Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: I'm Hannah Elliott and I'm Matt Miller.
Speaker 3: This is Hot Pursuit.
Speaker 2: Coming up on today's podcast. We've got Kevin Tynan, the
Speaker 2: director of research for the Presidio Group. Now we know
Speaker 2: Kevin as the head of automotive intelligence for Bloomberg. That's
Speaker 2: how we have met him and known him for years.
Speaker 2: But he is such a great analyst and communicator of
Speaker 2: what's actually happening in the automotive market. So I'm very
Speaker 2: happy to have Kevin.
Speaker 3: And a massive gearhead. I mean, he has an amazing
Speaker 3: garage in New Jersey with it. So it's packed with
Speaker 3: guitars hanging from the wall. You've seen it, right, and
Speaker 3: like amplifiers everywhere. And then he's got like Mercedes.
Speaker 2: Well, we haven't seen it. I don't think I've seen it.
Speaker 3: It's insane. It is so good, it's like I don't
Speaker 3: for some reason, I think of like if Gene Simmons
Speaker 3: was a gearhead and built his own garage, it would
Speaker 3: look like this. So I'm looking forward to that conversation
Speaker 3: as well. We're going to dig into the big problems
Speaker 3: that especially German automakers are facing, in the face of
Speaker 3: Chinese competition and high cost production. But I want to
Speaker 3: focus in with you for a moment, Handah on German automakers,
Speaker 3: because you and I have both been driving a lot
Speaker 3: of BMW's. I recently bought one, and you've had specifically
Speaker 3: a string of M cars that would make you know,
Speaker 3: a teenage roadent track subscriber drool. What have you been driving?
Speaker 2: So, as you know, I was in the M two
Speaker 2: CS and the the M four, and last week, or
Speaker 2: actually this week, I should say, I've been in the
Speaker 2: M five to two, which is of course the wagon.
Speaker 2: The one I had was in this amazing green color.
Speaker 2: Somebody said it looked like a green slug, which is
Speaker 2: kind of cool. It's like this olive green.
Speaker 3: Yeah, I thought it looked like an olive pretty much.
Speaker 1: Yeah.
Speaker 2: I love the spec. Of course. It's a four point
Speaker 2: four leader V eight eight speed starts at about one
Speaker 2: hundred and twenty two thousand dollars, so kind of the
Speaker 2: same price as the M four, and I loved it.
Speaker 2: Now I know we're gonna have a little conversation about this,
Speaker 2: because coming out of the M four, going into the
Speaker 2: M five, the M five felt instantly more adult, more powerful,
Speaker 2: more uh, just more of a serious car. As you know,
Speaker 2: I thought that the M four to me is a
Speaker 2: little bit just soft. I this actually felt great to
Speaker 2: get into.
Speaker 3: I take the other side of that bent because I
Speaker 3: a couple of weeks ago. Also as driving the M
Speaker 3: five Wagon, mine was in an amazing purple, like a
Speaker 3: plum purple color. And they're nailing it in terms of
Speaker 3: their paints. And normally I'm a massive fan of the wagon,
Speaker 3: like I adore a station wagon. My first car that
Speaker 3: I ever bought myself was an Audi a four Avant,
Speaker 3: And I mean I would never option a sedan when
Speaker 3: I could have a wagon. But to me, the M
Speaker 3: five Wagon or not, I've driven both versions of this generation.
Speaker 3: It's just like too good. It's so good that it's
Speaker 3: boring a lot like a nine to eleven GTS. I
Speaker 3: just can't really feel the gear changes. It does have
Speaker 3: those like teenage pops on DCEL, which I'm very much over.
Speaker 3: And it's just so big.
Speaker 2: It's it is long. It feels long for sure, it's
Speaker 2: a slug and.
Speaker 3: I don't really love the way it looks either. Like
Speaker 3: I think the M four is more much more attractive
Speaker 3: and more resolved design. And I also recently drove the
Speaker 3: M two CS, which is much more raw and exciting
Speaker 3: and you know, a visceral experience everything that we want,
Speaker 3: even without the stick. I loved the M two CS.
Speaker 3: So for me, I'd say the M five is the
Speaker 3: is my third choice of those three.
Speaker 2: Wow, I am really really shocked. Really, I am very
Speaker 2: shocked because with this IN five, for instance, Okay, it's
Speaker 2: got that urban green the factory color is urban green.
Speaker 2: It's a five thousand dollars option, but also the it
Speaker 2: was like twenty and twenty one inch dual spoke bicolor
Speaker 2: wheels that were super cool. It's got all of it's
Speaker 2: got the glow package on the kidney grill, It's got
Speaker 2: all of these extra like black roof and shadow line
Speaker 2: lights and like obviously red red break calipers, and like
Speaker 2: all of these things that all the Beamer bros love
Speaker 2: and I kind of get it. Maybe I wouldn't buy
Speaker 2: it from my personal car if I only had one,
Speaker 2: but I'm very surprised because this to me, was more
Speaker 2: brutalist and like structurally interesting in the four, which, again,
Speaker 2: the M four to me was just like a little
Speaker 2: bit of a version of the M two with all
Speaker 2: the edge rounded and off, it just felt a little
Speaker 2: bit soft, a little bit bloated.
Speaker 3: No, you're right, I get it. I get what you're saying,
Speaker 3: and I think you're wrong. Like the M two and
Speaker 3: the M five are both much more severe designs, right,
Speaker 3: and the M four looks a lot more like every
Speaker 3: other BMW, Like you wouldn't be able to tell if
Speaker 3: that's really an M four or an M six and
Speaker 3: the when you look at it.
Speaker 2: And but that's why I'm surprised you like it.
Speaker 3: But but but uh, I think it's so the M two.
Speaker 3: I love that it's so in your face and raucous,
Speaker 3: and it drives that way as well, which is what
Speaker 3: I love. The M four, I just think is a
Speaker 3: more attractive vehicle, Like objectively, it's it's finished the way
Speaker 3: you would expect the M five. To me, it's just
Speaker 3: nothing can hide how big and heavy it is. It's
Speaker 3: just and I and I just for some reason don't
Speaker 3: dig the way it looks. I yes, the wheels are cool,
Speaker 3: black roof. I've never understood why you would want unless
Speaker 3: it's you know, just the carbon fiber look like, why
Speaker 3: do you want a heat sink? On your roof and
Speaker 3: on your hood. I've never understood why people do black
Speaker 3: roof and hood. If you're gonna do anything different than
Speaker 3: do white roof and hood, you know there's a look well,
Speaker 3: but not not for the look, right, but so that
Speaker 3: you don't have the sun boiling you on the inside.
Speaker 3: I don't know.
Speaker 2: To me, let me ask you this so fast.
Speaker 3: And it's so and it's so good that it's like boring,
Speaker 3: and it still has the big sharp screen on the
Speaker 3: inside that I can't get along.
Speaker 2: Find that screen that I know we've talked about this
Speaker 2: for some reason that didn't get me. Let me ask
Speaker 2: you this, how much does your seventh series way?
Speaker 3: The seventh series must weigh more? I don't actually know
Speaker 3: the M five. I wouldn't be I wouldn't be surprised
Speaker 3: if they're about the same. But the thing is so
Speaker 3: I had the M five wagon the same week that
Speaker 3: I got the seven series or a week later. Yes,
Speaker 3: And one of the problems for me with the M
Speaker 3: five is I would walk out to my driveway look
Speaker 3: at this new fangled high tech M five and it's
Speaker 3: fast and it's precise, and then I would look at
Speaker 3: my big boat of a seven sixty and it's like
Speaker 3: driving a diesel locomotive. I chose the seven sixty more
Speaker 3: often than I chose the M five. Part of that
Speaker 3: is probably because I just got it. It's mine and
Speaker 3: it's new, new to me.
Speaker 2: Well, that's totally fair, that's totally fair.
Speaker 3: But I just if I were going to order M cars,
Speaker 3: I think I would put the M five Like last,
Speaker 3: I would rather have an M two. I would rather
Speaker 3: have the new M three cs Hans Shelter. I would
Speaker 3: rather have an M four. I would rather have They
Speaker 3: don't make the M six anymore, I don't think. But
Speaker 3: I'd rather have the M eight even as you know, like, yeah,
Speaker 3: so all of those for me would would trump the
Speaker 3: big wagon, which is interesting because I'm such a wagon guy.
Speaker 2: Yeah, I'm surprised. It's good to know. Yeah, I mean,
Speaker 2: I'm not. Does a wagon fit a child seat in
Speaker 2: the in the.
Speaker 3: None of those cars, except for the seven series, will
Speaker 3: fit a large rear facing child seat behind a driver
Speaker 3: who is pushed all the way back like that doesn't
Speaker 3: work in a range rover unless it's the long wheelbase.
Speaker 3: That's why I like these big German limousines, because it
Speaker 3: does work in the A eight to L. It does
Speaker 3: work in the seven series, the L versions, which almost
Speaker 3: all Americans ones are, and it does work in the
Speaker 3: S class. That's for a dad, that's a huge bonus.
Speaker 3: By the way, I want to just pivot to Mercedes
Speaker 3: before we get to Kevin, and we'll talk with him
Speaker 3: about Mercedes a lot because he owns so many and
Speaker 3: he's a big fan, and we're going to focus on
Speaker 3: German cars. But there has been so much hate for
Speaker 3: AMG online and there's always I mean, online is where
Speaker 3: hate lives, so I guess that's to be expected. But Callari,
Speaker 3: I've been driving the AMG GT sixty three that you
Speaker 3: and I both love. You picked it for your Car
Speaker 3: of the Year last year of it, but I've been
Speaker 3: driving like the pro version. So they make this big
Speaker 3: beefy hybrid, the s E Performance version with eight hundred
Speaker 3: horsepower a thousand pounds feet of torque. That's to me,
Speaker 3: the AMGGT version of the nine to eleven turbos, right,
Speaker 3: And they make now this GT sixty three pro version,
Speaker 3: which I'm gonna call their GT three touring. It's like
Speaker 3: a nine to eleven GT three touring because it's it
Speaker 3: takes away the hybrid components, so it's just the motor. Okay,
Speaker 3: it's not naturally aspirated, but it's a big V eight
Speaker 3: with turbos. And you can't get a stick with the
Speaker 3: AMGGT either in any form or even a DCET. They
Speaker 3: have their own transmission, but it's like lighter, five hundred
Speaker 3: pounds lighter. It's a lot more nimble as a result,
Speaker 3: and some of the luxury like sound deadening is stripped out.
Speaker 3: But it's just an amazing car. And for all of
Speaker 3: the for all of the shade that AMG gets, for
Speaker 3: going down to four cylinders or even no cylinders, I
Speaker 3: think these amggts are just amazing vehicles. Granted they cost
Speaker 3: a ton of money.
Speaker 2: They cost a ton of money, but I have to say,
Speaker 2: and I was just with Mercedes earlier this week in
Speaker 2: Beverly Hills. They had an opening for their new my
Speaker 2: Boch Attilia and they unveiled a new Mercedes my Boch SUV,
Speaker 2: the GLS six't eighty. And I had some time talking
Speaker 2: with some of their board members and executives this week,
Speaker 2: and this is going to sound very oversimplified, but they
Speaker 2: are so smart and they are so good they know
Speaker 2: what they're doing, and they are able to articulate exactly
Speaker 2: why they're doing things in a way that is not
Speaker 2: calm among every other automaker. And I always say, the
Speaker 2: products indicate what's happening in the company. Again, maybe this
Speaker 2: is an oversimplified thing, but it remains true. The products
Speaker 2: indicate what is really going on, and there is a
Speaker 2: lag time between product and where the company is. But
Speaker 2: that has that has always been true in my experience,
Speaker 2: and the products at Mercedes continue to be good, some
Speaker 2: better than others. But to your point, Matt, they understand
Speaker 2: that that there is a very strong appetite among certain
Speaker 2: people like us who are appreciate and love that car
Speaker 2: and really need that car who to exist. I mean,
Speaker 2: they get they understand that.
Speaker 3: I just wish it was making sense thing too. I mean,
Speaker 3: I just wish it wasn't so expensive like this one
Speaker 3: starts at I think two hundred and fifteen or two
Speaker 3: hundred and twenty thousand. If you want the se performance,
Speaker 3: you're paying you know that. Plus it's like it's unaffordable
Speaker 3: for almost anyone. Right, Yeah, let's get to SpaceX. Let's
Speaker 3: get SpaceX shares.
Speaker 2: And that reflects the fact that these things are becoming scarce,
Speaker 2: which makes them luxury objects.
Speaker 3: But I also think that it can hold its own
Speaker 3: against Obviously a nine to eleven is a slightly different
Speaker 3: use case, but definitely they're priced that way too. When
Speaker 3: you get to the Turbo and the GT three, it
Speaker 3: can hold its own in my opinion, against the Lamborghini Temorio,
Speaker 3: which I drove last week, and although it took me
Speaker 3: a while to fall in love with it, I did.
Speaker 3: It feels like more of an Audi than a Lamborghini.
Speaker 3: But it's twice the price of this GT sixty AMGGT
Speaker 3: sixty three Pro, and the AMG sounds better. The AMG
Speaker 3: is more comfortable and maybe in some circles, also more
Speaker 3: socially acceptable. I feel like it's a supercar. It's a
Speaker 3: legit supercar. These amggtas car, for sure, they're so powerful.
Speaker 3: I'd rather have a Corvette than either one. But oh wow,
Speaker 3: well because I save so much money that way, right, Yeah,
Speaker 3: The Corvette has a six point eight liter naturally aspirated
Speaker 3: V eight and it starts at like seventy five thousand dollars.
Speaker 3: That's insane, I know.
Speaker 2: I think you lose something on the fit and finish
Speaker 2: components inside, but.
Speaker 3: Maybe but something that an extra you know, one hundred
Speaker 3: and fifty to three hundred thousand dollars would make up
Speaker 3: for maybe.
Speaker 2: Yeah, good bye two of them.
Speaker 3: By the way, quick, just my quick take on the
Speaker 3: GLS right my box or not? And Mercedes are not
Speaker 3: in my opinion, any three to row suv that it's
Speaker 3: not body on frame truck. Forget about it. Like we
Speaker 3: have a GLS, I know you do, and I wish
Speaker 3: I had a Tahoe. You know a friend of mine
Speaker 3: has an X seven. Uh, he wishes he had a Yukon.
Speaker 3: The same is true when Audi comes out of the
Speaker 3: Q nine, like if it's not a body on frame
Speaker 3: truck and it's not like Kia EV nine, like it's
Speaker 3: for me, it's a miss that is too big for
Speaker 3: a unibody vehicle.
Speaker 2: And you're saying that because of oh, sorry you can
Speaker 2: I don't know if you can hear that horn or not.
Speaker 2: You're saying that because of the way the car behaves
Speaker 2: in motion.
Speaker 3: No, because a hell on American roads and the suspension
Speaker 3: just cannot handle it. They're just not heavy duty enough
Speaker 3: to drive around the northeast of the decrepit United States
Speaker 3: of America Highway system and that for that you need
Speaker 3: a Tahoe or a Yukon or an expedition if you're
Speaker 3: willing to forego a v which I don't know why
Speaker 3: you would be in that size vehicle, although you know
Speaker 3: I love the Nissan Armada. By the way, quick note
Speaker 3: on audio. Throughout this interview with Kevin Tynan, you're gonna
Speaker 3: hear some grunting, maybe some whining a little.
Speaker 2: It's not are you saying that? Wasn't you?
Speaker 1: Yeah?
Speaker 3: No, I'm holding my twenty seven day old baby because
Speaker 3: my wife, who's been up all night feeding him, is
Speaker 3: now recovering some sleep, and I am on daddy duty.
Speaker 3: I'm actually on paternity leave for the next like five months.
Speaker 2: So we're so happy for you.
Speaker 3: As Freddy is joining the conversation today.
Speaker 2: Yeah, this is Freddy's first appearance appearance, not his last
Speaker 2: by any means, and he's been he's added some wonderful
Speaker 2: grunts and.
Speaker 3: He's cooing a little bit. All right, Without any further ado,
Speaker 3: let's get to Kevin Tynan, formerly of Bloomberg Intelligence, now
Speaker 3: at the Presidio Group. That the reason, Kevin, that that
Speaker 3: Hannah and I both were thinking about having you is
Speaker 3: because we're hearing about so much upheaval in the automotive industry,
Speaker 3: and specifically because I've lived in Germany for ten years,
Speaker 3: I'm getting so many messages from friends who are terrified
Speaker 3: about the state of the industry and the economy there.
Speaker 3: Folkswagen wanted to fire fifty thousand people, now maybe it's
Speaker 3: one hundred thousand people that they want to fire. They're
Speaker 3: talking about closing down factories all over the country. And
Speaker 3: it's harder for them, obviously because they have so much
Speaker 3: union control and so much government control. But how bad
Speaker 3: is it especially for Folkswagen.
Speaker 1: Well, look, you know, if you ask me, I think
Speaker 1: Europe has a China problem. Right. If you're gonna just
Speaker 1: import Chinese vehicles, this is what you get, right. It's
Speaker 1: for manufacturers, that's a zero sum game. And not only
Speaker 1: are you now unable to sell right like that, that's
Speaker 1: jobs specifically, And when you look at how quickly Chinese
Speaker 1: manufacturers have taken market share in Europe, it's amazing, it's
Speaker 1: actually terrifying. So you understand that what we're facing here
Speaker 1: in the US is a similar story. Right, It's like, well,
Speaker 1: cheap appliances or jobs because we're not just like Europe.
Speaker 1: We're not low cost manufacturing countries or regions, so we
Speaker 1: can't compete on price for a lot of those things.
Speaker 1: And I think once that gets in the consumer's mind
Speaker 1: of oh, look at this, you know, they don't care
Speaker 1: that it's a subsidized vehicle and that it's half the price.
Speaker 1: Right to them, it's a better value. And that's costing
Speaker 1: your jobs. That's market share, that's just flying out the window.
Speaker 1: And it's very difficult to stop it. But Luna, come on.
Speaker 3: But know, I mean to me that part of the
Speaker 3: problem is Folkswagen was relying on sales in China, so
Speaker 3: it's not just about losing markets here in Europe, right,
Speaker 3: And for for years or decades they agreed to minority
Speaker 3: stakes in jvs where they willingly gave their IP and
Speaker 3: their tech to the Chinese. You know, they were essentially
Speaker 3: trading control for access. And now it's time to pay
Speaker 3: the piper. Like they they they have as much responsibility
Speaker 3: in this as the Chinese.
Speaker 1: And you know what too, And that's one of the
Speaker 1: things that that as you know, a watcher of this space,
Speaker 1: and albeit from a different perspective, you know, in this
Speaker 1: role that's one of the things about China that is
Speaker 1: scary is China two point oh China three point zero,
Speaker 1: which is to say, come on in, take a minority
Speaker 1: stake in this venture. You have access as a manufacturer
Speaker 1: to a what twenty five to thirty million unit market, Right,
Speaker 1: so when you think about that globally and absorbing costs
Speaker 1: like this is great. You just you can just run
Speaker 1: the factories here. Meanwhile, once they're ready, and they say,
Speaker 1: you know, we can sort of turn off that demand,
Speaker 1: row you out whatever rules you want to change, and
Speaker 1: you're right. I mean, and I can't believe. And there's
Speaker 1: a lot of things that I say, or I say
Speaker 1: this a lot about a lot of things. I can't
Speaker 1: believe auto manufacturers didn't see that coming, you know, just
Speaker 1: like electrification. You know, you can't tell me, well, you
Speaker 1: know that Toyota did the math, but you can't tell
Speaker 1: me that everybody did the math, and says, China owns
Speaker 1: the entire supply chain here, how does this ever become profitable? Right?
Speaker 1: If it's not profitable on day one or even close, right,
Speaker 1: look at Ford model eve the law loss is there
Speaker 1: five billion dollars a years? How does it get profitable
Speaker 1: when China controls that supply chain, which is which is
Speaker 1: a strategy that's been in place for decades, you know,
Speaker 1: controlling the mind, controlling the processing. So I agree with you,
Speaker 1: you had to see this coming.
Speaker 2: We're here with Kevin Tynan, the head of research for
Speaker 2: the Presidio Group. More with Kevin Tynan. After this, we.
Speaker 3: Are back with Kevin Tynan of the Presidio Group, formerly
Speaker 3: of Bloomberg Intelligence. Let's get back to our conversation.
Speaker 2: When we go back and look at the history of
Speaker 2: of this and how this all unfolded. What are what
Speaker 2: are historians going to point at and say was the
Speaker 2: fatal flaw which led to them not seeing this coming?
Speaker 2: How how could they miss this?
Speaker 1: So, yeah, this probably would be and out unpopular way
Speaker 1: to put it. But right, so you go back to
Speaker 1: the diesel cheating scandal. Right, and as a global manufacturer,
Speaker 1: which a lot of those German companies are and were
Speaker 1: and will continue to be, right, you want to share
Speaker 1: as much technology platforms parts as possible. Right, That's the
Speaker 1: point of being global. But when you understand that the
Speaker 1: demand profile and all these regions is very different. Right,
Speaker 1: we drive big trucks here that just doesn't work in Europe,
Speaker 1: it doesn't work in a lot of parts of the world,
Speaker 1: probably other than here. So when you think about the
Speaker 1: diesel scandal, I think there's this sort of light bulb
Speaker 1: that goes off for European manufacturers, German especially, that says, Okay,
Speaker 1: maybe diesel's not the way forward, and if it's not
Speaker 1: the way forward in Europe, well then it's not going
Speaker 1: to be the way forward in the US. And we
Speaker 1: always sort of push back on dieseline. I know, people
Speaker 1: love diesel, but it was never it was never a
Speaker 1: high volume. It was a.
Speaker 3: Diesel, you know, right, it.
Speaker 1: Wasn't you know, it was it was niche. Right, So
Speaker 1: now you say, okay, like, let's face the reality that
Speaker 1: that diesel is not going to be our way forward.
Speaker 1: And then you get the cheating scandal, and then it's like, okay,
Speaker 1: now we have to be environmentally responsible and you know,
Speaker 1: and do what we need to do. So now you
Speaker 1: sort of invite electrification and you say, hey, look we're
Speaker 1: going one hundred percent EV and then there's China waiting
Speaker 1: by the phone, going, you know, funny that you should
Speaker 1: mention that because we've accumulated all the assets and and
Speaker 1: the and created the supply chain, and we can do
Speaker 1: it cheaper than anybody. We can get you EV's you know,
Speaker 1: all day, every day. And when you just let them
Speaker 1: export to you and you import those products again, that's
Speaker 1: that's zero sum. That's one proble. What you bring in
Speaker 1: is one you don't build and sell in your own country.
Speaker 1: And then that snowballs. Once that Pandora's box is open,
Speaker 1: that foot is in the door, it's hard to reverse it.
Speaker 1: And I think that's exactly what in hindsight it will
Speaker 1: look like, is that.
Speaker 3: Is that then, I mean, no problem for US manufacturers
Speaker 3: in the sense that Americans for the most part aren't
Speaker 3: really buying evs and we're not allowing Chinese imports.
Speaker 1: Right. But but then what do you hear? You hear
Speaker 1: you know what I called we're getting technology shamed. And
Speaker 1: I don't know if that's you know, the narrative that's
Speaker 1: coming out of China or or from our own country,
Speaker 1: which says like, oh, we're falling behind because we don't
Speaker 1: do evs as well or to the volume that China
Speaker 1: does them, you know. And my my response is, well,
Speaker 1: we don't have to. We do We do pickup trucks
Speaker 1: better than everybody else. Now, what's what's going to happen though,
Speaker 1: and what the side of the that argument is that? Okay, well,
Speaker 1: now look at China exports. They are vehicle exports, right,
Speaker 1: one point one million exports in June alone, Right, so
Speaker 1: a twelve million unit a year run rate just on exports,
Speaker 1: never mind their own domestic market. And then look at
Speaker 1: the size of the total global auto it's seventy million vehicles,
Speaker 1: ninety ninety five if you include commercial stuff. So they're
Speaker 1: already exported a large part of the world's vehicles. That
Speaker 1: we're not going to undo that by standing and going
Speaker 1: toe to toe, like I think Bill Ford just came
Speaker 1: out and talked about going toe to toe. And you know,
Speaker 1: as I'm traveling around and talking to dealers and I
Speaker 1: see other speakers and this this idea of going toe
Speaker 1: to toe with China, you understand that fight, especially on
Speaker 1: EV is already over right. This is not oh, we
Speaker 1: stand toe totel. We're not going to take back those
Speaker 1: China export markets, right, If they're exporting twelve million units
Speaker 1: a year and growing, we're not going to win that
Speaker 1: market back because we're not a low cost manufacturer, because
Speaker 1: we don't control the supply chain, right. So again, to me,
Speaker 1: the best thing that US manufacturers could do is, you know,
Speaker 1: and if it means joining up with the European manufacturers
Speaker 1: in South Korea and you know, other Asia manufacturers saying like, hey, look,
Speaker 1: you've won the EV battle. We're going to the next technology.
Speaker 1: Whatever that is. Whether that's better internal combustion, whether that's hybridization,
Speaker 1: whether that's hydrogen, I don't know, whatever it is, but
Speaker 1: understand that the export and the EV fight, China's already won. Wow,
Speaker 1: And I think one of the dumbest thing we could
Speaker 1: do is to go, yeah, we'll stand here toe to
Speaker 1: toe with you, right, because you know, and it's not Let.
Speaker 2: Me ask you, Kevin, when you say you're basically saying
Speaker 2: like the American EV has been crushed, which I think
Speaker 2: was a headline that we saw from that New York
Speaker 2: Times piece a few days ago. In your mind, does
Speaker 2: that also include pure play EV makers in America like
Speaker 2: Tesla Lucid Rivian or are they in a separate category
Speaker 2: when you're talking about going toe to toe and we
Speaker 2: shouldn't we're not doing that.
Speaker 1: Well, here's the thing, is I I'm my second question
Speaker 1: is always well, what is your definition of winning? Right?
Speaker 1: And so you say, like, okay, is losing money right
Speaker 1: for Ford modeling? Or look at Lucid. Lucid it's like
Speaker 1: at its bill of goods, at its gross profit line
Speaker 1: is like one hundred thousand dollars per vehicle upside down,
Speaker 1: so you know, and Ribbean's closer, but still you know,
Speaker 1: no operating profit there. So you say like, well, what
Speaker 1: would and you know Tesla's profitability and you saw it
Speaker 1: the other day, you know, and I would argue, is
Speaker 1: not on the on the automotive side, is not anywhere
Speaker 1: near certainly what it used to be or even what
Speaker 1: it used to be reported as you know, because if
Speaker 1: you look at what every other automaker does on the
Speaker 1: P and L in terms of profitability, I can't believe
Speaker 1: Tesla is that different at the end of the day,
Speaker 1: right if you really, if you really got into the numbers.
Speaker 1: So that said, you know, what is winning is winning
Speaker 1: purposely losing money. And that's and that's part of the
Speaker 1: issue too. And and it's not that Chinese manufacturers are
Speaker 1: that much more profitable. You know, if there's one hundred
Speaker 1: and fifty manufacturers in China, you know, a handful are profitable,
Speaker 1: and and and the point of that is that because
Speaker 1: it's not automaker versus automaker, it's automaker versus automaker plus
Speaker 1: China's balance sheet, China government balance sheet, and it's just
Speaker 1: not a fair fight. So the China the US ev
Speaker 1: getting crushed. I'm saying like, well, if you can't make
Speaker 1: money doing it, and you know I've said this for years, right,
Speaker 1: if you can't make money doing it, you're not going
Speaker 1: to want to do it. And that was who's argument? Right?
Speaker 3: And no way, Kevin? Why does I mean with Tesla,
Speaker 3: Elon wants to have another business or many other businesses
Speaker 3: and it's not valued as a carmaker anyway. With Rivian
Speaker 3: you say, maybe they're closer to not losing one hundred
Speaker 3: thousand dollars per car. With Lucid, why bother? What's what's
Speaker 3: the point? Who's who says like, ah, we should continue this?
Speaker 3: Maybe he light at the end of the tunnel, or.
Speaker 1: Well, Saudi Money says let's continue this. But well, I
Speaker 1: think I think a big factor of it was when
Speaker 1: you go back in time and this happened. Even this,
Speaker 1: you can make this argument for why Ford did what
Speaker 1: it did. What GM did, which is to say, when
Speaker 1: you look across the room and there's Tesla worth a
Speaker 1: trillion dollars for doing things you know you can do. Also,
Speaker 1: you're not sure that the profitability is there, right because
Speaker 1: you've done that math and you go like, I don't
Speaker 1: see it, but but he's worth a trillion dollars, right,
Speaker 1: His money losing automaker is worth a trillion dollars. Maybe
Speaker 1: we get there, or we have access to capital that
Speaker 1: somehow gets us there, but the math just didn't work right.
Speaker 1: And that's what I'm saying is Toyota did the same
Speaker 1: math and said we don't get it. They're the one.
Speaker 1: They're the ones who's stuck, stuck by their analysis and said,
Speaker 1: you know we and they remember they were vilified for that,
Speaker 1: like oh you're a dinosaur, and now they're the smartest guys. Right,
Speaker 1: So there was that valuation component of it, right. So
Speaker 1: if Mary Bara Jim Farley can take four GM from
Speaker 1: forty billion dollars market cap to one hundred and forty
Speaker 1: billion market cap even on a money losing business model, right,
Speaker 1: that's that's still value to them, right, And then you
Speaker 1: hope that the day comes where where you can get
Speaker 1: profitable in it. But it doesn't look like that day
Speaker 1: is coming. In fact, it seems like they've they've accepted
Speaker 1: that that day isn't coming by writing down those assets.
Speaker 3: Dude, Can we get back to the German automakers, because
Speaker 3: I really want to understand what's happening there, And obviously
Speaker 3: you cover the entire industry globally, but you have, like
Speaker 3: many of us, a love for a particular German brand
Speaker 3: and motors that they aren't going to be making anymore. Mercedes,
Speaker 3: you have like a at least one V twelve there right, so,
Speaker 3: and Lauria, you do you have like an SL sixty
Speaker 3: five and a sixty three or something.
Speaker 1: No, I have an older six hundred, so I have
Speaker 1: the naturally aspirated V twelve, the R one twenty nine
Speaker 1: platform which ended in two thousand and two. I also
Speaker 1: have that car in the V eight, the silver Arrow edition,
Speaker 1: the last one they made. And then and then I
Speaker 1: have an m L fifty five, a MG so the
Speaker 1: little knock around truck with the naturally aspirated five point
Speaker 1: five leader there and they're when they work there, unbelievable.
Speaker 3: But Mercedes as I as far as I understand it.
Speaker 3: Mercedes is doing better than Volkswagen in this crisis, and
Speaker 3: BMW is doing better than both of them. Is that fair?
Speaker 1: Yeah, I BMW's announced some things, but but yeah, that
Speaker 1: that's fair. And I and I think you know when
Speaker 1: you look at BMW and the component of that is
Speaker 1: obviously heavy, BMW rolls Royce, Mercedes right, different different client
Speaker 1: tele right, and then within Volkswagen, the competitor would be Audi,
Speaker 1: which has really moved down market, especially here in the US.
Speaker 1: When you look at transaction prices of BMW and Mercedes
Speaker 1: in the high seventies heading towards this is the average
Speaker 1: high seventies towards eighty thousand, and then you look at
Speaker 1: Audis in the sixties, you know, low to mid sixties.
Speaker 1: So I get the point of finding open clear air
Speaker 1: to operate in and not going head to head with
Speaker 1: BMW and Mercedes. But I think it's hurt the brand.
Speaker 1: It's sort of it made it not look competitive to
Speaker 1: the other two. But look at the end of the day,
Speaker 1: you said it in your first question, which is you're
Speaker 1: dealing with the unions. It's hard to take costs out.
Speaker 1: So when your market share regionally globally is declining quickly,
Speaker 1: and you can't right size your enterprise by getting costs
Speaker 1: out of the system. Whether it's capacity, whether it's head account,
Speaker 1: whatever it is, you're going to have a problem. And
Speaker 1: that's what that's what the European manufacturers are facing now
Speaker 1: is do we continue to lose market share? And if
Speaker 1: we do, can we get costs out quick enough which
Speaker 1: usually you cannot or you have to find somewhere to
Speaker 1: go to rebuild that revenue somehow.
Speaker 2: How how serious is this movement in the US to
Speaker 2: expel companies with I think is it fifteen percent Chinese ownership?
Speaker 2: How serious a thread is that? I know Mercedes is
Speaker 2: fighting against it, We had a piece on them. Is
Speaker 2: that a serious threat? And I asked also in light
Speaker 2: of what happened with Pollstar, how you know could that
Speaker 2: actually happen to Mercedes as well?
Speaker 1: It's a long tail on that. I think the number
Speaker 1: what's twenty by twenty thirty, which I guess is not
Speaker 1: that far away, probably be here before we know it,
Speaker 1: you know, And maybe if that goes a couple of years,
Speaker 1: gets pushed out a little bit further. I don't think
Speaker 1: it would go as far as hey.
Speaker 3: What's the what's the number? Twenty percent ownership by twenty
Speaker 3: thirty right and right now mercecial provision. Right now, Jillie
Speaker 3: owns like ten percent of Mercedes fifteen.
Speaker 2: I think they're at fifteen, right, combined with Glie and
Speaker 2: private ownership.
Speaker 1: Right, So it would be you would you have you know,
Speaker 1: three four and if it's becomes twenty thirty two, I
Speaker 1: don't think it becomes twenty thirty five. But basically, you know,
Speaker 1: you divest them, you know those those Okay, so.
Speaker 2: They get it adjust basically.
Speaker 1: I mean, I guess if it's China that says we're
Speaker 1: not giving up our steake, but I guess you would
Speaker 1: have to.
Speaker 3: But but Kevin, in trying to understand the problem with VW,
Speaker 3: Mercedes and BMW and how bad each of these German
Speaker 3: companies is impacted, it's pretty apparent that BMW, which is
Speaker 3: doing the bad, produces a hell of a lot of
Speaker 3: vehicles here in the US, and Mercedes mercedesuces some. Right,
Speaker 3: the MW has in Carolina, Mercedes has in Alabama, and
Speaker 3: Volkswagen has like none. Okay, they have a Chattanooga plant,
Speaker 3: but no one buys Volkswagen brand cars because they don't
Speaker 3: really have any cool cars. And then Audi and Porsche
Speaker 3: obviously are made in Germany for the most people.
Speaker 1: Yeah, and look, and that's an interesting point. And I
Speaker 1: started to look at this last week before I was traveling.
Speaker 1: You know where where the operating profit comes from from
Speaker 1: global automakers, right, and and and two examples I usually give.
Speaker 1: One is Nissan and the other is Stilantis, which is right.
Speaker 1: Think about when it was Fiat Chrysler and Sergiomachioni was
Speaker 1: running the company. The presence in North America and the
Speaker 1: US specifically was big.
Speaker 4: Right.
Speaker 1: You always knew who was running the company. You knew
Speaker 1: who was in charge. You knew you know, like he
Speaker 1: was a he was and this is a very important
Speaker 1: market in terms of operating profits.
Speaker 3: You were always in Auburn Hills, all the heads.
Speaker 1: Of the right, right because because of Jeep Ram and
Speaker 1: the money that those those brands made here is very
Speaker 1: important to the global enterprise that became Spillanthus, Nissan is
Speaker 1: another example. Whatever the situation the politics with Carlos gon
Speaker 1: once he's gotten the same thing, right, Like he was
Speaker 1: a guy that you knew who the head of Nissan
Speaker 1: was in the US in North America for better or
Speaker 1: for worse, you know, with with whatever their strategy was.
Speaker 1: But really, since then you're kind of looking at that
Speaker 1: company and I don't you know, and maybe that leadership
Speaker 1: is great, but if it's over in Japan, I feel
Speaker 1: like this market loses interests and you really have to
Speaker 1: be on top of this market because it is a
Speaker 1: truck market and like it or not, you know, that's
Speaker 1: where the profit is. So you have you know, you
Speaker 1: can have your your Nissan Censors, but at the end
Speaker 1: of the day, it's going to be it's going to
Speaker 1: be Rogue and Pathfinder and your pickup trucks that that
Speaker 1: frontier that make the difference here.
Speaker 3: And you can't just forget the Armada my favorite largest
Speaker 3: Yeah right, so I love the Armada so much.
Speaker 1: Yeah, I just saw I was walking in Atlanta the
Speaker 1: other day, so what is it like the QX eighty
Speaker 1: and fifty enormous. But the point is is that you
Speaker 1: had visible leadership, you had vocal leadership in in the
Speaker 1: US and it's a big contributor to the profitability of
Speaker 1: those firms. And when that went away, I feel like
Speaker 1: those brands really slipped and have to get back to that.
Speaker 2: I want to go back to Mercedes for a second,
Speaker 2: because this AMGGT four door that they've come out with,
Speaker 2: which is the electric sedan with the fabricated V eight sound,
Speaker 2: is so polarizing. And Kevin, what like, we're talking about
Speaker 2: the strength and the merits of Mercedes. What does a
Speaker 2: vehicle like that do to the company? Potentially? Is it
Speaker 2: a non issue because it's just gonna be here and
Speaker 2: then go away? Because no one?
Speaker 3: Do you see that real I sent you the other
Speaker 3: day on Instagram?
Speaker 2: Yes I did.
Speaker 3: There's a parody. Somebody made this parody reel which is AI.
Speaker 3: But you have actual Mercedes and AMG execs bragging about
Speaker 3: how they've ruined AMG. And I don't think that's the case.
Speaker 3: Hannah and I both love you.
Speaker 2: This is this is why I'm asking Kevin, let's get
Speaker 2: some actual adult in the room, because you know, if
Speaker 2: people hate it, but the executives, of course say it's
Speaker 2: a game changer, et cetera, et cetera. I am going
Speaker 2: to drive at this fall, so I'm looking forward to it.
Speaker 2: So give us a prep.
Speaker 1: Well. I think one of the things that's important is
Speaker 1: is and you know my view is this is a
Speaker 1: push industry. The manufacturer's going to do what's good for them,
Speaker 1: what makes them, what makes them profitable. But I understand
Speaker 1: the value of meeting the customer where they are, right, So,
Speaker 1: but that means there has to be choice. So you
Speaker 1: can do your ev your plug at hybrid, your hybrid
Speaker 1: whatever it is. Ag yeah, right, like you know, but
Speaker 1: but you got to you got to understand where the
Speaker 1: money is made, right and and and as long as
Speaker 1: they're doing that to go only EQ war electric, right,
Speaker 1: I think is the mistake. Is My point is that
Speaker 1: you know, as my wife, my lovely wife often says, look,
Speaker 1: there's an ass every seat, and and that's and that's true, right,
Speaker 1: But but I think when you start limiting the choice
Speaker 1: of the consumer because of profitability of because the government
Speaker 1: is telling you you have to move to one technology
Speaker 1: over another, I think that's where you run into a problem.
Speaker 1: I think Mercedes, and I know, and and I was
Speaker 1: just saying, like, we spend time with Adam Chamberlain at
Speaker 1: our conference in in May, and like he gets it.
Speaker 1: He's a car guy. He's showing me, you know, pictures
Speaker 1: on his phone of his little go to sl that
Speaker 1: he's having restored. And I like ad yeah, like and
Speaker 1: he gets.
Speaker 2: It eeo of Mercedes spends USA, we should say for listeners,
Speaker 2: right right right yeah.
Speaker 4: So so so as long as that sort of passion
Speaker 4: is built into the brand, I think it'll be Okay,
Speaker 4: there's go there's going to be compliance cars, there's going
Speaker 4: to be missions, fuel economy mandates.
Speaker 1: I mean, look at Ferrari. I mean that's what that is.
Speaker 1: There's things you have to do so that you can
Speaker 1: do the other things that you want to do or
Speaker 1: the very profitable things. And that's just the price of
Speaker 1: doing business.
Speaker 3: Kevin, how badly has do you think the luce has
Speaker 3: hurt Ferrari more than you would have expected? It seems
Speaker 3: the fallout seems pretty severe.
Speaker 1: It did. But you know, in the scheme of things,
Speaker 1: what's it going to be. You sell a handful of
Speaker 1: good clients and you promise them a fire breather down
Speaker 1: the road, right So now, And I don't know, I
Speaker 1: didn't do the sort of research and analysis on this,
Speaker 1: but you know there's probably some sort of global volume
Speaker 1: sort of regulation that says, look, if you want to
Speaker 1: sell this many units, you have to have emissions or
Speaker 1: reduction or fuel economy level around here and this is
Speaker 1: the compliance car that gets you there is what This
Speaker 1: is the Chevrolet bolt that lets you sell Silverado's all
Speaker 1: day long.
Speaker 2: Right.
Speaker 1: So, so you build a handful of them, you get
Speaker 1: your good clients to buy them, and now you're free
Speaker 1: to do the things that you want to do, which
Speaker 1: is my point. And until we get you know, governments
Speaker 1: around the world that step out of the industry and
Speaker 1: let you just be what you want to be, fail
Speaker 1: or succeed based on what you want to do. That's
Speaker 1: what that's the cost of doing business. So I don't
Speaker 1: I didn't think. I thought the react it was an
Speaker 1: overreaction to that. I understood what it was. Would I
Speaker 1: have made it better looking, probably well, but I understand
Speaker 1: what it means.
Speaker 3: It's interesting that the reaction just continues to live and
Speaker 3: maybe that's an online you know, amplification. But I want
Speaker 3: to just I want to get back to Mercedes, Kevin.
Speaker 3: I want to get back to Mercedes because because you're
Speaker 3: a fan, because Hannah and I are fans also of
Speaker 3: actually the amg GT sixty three. I'm currently in the
Speaker 3: AMGGT sixty three Pro, which is like their I guess
Speaker 3: GT three version of the car. Because they take out
Speaker 3: five hundred pounds by removing the hybrid pieces. But the
Speaker 3: I also have driven the se Performance version, which is
Speaker 3: like eight hundred plus horse power a thousand plus pounds
Speaker 3: feed of torque. It's insanely good. Yeah, And I've recently
Speaker 3: noticed because I'm always hunting for older amggts and hoping
Speaker 3: that they'll fall in price, they're not falling in price.
Speaker 1: It's true.
Speaker 3: With the X S sixty five and the SL sixty five,
Speaker 3: I keep hoping they're gonna depreciate more, and they're not depreciating.
Speaker 1: I know. And look, I think that speaks a lot
Speaker 1: to you know, and maybe it's niche in this country,
Speaker 1: but you know, people will pay for the for the
Speaker 1: fire breathers. I mean, I thought it was an interesting
Speaker 1: move when you know, Dodge kills SRT, scat packs, hellcats,
Speaker 1: demons to make an electric daytona thing. But the fact
Speaker 1: that they're making them as ridiculous and I'm talking about
Speaker 1: Mercedes as ridiculous as they are for the everyday driver,
Speaker 1: to me again, like that's sort of the point, and
Speaker 1: it shows that they understand that there's a consumer there
Speaker 1: for that product. And then you have to kind of
Speaker 1: accept that every once in a while, you or more
Speaker 1: than every once in a while, but you have to
Speaker 1: do you have to do the compliance vehicle to be
Speaker 1: able to hit certain regulatory targets that enable you to
Speaker 1: do the things that your brand is passionate about. And
Speaker 1: you know, I don't expect the consumer or media to
Speaker 1: necessarily understand that or like it, but it's just it's
Speaker 1: just the realities of doing business in the United States
Speaker 1: so or in Europe too.
Speaker 3: But on that point, Hannah, let me just mention, we're
Speaker 3: always bemoaning the death of the manual transmission, and you
Speaker 3: and I have talked and will continue to talk a
Speaker 3: lot about the BMW cars M cars that we love
Speaker 3: for so long, the CS, like the M two c
Speaker 3: S doesn't have a manual and the M three CS
Speaker 3: never never did. Now the BMW is putting out an
Speaker 3: M three CS with three pedals and a stick and
Speaker 3: it's US only, which I thought was crazy, Like we're
Speaker 3: you know, we always talk about the fact that Europeans
Speaker 3: know how to drive standard transmissions, but the BMW is
Speaker 3: only selling this han shelter version in the US, which
Speaker 3: is which is pretty cool.
Speaker 1: Yeah, And I think they just because I you know
Speaker 1: my son is involved. There's a four. He had a
Speaker 1: manual transmission Z four I think went out of production
Speaker 1: or was he? I know he because you know he's
Speaker 1: a young guys. He's one of the twenty somethings who
Speaker 1: can actually drive a manual transmission daily. And uh and
Speaker 1: he wanted to get another one. And I guess whether
Speaker 1: it wasn't in the program or anymore or whatever happened,
Speaker 1: but it was. It was just a point. So now
Speaker 1: we're in the market looking for something with that we
Speaker 1: can peddle ourselves.
Speaker 3: The Z four is a great used purchase. So is
Speaker 3: a base M two and there, I mean a Z
Speaker 3: four in green rag green rag top with a stick
Speaker 3: is such a dream?
Speaker 1: Yeah, he was. His was purple with a white interior
Speaker 1: and black top.
Speaker 3: His hist approve of that color combination.
Speaker 1: Yeah, it was very nice. His his X six, uh
Speaker 1: X sixty or whatever it is is is that green
Speaker 1: color now very cool truck too.
Speaker 2: So Kevin, do you do you think even in America,
Speaker 2: EV's ultimately are still the future, because you know, everyone
Speaker 2: in quotes says they still are. It's taking longer than
Speaker 2: we thought, but they are still the future. And if
Speaker 2: and if that's the case considering what you said before,
Speaker 2: which is China has already won EV's Yeah, what does
Speaker 2: that mean for us?
Speaker 1: Yeah? I look, here's here's the thing. And you know,
Speaker 1: I've talked about this since I was a child, which is,
Speaker 1: first of all, manufacturers and dealerships will sell anything that
Speaker 1: makes them money, right, you can, They'll sell you a
Speaker 1: bag of sands, right if they can make money on it.
Speaker 1: So this idea that automakers don't want to do it,
Speaker 1: or dealers don't want to sell them, or it's it's
Speaker 1: just it's it's about profitability.
Speaker 2: The purpose of karkampanies is to make money. This is what.
Speaker 1: Yes about making causes about making money. So if I'm
Speaker 1: working backwards from that, to me, that's that's the argument,
Speaker 1: which is to say, well, we don't control the mining,
Speaker 1: we don't control the materials processing. We're way behind on that.
Speaker 1: Do we develop our own supply chains? We're not going
Speaker 1: to mine here. I can tell you that. Do we
Speaker 1: get to the point where it becomes cost efficient enough
Speaker 1: for us to be profitable on EV? If so, yes,
Speaker 1: it's the future. Are we so far away from profitability
Speaker 1: on EV because we don't control any of that supply
Speaker 1: chain or just you know, the the dynamics of the
Speaker 1: cost inputs of that technology will never make economic sense.
Speaker 1: Then I would say then no, we're not going to
Speaker 1: have eeds here. And at the.
Speaker 2: Point when when Chinese made vehicles would be sold in
Speaker 2: the US.
Speaker 3: Well.
Speaker 1: Again, and I think that they could do that with
Speaker 1: almost any technology because it's subsidized. So if now you
Speaker 1: have to understand right what they China doesn't want to
Speaker 1: be dependent on for and oil. They've accumulated the electricity
Speaker 1: assets they are, so it made sense for their for
Speaker 1: what they've built and their long view of it to
Speaker 1: be electric, to make their transportation electric, their generation electric,
Speaker 1: and it and you understand that they want the world
Speaker 1: dependent on China and them not dependent on anything. So
Speaker 1: it's this great capacity uh supply chains to go in
Speaker 1: that direction. And now essentially the job is convince the
Speaker 1: rest of the world that this is the direction that
Speaker 1: you all need to go. And that's what I called
Speaker 1: it technology shaming. Before, well, it makes sense for you
Speaker 1: to go electric, China, and now you've convinced Europe and
Speaker 1: Australia that you need to go electric. And you know,
Speaker 1: whether that's the argument of you know, it's an ESG
Speaker 1: argument or whatever it winds up being, but it seems
Speaker 1: like the evidence in terms of market share, the evidence
Speaker 1: is that if you buy into that and go electric,
Speaker 1: you give your your manufacturing industry to China. Now keep
Speaker 1: in mind, also, and I've been saying this, there probably
Speaker 1: will be an administration, maybe the next one, that says, hay, China,
Speaker 1: build your factories in the US, hire the UAW share
Speaker 1: your intellectual property, reinvest all your profits here in our country,
Speaker 1: build all you want and export, but you can't import anything.
Speaker 1: There probably will be an administration that says, look what
Speaker 1: I did, I brought.
Speaker 3: You Trump already Trump has already said that He's like,
Speaker 3: I'm fine with the Chinese that they build their factories here.
Speaker 1: But that changes the cost dynamics for them also, Right,
Speaker 1: so now they're not this low cost manufacturing in China
Speaker 1: and then dumping vehicles all over the world. It changes
Speaker 1: that dynamic a little bit.
Speaker 3: Not that they can steal whatever ip they haven't yet taken, right.
Speaker 1: Basic, right, right, But the endman is toe to toe
Speaker 1: and we'll steal we'll steal it back, you know which
Speaker 1: we Well.
Speaker 3: You're not going electric, Kevin, and neither me, Hannah.
Speaker 1: So, and again I'm not I'm not anti anything, right.
Speaker 2: I love I love the Electric five hundred are.
Speaker 1: If it has wheels, I love it. I'm just saying
Speaker 1: from a financial analyst perspective, it just doesn't make sense.
Speaker 1: And I and I understand that there's there's not a
Speaker 1: whole lot of things that I would want to drive.
Speaker 1: But that's because you don't as a manufacturer. You don't
Speaker 1: want to accidentally sell a lot of something that you're
Speaker 1: losing money on. It's the opposite point. It's why we
Speaker 1: don't have great ones here. I think it's why you know,
Speaker 1: Chevrolet Bolt, right, Like you look at Chevrolet General Mode
Speaker 1: is a good example, right, You look at both and
Speaker 1: it's like, oh, it's not competitive to Tesla who doesn't
Speaker 1: care about profitability, you know, or even looser and Rive
Speaker 1: and don't care about profitability. And you're saying, well, both
Speaker 1: is uglier than all of those things. And it's like,
Speaker 1: you can't tell me that Chevrolet, who makes the C
Speaker 1: eight Corvette and has made corvettes for you know, since
Speaker 1: nineteen fifty three, can't come up with a better design
Speaker 1: if they wanted to, if they wanted to sell that product.
Speaker 1: And it was important and it was profitable, you would
Speaker 1: get an incredible EV. Right, But when you look at
Speaker 1: the P and L and you're losing fifteen thousand dollars
Speaker 1: a pop and the government isn't making you hold the
Speaker 1: way it is in China right BYD was getting forty
Speaker 1: four thousand dollars a vehicle in the early day. As
Speaker 1: a EV, it's probably about still in the teens across
Speaker 1: the board for those manufacturers. We're never going to directly subsidize.
Speaker 1: So until you get that, where's my motivation as a
Speaker 1: manufacturer to you're forcing me to do unprofitable things?
Speaker 3: You would be the Silverado and the Sierra are amazing.
Speaker 1: Yeah, yeah, even if you're losing money on them, you're
Speaker 1: you're able to write. So those are those are again
Speaker 1: those can be your compliance vehicles. I understand CAFE and
Speaker 1: a mission those regulations are different now, but so and
Speaker 1: I would always joke something like Bolt or Silverado EV.
Speaker 1: If it were important to hitting some sort of corporate
Speaker 1: average fuel economy or emissions target, you would you would
Speaker 1: you would put a number on the cubicle of an
Speaker 1: intern that says forty thousand units. As soon as that
Speaker 1: forty thousand unit is sold, that intern comes running out
Speaker 1: of the cubicle, goes to Mary Barr and says, did
Speaker 1: it stop selling, issue a recall, whatever you gotta do,
Speaker 1: and now go sell all the internal combustion super profitable ones.
Speaker 2: And I'd like to say, I'd like to just say,
Speaker 2: for the record, there have been many EV's that I've
Speaker 2: given positive reviews to. For instance, g Wagon EV I
Speaker 2: thought was great, Rolls Royce Specter, also great, Dodge Charger, Daytona,
Speaker 2: the Electric I had a lot of fun drag racing.
Speaker 3: Yeah, I loved, I love. I lived that car for
Speaker 3: a week and absolutely loved it. Taikon, especially the Wagon
Speaker 3: version that discontinued. Absolutely loved the BMW I seven I adore.
Speaker 1: And what have they been common? What they're probably better?
Speaker 3: No, you're right, you're right there. That was a conversation
Speaker 3: with Ken Kevin Tynan, which will continue on the other
Speaker 3: side of this break. This is we are back with
Speaker 3: Kevin Tynan of the Presidio Group formerly of Olberg Intelligence.
Speaker 3: Let's get back to our conversation.
Speaker 2: So call it for the first half of the year.
Speaker 2: Are there any names that come to mind in terms
Speaker 2: of brands that you think are beating everyone else or
Speaker 2: really doing especially poorly.
Speaker 1: Well, it's interesting because of the expiration of the federal
Speaker 1: tax credit in September of last year, which in a
Speaker 1: maybe nuanced way, enabled US or any manufacturer selling in
Speaker 1: the US to kind of go back truck, right, And
Speaker 1: keep in mind, and when I say truck, I mean everything,
Speaker 1: pick ups, crossovers, minivans, whatever. We're eighty four percent of
Speaker 1: it's eighty four percent by volume in this country now, right,
Speaker 1: So that financial pressure of a compliance money losing ev
Speaker 1: or small car was a little bit risk off as
Speaker 1: of the end of last year. So what you're seeing
Speaker 1: is is, you know, GMC, for example, which is really
Speaker 1: good stuff. And I'm talking also from the perspective that
Speaker 1: we have at the Presidio Group, which is, you know,
Speaker 1: looking at the M and a market, right, dealers really
Speaker 1: interested in in GMC and maybe surprisingly, and I don't
Speaker 1: mean it's in a bad way, Buick as well, you
Speaker 1: know bugs, yeah, I know, right, own guys like us
Speaker 1: still think that. But I think what's interesting is by
Speaker 1: transaction price, Buick is actually GM's most affordable brand. It's
Speaker 1: not Chevrolet anymore, right, because they're not doing big pickups.
Speaker 1: So I think that I think that that you know,
Speaker 1: average buy er age of might still be any early hundreds.
Speaker 1: But but it seems like that sort of rolled over
Speaker 1: and you your generation is saying like, hey, I need
Speaker 1: something affordable, and this is it's not obviously depressing.
Speaker 3: Dude, I gotta say, like, so a GMC is among
Speaker 3: my very favorites. If I have, you know, a Yukon
Speaker 3: eighty four in the driveway, like I'm making every excuse
Speaker 3: to go on an errand right, if I am test
Speaker 3: driving a Buick and Vista, it makes me literally depressed
Speaker 3: about life.
Speaker 1: Right, right, But that that's sort of the that's sort
Speaker 1: of the point, right It's it's going to be a
Speaker 1: loss leader. But but what you understand, though is if
Speaker 1: you take Buick out of that mix, GM's average transaction
Speaker 1: price is probably north of sixty thousand dollars. And what
Speaker 1: you're doing in that instance, and what has happened over
Speaker 1: the years, is that you're basically telling the consumer, we
Speaker 1: have nothing for you until you're ready to spend sixty
Speaker 1: thousand dollars because we're not going to make a you know,
Speaker 1: and you're seeding that market to your you know, mostly
Speaker 1: Asia based competitors who can willing to lose money at
Speaker 1: sub thirty five or twenty five thousand, or thirty or
Speaker 1: twenty five thousand dollars, because what they're saying is, we
Speaker 1: will use this as a loss leader. We but we
Speaker 1: think you're going to like the product and the dealership
Speaker 1: experience enough that you'll come back. That same argument for
Speaker 1: somebody like GM without a buick or you know, the
Speaker 1: bottom of the market Ford stuff has gone away. What
Speaker 1: you're saying is is that we don't believe in our
Speaker 1: sort of customer retention from twenty five to thirty five
Speaker 1: to forty five to fifty five where you're profitable. That's
Speaker 1: for unprofitable vehicles. We have to sell you hoping you
Speaker 1: come back into the money making part of our portfolio.
Speaker 3: So, by the way of first of all, GM has
Speaker 3: an Asia based product, right, so they can tell you attracts.
Speaker 3: And by the way, part of the problem is tariffs
Speaker 3: because it's more expensive for them to produce that kind
Speaker 3: of vehicle here than it is for them to produce
Speaker 3: in Korea and import it. They'd rather take a fifteen
Speaker 3: percent hit. On another note, Kevin, I have to say,
Speaker 3: so I recently bought twenty twenty BMW M seven sixty.
Speaker 3: It's the six point six literer of E twelve. I
Speaker 3: love it. And after I got it, I took it
Speaker 3: to the BMW place here in port Chester for service.
Speaker 3: I had them you know, check and test everything from
Speaker 3: the radiators to the hydraulic you know, the air suspension,
Speaker 3: like everything, just because I want to keep it forever.
Speaker 3: And I also hit a pothole on the Wanta Parkway
Speaker 3: and blew out a tire, so I had to take
Speaker 3: it to the BMW Dealership and Date in Bayshore, Long
Speaker 3: Island to replace my tires. All this is a long
Speaker 3: way of saying I've experienced BMW service and it is
Speaker 3: next level. It is the dealer The BMW dealership service
Speaker 3: experience is for me only paralleled by you know, German
Speaker 3: like when I had my Portiae in Berlin, or when
Speaker 3: I bought my g Wagon in Stutteguard. Like that's the
Speaker 3: level of service at these BMW dealerships. I'm so impressed.
Speaker 1: Yeah, and I think, you know, that's one of the things,
Speaker 1: and it's one of the areas in terms of the
Speaker 1: dealerships I've been looking at a lot is fixed ops,
Speaker 1: you know, parts and service. And what I'm starting to
Speaker 1: believe is that is that the problem there that the
Speaker 1: consumer has with with franchise dealer service departments is its capacity.
Speaker 3: Right.
Speaker 1: It's you know, there's not enough text, there's not enough bays.
Speaker 1: It's not and it's really not much more expensive when
Speaker 1: you look at the hourly rate of independent repair shops.
Speaker 1: But the fact of the matter is when you call
Speaker 1: a service department and they're two and a half three
Speaker 1: weeks out from an appointment, is a big deal, right,
Speaker 1: And that's that.
Speaker 3: Then that took me immediately right well, the way the
Speaker 3: way the way the tech works on me, I trust him.
Speaker 3: I don't feel like I'm getting ripped off even though
Speaker 3: the prices are high, you know, real.
Speaker 1: They show your V twelve and they probably closed the
Speaker 1: shop and went home for the for the month because
Speaker 1: you you just send everybody to college.
Speaker 3: It's not that bad, it isn't. I mean, it's isn't
Speaker 3: It isn't cheap, but it's not crazy.
Speaker 1: Yeah, now, And that's that's one of the things that
Speaker 1: like I'm saying, is that we we think that because
Speaker 1: when I look at repair or r counts of customer
Speaker 1: pay what we would call customer pay of the franchise
Speaker 1: dealer base, they're flat. But when you look at the
Speaker 1: value of vehicles, the number of vehicles, the age of vehicles,
Speaker 1: how much we're traveling, you would think that dealership ros
Speaker 1: would be going gangbusters through the roof, and they're not.
Speaker 1: And I think it's a capacity issue, because I don't
Speaker 1: think it's to your point. I don't think it's an
Speaker 1: hourly rate issue either, because it's not that much worse
Speaker 1: than what you would get at a BMW specialist, you know,
Speaker 1: in Great Neck or wherever you wound up. Being so
Speaker 1: interesting dynamic happening in the franchise base in terms of
Speaker 1: parts and service. But yeah, for us guys with V twelve,
Speaker 1: that's a it's a little scary. I'm wrestling with mine
Speaker 1: with an obscure engine code right now, but it's a
Speaker 1: little bit older.
Speaker 3: Dude. I don't want to keep you for the entire afternoon,
Speaker 3: like I do, still have a million questions, but I'll
Speaker 3: just I'm going to come over something that.
Speaker 1: Yeah, stop, I let me know when you're in town.
Speaker 1: We'll go. We'll go for a rip. I got a
Speaker 1: good I got a good little windy road on the
Speaker 1: river here that we that it was funny during COVID
Speaker 1: we're all isolated, we're all working from home in those
Speaker 1: first couple of weeks, and I got a good neighborhood
Speaker 1: for car guys. And about twelve o'clock every day you
Speaker 1: would go down on this river road and there would
Speaker 1: just be nine to eleven's and me and my V
Speaker 1: twelve and it was like it was like a just
Speaker 1: waiting everybody, just everybody blowing off steam in the middle
Speaker 1: of the afternoon. And uh, you know, if you got plullbelvi,
Speaker 1: you just cost it into your hand a couple of
Speaker 1: times and the cup let you go. It's it was
Speaker 1: the good days.
Speaker 3: They were the great days.
Speaker 2: Love Lockdown, Kevin, Thank you for joining us. It's so
Speaker 2: good to talk with you. That does it for this
Speaker 2: week's show. Remember to follow and subscribe to Hot Pursuit
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Speaker 2: I'm Matt Miller and I'm Hannah Elliott will be back
Speaker 2: in your podcast feed again next week