China EV maker Seres adjusts U.S. plan to fit reality

Several Chinese EV makers have recently scaled back their U.S. market plans. One, Seres Automotive, at least has a Plan B, its new co-CEO Jim Taylor tells ChinaEV. It aims to be both a contract manufacturer at its U.S. plant and a supplier of electric vehicle drive train technology.  Launching an electric vehicle in the U.S. is on hold for now, he says.

Seres is the new name – and brand name, it seems — for the vehicles produced by SF Motors, which is a subsidiary of Sokon Industrial Group, a large privately-owned manufacturer in China. More on Sokon later.

You may be familiar with Seres, though you didn’t know it. The EV maker opened an office in Santa Clara, CA, in Silicon Valley, in 2016 under the name SF Motors. Like many Chinese automakers it started out with a very ambitious plan, and moved quickly. It opened an research and development center in Silicon Valley in March of 2017. In October of 2017, Seres acquired battery startup inEVit, Inc.  In November of 2017, Seres acquired the former AM General manufacturing plant in Mishawaka, IN. In April of 2018, it established a second Silicon Valley R & D center. Then reality set in.

Taylor is not new to working for Chinese companies.   Most recently, he has held various positions at Karma and Fisker, two EV startups with Chinese owners, albeit radically different types of Chinese owners. That is for a different blog, however.

That experience may serve him well. Taylor came on board as Seres co-CEO in May; he shares the CEO role with Hu Xindong, who established the U.S. operations.  Hu had a long career with Dongfeng, with whom Sokon has a joint venture. Hu has an MBA from the Maastricht School of Management in the Netherlands.

I know, I’m thinking the same thing. This may be a tricky relationship given that Taylor is completely re-doing Seres’ U.S. strategy, which Hu created.  Also in the mix is John Zhang, son of the owner of Sokon Industries Group. John Zhang is listed as CEO of Seres on the U.S. website while Taylor is co-CEO of Seres Automotive. I guess John Zhang is in charge of the brand in China?

Taylor had a long career with General Motors, including a stint as CEO of the Hummer brand. (That surely helped put the Indianapolis plant on his radar as AM General manufactured Hummers there.). Taylor was also with GM’s Cadillac brand for more than 10 years, including as general manager and chief marketing officer. The Chinese press really talks about the Cadillac experience a lot.

When he came on board at Seres in May of this year, Sokon Group was already ready re-thinking its aggressive schedule for the U.S. market, says Taylor.  That schedule called for launching the Seres brand in China and the U.S. at almost the same time, This is a new brand, mind you. And, Sokon has little experience selling passenger cars, much less electric vehicles.

Sokon Industry Group is listed on the Shanghai Stock Exchange. Its vehicle portfolio in China consists primarily of small ICE commercial vehicles, which it manufactures through a joint venture with Dongfeng. Sokon also manufactures its own line of small electric vans and manufactures “energy-saving and eco-friendly engines” which it sells to other manufacturers.

As for the change in the U.S. business plan, Taylor says he helped Sokon/Seres “see the situation” more clearly and add some momentum to the business plan change.  “To try to launch simultaneously in two countries when it is a new brand in both is more what an enormous company could handle,” he says. “Seres needs to get the brand off the ground (in China), then come back with a second launch in a new country.”

On top of that, add the downturn in China’s economy and the “messy,” as Taylor termed it, relationship between the U.S. and China right now (the economic downturn in China is not helped by the trade situation but is also not the cause. And in any case, China takes the long view, as Stephen Roach points out in an excellent blog posting.)

To Zhang’s credit, though Sokon has invested millions in the U.S. plant and R&D facility, had “strong intentions to manufacture vehicles here” and was “going full-speed towards that,” according to Taylor, it has put the brakes on the U.S. vehicle manufacturing for the time being.

“We had to let a few people go (who were) lined up to execute the old business plan, says Taylor. It laid off 30 employees in Mishawaka and 17 in Santa Clara., says Taylor.

Though Seres won’t be producing EVs in Indiana right now, that doesn’t mean Seres has no commercial opportunities in the U.S., Taylor says.  It will, to use a painful-to-type word, pivot. “Just because we had a prior business plan doesn’t mean we have to stick with that,” he says.

One business area Seres is pursuing now: supplier. “We have a very large powertrain team in Santa Clara,” says Taylor. He says he is spending 80 percent of his time in Silicon Valley.

Engineers at Seres took a vertical approach to developing the EV powertrain. “They started from the bottom,” says Taylor, including designing the gear box, the motor, and building their own inverters. Since the powertrain is already incorporated into vehicles in China, it has been undergone millions of kilometers of testing, he adds. Taylor figures Seres could turn into a Tier 1 supplier of EV components or an entire drivetrain.

The Santa Clara R&D center (or maybe the Milpitas location…) has “legitimate IP,” says Taylor. “They are not integrating other’s products.” Taylor claims the Seres electric powertrain is as good or better than anything on the market, “better than the current Tesla systems.”

Sokon Industry Group, based in the southwest China municipality of Chongqing, introduced the first Seres model, the SF5 SUV BEV, in April of this year at the Shanghai Auto Show. The SF5 (below) will be intelligent and connected, natch. It will be on the market by the fourth quarter of this year, says promotional material.  It is also developing a second model, the SF7.

Alas, I didn’t know I’d be blogging about this or I would have attended the Seres presser at the Shanghai show.  I did manage to attend, or at least take photos of, electric SUVs being launched by Bordrin, Aiways, Evolve, Gyon, Hozon, Lixiang, Singulato, Xiaopeng, Qingyuan, NIO, WM, Red Flag (FAW), Venucia (Dongfeng), and JAC, among others.

Get my point? The segment is pretty crowded. Seres faces a challenging market in China. As establishing the brand there is a bit of a prerequisite for launching it here, it’s a good thing Seres is currently pursuing Plan B.

As for the second part of Plan B, i.e. selling manufacturing capacity at its Indiana plant, Taylor figures there is a place for contract manufacturing, in the U.S. “There hasn’t been a lot of contract manufacturing in the U.S. since AM General,” he says. The Indiana plant has a 50,000 unit annual capacity running two shifts daily, and an experienced workforce, Taylor points out.

Customers could include established automakers who need temporary capacity, want to do small-volume manufacturing with a model, or have other limited scale production needs, he says. Startups are another potential customer pool.  Many of them are looking not only to fund a product program but also to find a plant to manufacture the product in. Buying or building a plant at such an early stage is expensive.  Seres’ capacity could be a “bridge plan” for the startup’s first two or three years, says Taylor.

There are a lot of uncertainties in Seres’ U.S. future right now, Taylor admits. One of the biggest is when China and the U.S. “shake hands.” That will help determine when the brand can launch here (though that is predicated on a successful China launch, so another uncertainty…). Even if China and the U.S. resolve some differences, there will be local content requirements to manufacture here. So Seres will need to localize some sourcing in the U.S. almost immediately.

Meanwhile, Taylor is hopeful his new approach, involving contract manufacturing and selling EV powertrains, will succeed.  “We have bites for both lines of business. This might have some legs,” he says.