Speaker 1: From Bloomberg News and iHeart Radio. It's the big take.
Speaker 1: I'm West Cassova today. That car you're thinking about buying,
Speaker 1: it's getting harder to find. And that's just the way
Speaker 1: the automakers wanted. If you visited an auto dealer lately,
Speaker 1: you know, not a lot of cars on the lot,
Speaker 1: and what is there they're selling for eyewatering prices, sometimes
Speaker 1: more than what's on the sticker in the window. Pandemic
Speaker 1: shortages made cars scarce and expensive, sure, but that's just
Speaker 1: part of it. We asked listeners to tell us about
Speaker 1: their recent car buying experiences. Here's what one of them
Speaker 1: had to say. Hey, I'm wilco Vara and I live
Speaker 1: in Richmond, Virginia. Uh So, my wife's car was totaled
Speaker 1: and we had to spend about a month comparing cars
Speaker 1: before settling on a Toyota route. For basically, any dealership
Speaker 1: outside of Richmond was pushing big, non negotiable markups like
Speaker 1: four thousand dollars in Virginia Beach, six thousand dollars in Springfield,
Speaker 1: richmad is the only place selling at sticker price. With
Speaker 1: all that, it was still about a three to four
Speaker 1: month wait from pre order to pick up. It was
Speaker 1: understood that the sticker price was a deal. My colleagues
Speaker 1: Keith Notton and David Welch in Detroit cover the US
Speaker 1: auto industry, and they've written a big story about why
Speaker 1: if automakers get their way, fewer cars and higher prices.
Speaker 1: Maybe here to say, David, maybe I'll start with you.
Speaker 1: I think anyone who's gone to look for a new
Speaker 1: car lately is realized that, Wow, cars are really expensive.
Speaker 1: But you and Keith in your story right, no cars
Speaker 1: are really expensive. Can you give a sense of just
Speaker 1: how much more expensive they've become in the last couple
Speaker 1: of years. Right now new cars are at record prices.
Speaker 1: They are pretty close to fifty hours is the average
Speaker 1: price of a new vehicle, and that's up about over
Speaker 1: the past two or three years. The ve Cheving Impeller,
Speaker 1: which was America's family sedan when an eight vehicles sold
Speaker 1: that year, was an Impeller sold for I think a
Speaker 1: base price of about adjusted for inflation, that's about twenty
Speaker 1: five dollars. So the prices today are twice what people
Speaker 1: paid for new cars back then. So it kind of
Speaker 1: tells you that this contract with the middle class that uh,
Speaker 1: you know, if you work hard, if you behave, as
Speaker 1: Billy Joel saying, you can get your great house and
Speaker 1: you can get your new car. It's getting further and
Speaker 1: further out of reach for everybody. In used car prices
Speaker 1: aren't much better. The average payment these days is about
Speaker 1: seven seventy a month for a new vehicle and between
Speaker 1: about five seventy a month for a used vehicle, and
Speaker 1: economists say that the average households be spending about four
Speaker 1: dred a month on a vehicle. So the prices are big,
Speaker 1: the payments are big. Part of this to do with
Speaker 1: interest rates, but it's getting very difficult, if not impossible,
Speaker 1: for middle class, working class people to afford a new vehicle. Keith,
Speaker 1: why have cars gotten so expensive? I mean that example
Speaker 1: of the Chevy and Paula, even adjusted for inflation, is
Speaker 1: being half of what you would pay for a new car.
Speaker 1: Now that's a pretty surprising number. What is behind that?
Speaker 1: So this all started West when the pandemic hit. Really
Speaker 1: the increase that David was talking about is, since it's
Speaker 1: not a very long time horizon, but as soon as
Speaker 1: the pandemic hit, well, first factory shut down and and
Speaker 1: you know the supply of cars went down, but then
Speaker 1: that was followed by the shortage of semiconductors worldwide. That
Speaker 1: really took a blow to auto manufacturing globally. So dealer
Speaker 1: lots emptied out with the old law of supply and demand.
Speaker 1: There were very few cars out there to buy, and
Speaker 1: the prices of both new and used cars just went
Speaker 1: through the roof at a much higher rate than inflation,
Speaker 1: and so you now have this situation of the fifty
Speaker 1: average price was about thirty five. That's exactly right, Keith.
Speaker 1: I mean this all started with the shortage of vehicles,
Speaker 1: and when dealers found that they could charge above sticker
Speaker 1: price and make you pay for not exaggerating special coatings
Speaker 1: on the seats that would prevent spills from staining them,
Speaker 1: clear coat on the glass, clear coat on the paint,
Speaker 1: and they would charge a thousand or two ford and
Speaker 1: some wouldn't even give you that stuff. They would just
Speaker 1: slap thousands of dollars above M s r P. Once
Speaker 1: dealers discovered they could do that, because there wasn't very
Speaker 1: much inventory, and automakers had been raising prices very quietly
Speaker 1: on their own, everybody was sort of basking in this
Speaker 1: bananza of pricing and profits. So what was bad for
Speaker 1: the consumer started by the pandemic and the semiconductor shortage
Speaker 1: has been great for the profits of those who build,
Speaker 1: engineering sell cars. Well, that's a really interesting point because
Speaker 1: in your story you write that, sure, this started with
Speaker 1: supply chain issues during the pandemic, and we've all heard
Speaker 1: about the chip shortage, but even after a lot of
Speaker 1: that ease, car prices didn't come back down. They stayed up.
Speaker 1: In what you write is that this is sort of
Speaker 1: by design that the auto industry has learned that scarcity
Speaker 1: is an easier way to make money than trying to
Speaker 1: sell a whole lot of cars at lower prices. Yeah,
Speaker 1: the new formula is sell fewer cars to wealthier people
Speaker 1: and you make more money. So the industry sold two
Speaker 1: million fewer cars last year than they did in twenty nineteen,
Speaker 1: but the revenues were actually higher and their profits as well.
Speaker 1: So if you're selling to you know, very wealthy households,
Speaker 1: they not only will pay a higher average price, they
Speaker 1: go for the highest trimmed out cars that there are.
Speaker 1: They order all the bells and whistles, and that's where
Speaker 1: you really get into the profits if you're an automaker.
Speaker 1: So they like this formula, they'd like to stick with it.
Speaker 1: They not only want to stick with it, they sort
Speaker 1: of look at the days when they didn't do this
Speaker 1: as the bad old days. And you know, the old
Speaker 1: business model for auto companies. And we're not saying it
Speaker 1: will never come back, but car companies are going to
Speaker 1: try very hard not to bring it back. But they
Speaker 1: used to just produce, produce, produce, you know, run three
Speaker 1: shifts of plants, go for markets here, go for big volume,
Speaker 1: and then voice these cars off on dealers and use
Speaker 1: discounts if they didn't move them all in order to
Speaker 1: get the sales going. And that's where you had four
Speaker 1: and five thousand dollar rebates and zero percent financing and
Speaker 1: cheap lease deals. Bob Blootz, the retired vice chairman of
Speaker 1: General Motors, used to call it the size of the
Speaker 1: bribe we had to give consumers in order to get
Speaker 1: them to buy the car. And these were they had.
Speaker 1: In addition to that big carrying cost. Because you need
Speaker 1: more part in inventory, you need more vehicles in inventory,
Speaker 1: dealers have to borrow money what they call floor plan
Speaker 1: financing to carry that inventory, and they have to take
Speaker 1: care of those cars. So everybody's paying more money up
Speaker 1: and down the system to sell a car that they're
Speaker 1: going to have to discount. It was kind of insane,
Speaker 1: but there was a reason for that. Throughout the past decade,
Speaker 1: the average new car payment was about four durs a month,
Speaker 1: and at the beginning of the pandemic it hit four ten.
Speaker 1: And then as things got tighter and things got tougher
Speaker 1: for all the reasons Keith explained, it just got worse
Speaker 1: and worse for consumers and better for everybody else. And
Speaker 1: there's another factor here too, is to make all those
Speaker 1: vehicles that flood dealer lots, you're running plants at three shifts.
Speaker 1: A lot of plants have scaled back. They're still running
Speaker 1: two shifts. But if they're paying fewer people to get
Speaker 1: more revenue with that's another thing the car companies really
Speaker 1: would rather not do. And Keith is not like the
Speaker 1: automakers are making a secret of this. The CEO of
Speaker 1: General Motors, the CEO of Already have kind of come
Speaker 1: out and said, we don't want to go back to
Speaker 1: the old days. Is that right, Yeah, they don't want
Speaker 1: to use the old push model where they're selling the
Speaker 1: deal rather than the car. They want to have what
Speaker 1: Jim Farley, the CEO of Ford Motor Company, has said,
Speaker 1: he'd like to have an ordering system like they do
Speaker 1: in Europe, where you order your car and then you
Speaker 1: wait for several weeks for it to arrive, and then
Speaker 1: it comes and you pay the price that is on
Speaker 1: the sticker and you get on with it. That's not
Speaker 1: the way Americans have been buying cars for a century.
Speaker 1: We show up on the lot and the dealer says,
Speaker 1: what do I have to do to get you into
Speaker 1: a car tonight? And you know, they have every color
Speaker 1: and combination scattered across that lot and you can go
Speaker 1: find the car you want. That requires very high inventories,
Speaker 1: and it's what David was talking about, these very large
Speaker 1: overhead So the automakers want to get rid of that.
Speaker 1: They it will lower their marketing costs, it will lower
Speaker 1: all these this discounting that they have to do. So
Speaker 1: they measure inventory in days supply. The historical rule of
Speaker 1: thumb was keep sixty or more days supply on a
Speaker 1: dealer's lot, and it would bloat up to a hundred
Speaker 1: on some hard to sell cars. They would like to
Speaker 1: have it now more in the range of forty to
Speaker 1: fifty days thirty five days if they could get away
Speaker 1: with it. But that means the choice consumers have when
Speaker 1: they show up that a dealer will be very limited
Speaker 1: and they'll be channeled into this system of ordering cars
Speaker 1: that Europeans accept. It's a big question as to whether
Speaker 1: or not Americans would would accept that. General Motor CEO
Speaker 1: Mary Barrows, and they never want to get back to
Speaker 1: the days where they carried this huge amount of inventory. Now,
Speaker 1: that doesn't mean they also want to run the way
Speaker 1: they did during the pandemic and the semiconductor shortage, where
Speaker 1: they had almost no inventory and they were signing cars
Speaker 1: over to consumers who had already paid for them right
Speaker 1: off the delivery truck. So they're looking for a happy
Speaker 1: medium that still gets them very good pricing. That does
Speaker 1: tell us that new vehicle prices will come down, but
Speaker 1: they probably just won't come crashing down to the point
Speaker 1: where we go from payments that are seven seventy a
Speaker 1: month to four hundred a month. Again. Yeah, Well, over
Speaker 1: at ford Um, the CEO Jim Farley covets the direct
Speaker 1: sales model that Tesla has. Tesla doesn't have dealer showrooms,
Speaker 1: it doesn't advertise and Farley says that gives Tesla a
Speaker 1: four thousand dollar car advantage. That's why Tesla's auto profit
Speaker 1: margins are close to and you know Ford is trying
Speaker 1: to get up to eight percent. So you know what
Speaker 1: Farley says about the inventory and the marketing and the
Speaker 1: advertising is we need to get rid of all of that.
Speaker 1: David and Keith, please stick around. We'll continue talking after
Speaker 1: the break. My name is Peloplin from l A. I
Speaker 1: purchased brand new luxury truck last November f King Ranch.
Speaker 1: I paid one thousand dollars less than M S r P.
Speaker 1: And ironically, I was very content with that deal, given
Speaker 1: how ridiculous the expensive luxury trucks have gotten over the
Speaker 1: past few years. The selling price of the truck itself
Speaker 1: was sixty nine thousand dollars, and with M S r
Speaker 1: P E plus tax, plus licensing fees plus extended warranty,
Speaker 1: it came in grand total justin eighty thousand dollars out
Speaker 1: of door. There's another listener telling us about trying to
Speaker 1: get a new car. Keith, you described how many Americans,
Speaker 1: milk class Americans simply can't afford a new car anymore either,
Speaker 1: because the cars themselves are so expensive, or the interest
Speaker 1: rates make the payments crazy. Are we now headed for
Speaker 1: a world in which only the rich can afford a car,
Speaker 1: and middle class earners and people who aren't in the
Speaker 1: middle class by used cars, like we have a two
Speaker 1: tiered system for sure. The historical precedent was set over
Speaker 1: a century ago by Henry Ford when he said he
Speaker 1: was going to build a car for the great multitude,
Speaker 1: and he paid his workers five dollars a day so
Speaker 1: they could afford to buy them. So that compact is
Speaker 1: being broken in this latest pricing scheme that is aimed
Speaker 1: at the wealthy. So what that does is it drives
Speaker 1: the middle class to the used car market, where they're
Speaker 1: going to find prices are high there too. The average
Speaker 1: used car now is thirty tho dollars. I mean a
Speaker 1: seven year old used car is close to twenty dollars.
Speaker 1: It's just this incredible inflation where if your middle class
Speaker 1: or or less, you're just gonna have a hard time
Speaker 1: getting into wheels, whether they're new or used. I think
Speaker 1: we'd be remiss if we didn't mention electric vehicles, which
Speaker 1: are the hot news segment in the market. I need
Speaker 1: to show you, right how the problem is even sort
Speaker 1: of worse there because those cars are just more expensive
Speaker 1: than their gasoline powered counterparts. They're basically luxury cars right now. Yeah,
Speaker 1: the average price of a new electric car is sixty
Speaker 1: one dollars um and that's come down because Tesla justst
Speaker 1: did this big round of price cuts. It was closer
Speaker 1: to seventy tho before the Tesla price cuts. So that's
Speaker 1: another thing that is pushing up the average price of
Speaker 1: new cars and and pushing it farther out of reach
Speaker 1: of regular Americans. As David said, an e V is
Speaker 1: a luxury car. Yeah, that's right, even if it's not
Speaker 1: sold under a luxury brand, they have all the amenities,
Speaker 1: they have cool technology, and they certainly sell at those
Speaker 1: prices you're seeing for de f one fifty Lightnings, so
Speaker 1: for eighty thousand or more. I believe, as you say,
Speaker 1: the automakers would like to keep supply low and prices high.
Speaker 1: So do you think ultimately competition comes back and pushes
Speaker 1: prices down more? Actually, Ford just said that they see
Speaker 1: overall industry wide prices coming down about five this year.
Speaker 1: The supply of chips is starting to improve, so that
Speaker 1: bottleneck is is finally breaking, so we're gonna see an
Speaker 1: inventory rise. And the dealers that we talked to, they
Speaker 1: think this notion that the automakers are going to be
Speaker 1: able to restrain inventory is just crazy. They say, as
Speaker 1: soon as the guy down the street starts discounting as cars,
Speaker 1: I have to discount mine or I lose all my business.
Speaker 1: So it'll be interesting to see if the American culture
Speaker 1: can support this restraint that the automakers would like. It
Speaker 1: feels like once you have supply and the American free
Speaker 1: market goes to work, we might even right back where
Speaker 1: we used to be. All that depends on how quickly
Speaker 1: the supply comes back to people. You're interviewed in the
Speaker 1: story Mary Barra and the other one, Jack Howiss, Toyota's
Speaker 1: top sales executive in the United States, both said the
Speaker 1: industry should have enough semiconductor chips to make fifteen million
Speaker 1: vehicles in the US this year, which is still better
Speaker 1: than last year, but historically down a couple of million
Speaker 1: vehicles worth. If that's the case, and if pricing and
Speaker 1: interest rates keep buyers away, you you don't have enough
Speaker 1: supply out there to bring prices crashing down. If Ford
Speaker 1: is correct, prices are going to Overall pricing drops five
Speaker 1: percent this year. That's from fifty that kids should have fifty,
Speaker 1: which is still a historically very high number. So that's
Speaker 1: what we say in the story, is that prices will
Speaker 1: come down because we'll have supply. Remember that this record
Speaker 1: pricing came out of a period of absolute, unprecedented scarcity.
Speaker 1: We're not going to have that forever, but we will
Speaker 1: have a different paradigm for a while because there just
Speaker 1: won't be chips supply to go back to seventeen and
Speaker 1: a half million vehicles a year, probably this year, maybe
Speaker 1: not next year. We will get there eventually, and then
Speaker 1: it will really test whether or not automakers have discipline.
Speaker 1: But for the foreseeable future, you'll see new car prices
Speaker 1: come down, but they have to come crashing down for
Speaker 1: middle class people to buy them. There's another factor to
Speaker 1: west that will be hitting this year on supply. So
Speaker 1: use car prices and new car prices sort of moving tandem.
Speaker 1: They affect each other and supply affects them both. The
Speaker 1: used car market gets a lot of its inventory from
Speaker 1: cars coming off three year leases. Three years ago, the
Speaker 1: pandemic was hitting the leasing market stopped entirely like every
Speaker 1: other market. So we're about to enter a period when
Speaker 1: there's no cars coming off lease because nothing was being
Speaker 1: leased three years ago. So that means the used car
Speaker 1: market will have a shortage of supply again, and that
Speaker 1: will prop up used car prices, which will then prop
Speaker 1: up new car prices. Get welch, Keith not thanks so
Speaker 1: much for coming in the show. Thank you West. Thanks West.
Speaker 1: When we come back. One country that's not cutting back
Speaker 1: on production, it's China. So we've heard how automakers like
Speaker 1: GM and Ford are embracing this new business model for
Speaker 1: your cars at higher prices. But at the same time,
Speaker 1: automakers in China are cranking out cars at a record
Speaker 1: pace and selling them often at far lower prices. All
Speaker 1: over the world except in the US. Bloomberg reporter Tom
Speaker 1: Hancock has taken a close look at China's booming auto industry,
Speaker 1: and he joins me now from London to explain, Tom,
Speaker 1: you've written this story with a great headline. The US
Speaker 1: hasn't noticed that China made cars are taking over the world.
Speaker 1: And one thing that really stood out was that China
Speaker 1: is now poised to become the world's number two exporter
Speaker 1: of path your cars, right behind Japan, which has been
Speaker 1: the leader for a long time. Yes, that's right. So
Speaker 1: China is on the verge of overtaking Germany, which has
Speaker 1: been the world's second largest car exporter after Japan in
Speaker 1: terms of the number of cars ship per year. And
Speaker 1: that has happened extremely quickly. Basically, it's all happened during
Speaker 1: the pandemic and we've seen a tripling of Chinese shipments since.
Speaker 1: And so in the last two years, basically Chinese car
Speaker 1: exports have exploded. So just in two years, they've tripled
Speaker 1: their experts, how is that even possible. Well, the groundwork
Speaker 1: for this has been laid for a long time, and
Speaker 1: the background really that I get to in the story
Speaker 1: is about how Chinese cars are of a much higher
Speaker 1: quality than they used to be, and there are a
Speaker 1: number of reasons why that's happened. In twenty eighteen, the
Speaker 1: Chinese car market, which is the largest in the world
Speaker 1: in terms of sales, actually shrunk in terms of sales
Speaker 1: for the first time in several decades. And that was
Speaker 1: really a wake up call, I think for the Chinese
Speaker 1: car industry and they started looking around and thinking, now
Speaker 1: we've got pretty good quality cars, we can focus more
Speaker 1: on exports, so it's a change of strategy. Another big
Speaker 1: factories electric vehicles, and China has really got behind electric
Speaker 1: vehicles or e v s as they're sometimes called, with
Speaker 1: subsidies for suppliers all up and down the chain from
Speaker 1: battery metals to batteries and car makers, and that's really
Speaker 1: given Chinese car makers a level playing field with the
Speaker 1: foreign car makers because everyone is starting to make evs
Speaker 1: from scratch basically, and China is where the supply chain is.
Speaker 1: There's been a very large increase in EV exports, particularly
Speaker 1: to Europe, where there's a hunger for cheap evs, and
Speaker 1: Chinese brands are filling that niche and they're often doing
Speaker 1: it not under their own brands, but under acquired European brands.
Speaker 1: The most obvious example are Volvo Vehicles. So we start
Speaker 1: the story by talking to a British man, Andreas Tat,
Speaker 1: who was looking around for a premium EV and he
Speaker 1: thought about a Tesla, he thought about some other models,
Speaker 1: and he settled on a pole Star pole Star too,
Speaker 1: to be precise, and that is a Volvo brand. But Volvo,
Speaker 1: of course was acquired by a Chinese company Geelie about
Speaker 1: a decade ago. They still produced cars in Europe, but
Speaker 1: the pole Star, partly because the advantages of making electric
Speaker 1: vehicles in China is made in China, and so he
Speaker 1: bought a made in China car. He was a little
Speaker 1: bit worried maybe about the quality, but he said he
Speaker 1: took it for a test drive and then he no
Speaker 1: longer had any doubts. He's been very happy with it since.
Speaker 1: And there are now a lot of Europeans driving around
Speaker 1: in evs made in China. And it's not just Chinese
Speaker 1: own brands that are producing a lot of cars in China,
Speaker 1: but some of the best known non Chinese brands like
Speaker 1: Tesla are churning out a huge number of cars in China. Absolutely.
Speaker 1: So Tesla opened a facility in Shanghai. They got permission
Speaker 1: in eighteen that it could be wholly owned. So that
Speaker 1: was a big break from what happened previously where foreign
Speaker 1: car makers if they wanted to access manufacturing in China,
Speaker 1: they had to form joint ventures with local companies. But
Speaker 1: China really wanted a Tesla factory, and so they said
Speaker 1: you can completely own it, and that means Tesla gets
Speaker 1: all the profits and so they realized that they could
Speaker 1: use China as an export hub because the e V
Speaker 1: supply chain is centered there. That means it's cheaper to
Speaker 1: make cars there than almost anywhere else. And so Tesla
Speaker 1: started using the Shanghai factory not just to serve the
Speaker 1: Chinese market, which is in normal US, but also to
Speaker 1: export cars to Germany and other European countries. And that
Speaker 1: was a big part of the surge of electric vehicle exports.
Speaker 1: Because you write that now more than half of the
Speaker 1: cars Tesla makes every year are made in the Shanghai plant, right,
Speaker 1: So by that measure, it's the biggest factory. Now, not
Speaker 1: all of those are exported. A lot of them are
Speaker 1: sold in China. Chinese people love to buy Tesla's but
Speaker 1: it also makes sense when you can't meet the demand
Speaker 1: from your US factory and because of costs, it makes
Speaker 1: sense to use China as an export hub. And that's
Speaker 1: been what's happening. The cars have not really been going
Speaker 1: to the US, and that opens up another discussion about
Speaker 1: why they haven't been going to the US. Yeah, let's
Speaker 1: talk about that. We're the biggest markets for these Chinese
Speaker 1: made vehicles. You know, I've talked a lot about electric vehicles.
Speaker 1: They're an important part of the story, they're an exciting
Speaker 1: part of the story, and they are probably the fastest
Speaker 1: growing segment of Chinese car exports. So that's one part
Speaker 1: of the story. But if we look at Chinese car
Speaker 1: exports overall, most of them are still internal combustion cars,
Speaker 1: your old fashioned gas guzzling cars, and they're exported in
Speaker 1: large numbers now to emerging markets. So in Saudi Arabia,
Speaker 1: in Chili, in Brazil, in Mexico, in Malaysia, people are
Speaker 1: buying Chinese branded and they do actually come under their
Speaker 1: own Chinese brands and not using necessarily foreign brands that
Speaker 1: have been acquired. People are buying these internal combustion cars
Speaker 1: that are made in China, and that's really because they're
Speaker 1: now competitive with the South Korea and Japanese brands that
Speaker 1: have often had that sort of budget niche in those countries.
Speaker 1: Chinese cars are now visible. And Europe also it now
Speaker 1: imports these internal combustion cars from China. But evs are
Speaker 1: sort of the growth market of the future, and it's
Speaker 1: what Chinese car brands of all stripes really see as
Speaker 1: the future. Now, you raise a very important question why
Speaker 1: aren't they going to America? The people that I spoke
Speaker 1: to in the industry, we're saying the number one reason
Speaker 1: is really tariffs. The fact that Donald Trump introduced very
Speaker 1: heavy tariffs on Chinese cars means that it doesn't make
Speaker 1: a lot of sense to manufacture in China and export them,
Speaker 1: So that's an obvious reason. Also, there's probably more suspicion
Speaker 1: of Chinese brands in general. This is at least what
Speaker 1: the Chinese companies think. They are worried about what US
Speaker 1: consumers will think of them as Chinese brands, and they're
Speaker 1: also worried about what the US government will do. Who
Speaker 1: knows what regulations there might be coming in. And then
Speaker 1: the final piece in the jigsaw puzzle really is Biden's
Speaker 1: Inflation Reduction Act. So that's all about making sure that
Speaker 1: evis are manufactured in the US. If you manufacture them
Speaker 1: in the U s you get all kinds of tax breaks,
Speaker 1: and if you manufacture them in China you won't get those.
Speaker 1: So now what we see is, for example, pole Star,
Speaker 1: which is ultimately owned by Chinese company Geelie, they are
Speaker 1: thinking about opening a factory in the US. That's clearly
Speaker 1: a response to the Inflation Reduction Act, and they'll get
Speaker 1: credits for doing that. So you might see more Chinese
Speaker 1: cars sold in the US, but that's not the focus
Speaker 1: because of these trade disputes, And if they want to
Speaker 1: enter the US market, it's likely they'll set up shop
Speaker 1: in the US, or maybe if their internal combustion, they'll
Speaker 1: set up shop in Mexico. US is a very tough
Speaker 1: market and it's sort of the last one that these
Speaker 1: car makes want to crack. They've got enough on their
Speaker 1: hands with Europe really town when you look down the
Speaker 1: road a few years from now, do you think that
Speaker 1: China will be able to crack the US market? There
Speaker 1: we're going to see maybe some of these Chinese brands
Speaker 1: with big factories in the US or have some other
Speaker 1: arrangements where Chinese cars are going to be competing head
Speaker 1: to head with all the other brands trying to find
Speaker 1: buyers in the US. I think it's really a political question.
Speaker 1: I think that if these brands have the economic and
Speaker 1: business case for selling in Europe, then it's not that
Speaker 1: hard to imagine that it could also work out for
Speaker 1: them in the US. Like I've said, probably they'll prefer
Speaker 1: to manufacture in the US but maybe US politics would
Speaker 1: even allow that. I think we have seen some Congress
Speaker 1: people making noises about they don't want Chinese battery factories,
Speaker 1: they don't want Chinese manufacturing FDI it's a foreign direct
Speaker 1: investment in their regions because they don't trust China. They
Speaker 1: think maybe they could be spying going on from the factories,
Speaker 1: or it's a strategic risk or something like that. And
Speaker 1: so it depends really if there is a political blocking
Speaker 1: of Chinese investment, and then Chinese companies won't want to
Speaker 1: go there. So I really think it's a political question.
Speaker 1: Tom Handcock, thanks for coming on the show. Thank you
Speaker 1: very much for having me. You can read more reporting
Speaker 1: from Tom Handcock and David Welch and Keith Norton at
Speaker 1: Bloomberg dot com. Thank you for listening to us here
Speaker 1: at The Big Take. It's a daily podcast from Bloomberg
Speaker 1: and I Heart Radio. For more shows from my Heart Radio,
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Speaker 1: The supervising producer of The Big Take is Vicky Bergolina,
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Speaker 1: I'm Westcasova. We'll be back tomorrow with another big take.