CPCA released Dec-22 and FY22 China NEV and PV sales.

In FY22, China’s domestic NEV sales reached 6.5M units (+98% of YoY). Penetration reached 28%.

China accounted for 60% of global NEV sales in 2022. Local brands dominate the NEV market, taking 85%+ of the market share (vs. 50% for PV).

NEV market is fairly concentrated, with BYD taking 29% of the share (followed by Wuling 10% and TSLA 7%). The PV market is more fragmented, with Top 3 OEMs (VW, Toyota, Honda) taking 25%

Contrarian view: China’s policy setting is an open book. Given its top-down nature, you basically get "free investment advice".

The Central Economic Work Conference is super insightful as it sets the tone for where the economy is heading.

Below are priorities set by CEWC 2022: (For 2023)
- [No.1] Restoring and expanding domestic consumption
- “Platform Enterprises” (e.g. BABA) will be supported to “fully display their capabilities”
- Supports Property, EV, Elderly Living
- Suports private sectors; pro foreign investors

VERY Pro-market. Two highlights:

TSLA is positioned to be an outsized beneficiary of IRA (boosts both demand & margin)

Impact on EPS:
$0.4/sh. from manufacturing credit
$0.5/sh. from sales credit should TSLA choose to raise prices. Even if they don't, it could maintain prices despite cost deflation in FY23. Sales Credit (to consumer)

~70% of its US sales will qualify for the $7,500 sales credit, with another 15% likely quality for $3,750.

This would give TSLA a lot of levers to pull even in a recessionary environment - vehicles are effectively cheaper, plus input cost deflation

Impact of the Shanghai lockdown may be underestimated.

With economies already struggling w/ high inflation and slowing growth momentum, impact of this lockdown could be much higher vs. 2020

Shanghai:
- World's #1 busiest container port
- China's busiest airport (world’s #3) US containerized imports from China accounted for 42% of total US imports in 2020, according to PIERS. The % further increased in 2021.

Demand remains buoyant (Durables spend is still ~40% >pre-pandemic) and US inventory level remains low.

Crazy moves this week on China stocks probably mark the beginning of deglobalization in the financial market.

- (-30%) / +30% round-trip in 5 days
- No fundamental news (see below, very interesting dynamic around the delisting news)
- Overnight rebound, mostly driven by local $ - How the de-listing news got circulated was VERY odd...

The 5 names first appeared on SEC website on 3/8, but it wasn't until 3/10 when people "found it".

One sellside found it and circulated it -> HK HF community reacted overnight -> (-30%)

Classic panic selldown.

BNPL

EM Asia, with low credit penetration(<5% Pop. has credit cards), is naturally a very attractive market for BNPL

What’s interesting is the business model played out in a VERY different way vs. RoW

Case study: % of Rev from Merchants: Kredivo (<10%) vs global peers (80%+) When a BNPL platform earns the bulk of rev from customers, it is essentially a credit card!

Net trx margin is double the level of global peers (5%+ vs. 1.5-2.2%):

- Higher gross rev (consumers pay more)
- Cheaper repayments: ACH-based payment rails vs. linked cards w/ high MDR

1/ 2021 was a great year for fintech in APAC:
- IPOs of Kakao Bank(+Pay), Linklogis, etc.
- Share price appreciation (Bank Jago +350%!)
- $$$ being deployed in the private markets

Key topics:
- Market opportunities in APAC
- Digital banks business model
- Digital banks valuation 2/
APAC is an attractive market for fintech overall – for a lot of countries cash is still preferred; the population is still largely unbanked/ underbanked.

However:
- Underpenetrated market =! Success.
- APAC is highly diverse.
- Some deals are done at debatable valuations.

1/ “Social Commerce” is a hot buzzword

The broader theme is the blurring of lines between ads and transaction/subscription models

While social commerce is still nascent here in the West, the industry in APAC is already 80%+ penetrated

East vs. West - how is it different? 2/
For years, US internet names monetize via 2 distinct ways – ads OR transactions/subs (NFLX: 100% subs; META: 100% ads)

Ads companies focus on engagement vs. Transaction-driven names prioritize reducing frictions

The Problems?
- Ads (way) overloaded
- Subscription fatigue

1/ Some takeaways on global e-commerce:

E-commerce’s business looks super simple (for 3P, just GMV * take rate), but a lot can be learned on the key assumptions:

- GMV (gross vs. net)
- Take rate (gross vs. net)
- Upside from Ads (%? when?)
- LT profitability (5%? really?) 2/ Big Picture

- E-comm is a $5trn market globally
- Est. 30% is 1P
- Online penetration varies: US 16%; China 30%; LatAm & SEA: 10-15%
- Growth varies

- #1 market leader typically captures 50% (AMZN 40%; BABA 60%) of the market but can enjoy 2-4x the amount of profit dollars

1/ BABA 2021 Investor Day Takeaway

No guidance was provided for FY23E.

"Investing" was the theme of this year.

New segmentation for its business segments (see below) was provided. International commerce, local services and Cainiao used to be all lumped under "China Commerce". 2/ Taobao/Tmall: a more mature, lower growth business going forward

- It will take some time to counter "market uncertainties", i.e. changing consumer behavior and competition

- "1+X" strategy to address more shopping scenarios and product categories (home décor, groceries)

1/ China’s e-commerce, with the highest online penetration (30%+), serves as a playbook of how the industry might evolve:

Search-based -> Social E-comm (2018) -> On-demand (2020) -> Live Streaming (2021+)

The industry, though very mature, has become MORE fragmented over time 2/ Where’s the rest of the world following China’s playbook:

- US: early days for Live Streaming E-commerce (all big platforms plus start-ups)
- SEA and LatAm: social e-commerce (Shopee)

Globally, the line between online media and e-commerce platforms is blurring...