Smart Columbus program had an expanded $417 million in resources to turn Columbus into the testing ground for intelligent-transportation systems.

Politics and future development is more interconnected than ever. Policy makers are becoming smarter and seeing/learning the tech future as others. “Policy infrastructure” played an important role in the past and will continue to do so. Each city/state may have a specialization and leveraging its hub effect. Blockchain is one of those “specializations” that many are going after. China and US are no different in terms of this strategy of development.

An Often-Ignored Factor Affecting Wine Industry – Global Warming

In wine’s history, we human began to enjoy/produce those fermented grape beverages some 6,000-9,000 years ago.

The well-known classification system for Bordeaux wines started in 1855 by Napoleon III using their producers’ names. A château (a french house/castle) usually gives its name to the wine produced in its neighborhood. The system has five levels for red wine, with Premiers Crus being the best, which now includes 5 châteaux.

winewordsandvideotape.com — Château Lafite Rothschild

But after nearly 200 years, things have changed fundamentally, e.g. global warming among many others.

Wine is essentially a pre-industrial-age agricultural invention. Grapes are inherently affected by climate changes (including not only temperature, but also drought for example).

What we deemed best in 1850s should be different from those in today’s league table.

Source: Cooperative Institute for Climate and Satellites

Due to global warming, the best grape varieties and growing locations for wine can hardly stay the same by the end of 21st century. Some have predicted that average global temperature could rise by 11.5° F this century if no human interventions to mitigate the causes.

A relatively extreme prediction in a 2013 study claims that wines from Burgundy, Napa Valley and other premium regions, will disappear within the next 50 years (and blue regions are future suitable areas to grow grapes).

Global change in viticulture suitability | Source: PNAS

However, wine to some extent is like art works. Values of wine aren’t mostly depending on how it tastes; many other factors such as traditions or experience are making it a more complex industry.

Visit Calistoga

While similar to other industries that the established or incumbents are not willing to/refuse to change, new opportunities will rely on new vineyards/newcomers and those choose to expand or create new brands.

Beyond Meat Go IPO and Non-animal Food Trend

From Vegetarians to non-animal meat-like food, we are entering an age of synthetic foods going mainstream.

Beyond Meat – story and IPO

Beyond Meat (BYNd), a start-up who made the first 100% plant-based burger, filed IPO with SEC recently and will become the first of its kind to trade on Nasdaq.

The founder grew up in Maryland with a family farm business. The company was founded in 2009, with initial operation, and manufacturing in Maryland. The foundational technology was licensed from two researchers in nearby universities. And initially, the company built its presence with Whole Foods Market in mid-Atlantic.

Beyond Meat was funded by venture capitals, including Kleiner Perkins (16.1% pre-IPO stake), Obvious Ventures, among others, totaling $140+ million before IPO. The latest round valued the company at $550 million last year.

The IPO filing indicates a $100 million raise. Currently, the most important product is the Beyond Burger, selling through various grocery chains and other channels, representing 71% of 2017 sales.

Beyond Beyond Meat

Within this space, the most famous startup might be Impossible Foods, sold in many restaurants including The Counter. It raised $114 million this year from investors including Temasek.

Other initiatives include the new plant-protein-based drink by Starbucks, although not a popular offering.

I think for sure in the future food market, the overall percentage of plant-based food will increase and animal-killing will be decreased by a lot. Whether eventually most of the food will be entirely synthesized remains a question for now.

At least in 30-50 years, I think the benefits of non-plant-based food are non-obvious. But the non-animal trend will be more influential and be part of everyone’s life, not just for vegetarians.

A Great Symmetry?

A random thought here…

San Francisco = New York City (Manhattan)| in terms of the central hub in west/east, financial and corporate presence, high rise apartments

San Jose (South Bay) = Philadelphia | in terms of specialized industries, lead in Information Age (semiconductor) & lead in Industrial Age

Los Angeles + San Diego = Orlando + Miami + Key west | In terms of weather, travel and entertainment industries, life styles

So California is a semi-country.