The Exxon Mobil of Electric Vehicle and FinTech Revolution

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Midas Letter

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Ideanomics (NASDAQ:IDEX) Chairman Bruno Wu joined Midas Letter to discuss monetizing the adoption of commercial electric vehicles, the associated energy consumption and developing next generation financial technology (Fintech) products. Last year, the company the formed its Mobile Energy Global (MEG) division enabling commercial fleet operators to migrate from gasoline and diesel-powered vehicles into electric vehicles. The commercial fleet segments MEG is focused on are Heavy Trucks, Buses & Coaches, Logistical Vans and Taxis. Ideanomics also provide financial services solutions powered by artificial intelligence (AI) and blockchain making these tools more accessible to a variety of industries and global markets. Watch the full interview to learn how the CEO wants to turn the company into the Exxon Mobil (NYSE:XOM) of the mobile energy transformation and Fintech revolution.

Transcript

James West: Dr. Bruno Wu joins me now. He’s the Chairman of Ideanomics, Inc., trading on NASDAQ under the symbol IDEX. Dr. Wu, thank you for joining me today.

Dr. Bruno Wu: Thank you. Good to be with you.

James West: Excellent. Could we please start with an overview of the business of Ideanomics, please?

Dr. Bruno Wu: Well, Ideanomics is a company that we took over about less than two years ago, and we’ve been working very hard on converting it into a – or, two parts of the business. Number One is a commercial EV, commercial electronic vehicle, ecosystem reader; and second is, we have innovation technology investment. Innovation could be fintech, AI, Blockchain, new medical devices, a bunch of things. So there are two parts of the company.

James West: Okay, and your focus on the electric car infrastructure and economy is of tantamount interest to me. I recently ordered a Tesla truck, so I’m going to be very interested in what you’re doing. Tell me, what is the driver of revenue?

Dr. Bruno Wu: Well, the driver of the revenue, we always want to have the vehicle sales revenue, the financing revenue that goes along with the sales. You know, the financing advisory revenue. On top of that, we’re really looking at the continuing recurring energy sales revenue on the secure clients. 

So in other words, we are GM, if you want, in the short-term, but in the long-term wise, we’d like to be Exxon Mobil.

James West: Hmm.

Dr. Bruno Wu: So we’ve got – 

James West: I see. And so you’re recently opened a 10,000 square facility in Qingdao. What kind of penetration do electric vehicles have in the Chinese market at this point?

Dr. Bruno Wu: Well, we’re actually opening up a 100,000 – sorry, a million square feet. A million square feet, 100,000 square metres. So it’s a million square feet.

James West: Ah, I see. Sorry, I misread that.

Dr. Bruno Wu: Much bigger than what you just said. The Chinese EV, overall the market occupation rate, the market rate, is going up. It’s going up more and more rapidly. But we focus in the commercial EV area, because we believe that, for all the passengers to switch to EV, we’re still looking at up to 70 years apart for the majority of the vehicles, passenger vehicles, to be EV, because there are a lot of stuff to support the infrastructure will have to come with it, and a lot of the functionalities will have to improve. The battery duration, all that stuff.

But with the commercial EV, particularly with heavy-duty trucks and buses and logistic vehicles, and even taxis, there is an economic incentive for the driver to change to EV, because they cut their energy cost, like, over 1 million journeys in the case of commercial truck, a heavy duty truck, for example.

So we focus on commercial vehicles into four different kinds of vehicles, which is, again, heavy duty truck; logistic vehicles; buses; and taxis. We see the percentage of that going up very, very quickly. Taking China, for example, if we take mining as a case, use case scenario, you know, what we do in Inner Mongolia. Inner Mongolia has 25,000 mining-related, heavy-duty trucks; 84,000, 85,000 of them are actually short-distance trucks, and a lot of them are off the road vehicles; they just work on a mining field, no license plates required.

If you cut it down, if you convert just the 84,000, 85,000 into EV, five years, 150 billion on the saving the fuel cost. 150 billion in five years. So it’s quite, you know, it’s quite astonishing. So that’s why we’re working with the government there to completely execute a transformation. Not only this will save fuel costs, save upgrading costs. It will also cut down pollution.

So in China and in mostly southeast Asian countries as well, because their resource, you know, they’re energy-poor. You know, they produce energy, and energy costs are going up. So they’re spending, in China in particular, the government puts a mandate to convert, like in Inner Mongolia, heavy-duty trucks. And in most of the Chinese cities, the buses are being converted very rapidly into EV buses. And it’s mandatory.

James West: So are the economic incentives, beside the economic incentives associated for the owners of these vehicles, is the government subsidizing the adoption of the electric, heavy-duty trucks in an effort to combat the air quality issues in China?

Dr. Bruno Wu: Yes. The government has been subsidizing for the past few years. But the biggest hurdle is not the government subsidizing; the biggest hurdle is, when you’re talking about large fleet replacement, okay, in Inner Mongolia, for example, you’re talking about 84,000, 85,000 vehicles to be replaced within two to three years’ window. You need a huge fleet financing being arranged. That’s Priority Number One, because before the fleet financing is put in place, you will not be able to replace 85,000 trucks. You would not even be able to replace 10,000 trucks. That’s, you know, because mostly the banks provide financing and the leasing financing company provides financing, but there’s a limit to it. There’s no blueprint value, no residual value, historical value, on EVs.

So they don’t know how to manage risk. So every time it’s even one financing at a time. So now when we put umbrella financing for the fleet purchase, so that’s what we’re working on, province by province electrification fund that we’re working with the government on putting together.

James West: I see. As a NASDAQ-traded company, are you trying to access North American capital to participate in this financing?

Dr. Bruno Wu: No. We have our financing pretty much sorted out. In China will be insurance companies. So the way we do it is, you know, we designed a very nice architecture that creates a win-win-win for everybody. So basically, we go to a local government with AAA or more in the Federal rating, a very sound financially sound government, and we’ll say to them, we’ll say to the government investment corporation, which has the triple-A rating or more, we say, How about we raise funds for you from insurance companies to do this? But we use your credit rating and use your government credit to guarantee the repayment of principal.

Because of that, insurance companies can offer loans at much cheaper price than the normal banks and other financial institutions. It becomes very attractive to the local government. So that’s how we’re putting the big, you know, ex-bank, non-bank, no other regular lending institutions. We’re putting together electric funds so that us, government and insurance companies, tri-party partnership. And we’re doing, we’re making very good progress on that.

So once you have put in place, you know, the implications…we don’t lack big ticket of all this; the issue is, how do you put financing in place? Once that’s done, the sales number will absolutely skyrocket.

James West: Okay, and so specifically, how does Ideanomics capture revenue from that whole process?

Dr. Bruno Wu: Well, first of all, Ideanomics is very much focused on signing umbrella agreements to lock up, to dominate certain market sectors. For example, heavy-duty truck. So not only we’re signing with Inner Mongolia, we’re actually signing with all China’s top six mining processes. So every EV truck works really well for mining, for court, for steel mills, and you know, these are the perfect scenarios. So we’re signing mines, we’re signing courts, so and we’re signing province by province.

So in that case, we also formed a partnership with CATL, which is the world’s largest battery company. So we’ve sort of begun CATL’s marketing and sales company. So CATL, and with them, you know, we signed with four or five EV manufacturers ourself on a volume discount, but now with CATL, we’re reaching to over 20 major manufacturers, on top of the four or five we signed ourselves. So now we have all the discounts. Now we have also the leasing financing and operation company forming alliance with us.

So our revenue coming from, number one, a very large number of sales, and there’s a very nice spread because we take out all the middlemen. Number two is, we arrange the financing. So on the managing the fund, we have a management fee and a financing, we take, you know, approximately 1 percent to 2 percent from the current financing. And we further have ABS, asset-backed securitization, opportunities with the leasing financing companies.

But most importantly is, we have secured very large clientele. For example, if we dominate Inner Mongolia in the trucking space, then these trucks need to be charged. So we make a deal with the energy company, power company, to take a cut in the power sales off of this time. 

So it is, once the sales starts, we get revenue left and right. Same version holds true with the umbrella agreement with the Chinese tourism automobile and vessel association, which regulates all the tour buses. You know that China has about 800 inter-city and tour buses, 800,000, sorry, which is, if you look at the whole size of the Chinese market per se, we’re looking at a 4.7 to 4.8 trillion heavy-duty truck market, which is the biggest. We’re looking at a 3.6 to 3.7 trillion logistic vehicle, inter-city logistic vehicle market. We’re looking at a 1.8 trillion bus market, and we’re looking at a 1.1 trillion taxi and ride-share market.

We’re certainly attacking all four of them, but with a very strong focus with bus and truck to begin with.

James West: Okay. Dr. Wu, we’re going to have to leave it there for now. Sounds like a fascinating business. We look forward to following you with interest, and we’ll have you back soon. Thank you very much for joining me today.

Dr. Bruno Wu: Thank you so much. Good to be with you.

James West: You bet.

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.