Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 2: I'm Geoe Wisenthal.
Speaker 3: And I'm Tracy Alloway.
Speaker 1: Tracy Chinese EV exports. I feel like is a topic
Speaker 1: that we've danced around, maybe is the way to put
Speaker 1: it in numerous episodes related to trade, batteries, tech, trade policy, tech,
Speaker 1: things like that, but we've never really like hit it
Speaker 1: square on.
Speaker 2: I don't think.
Speaker 3: No, it's true. It's one of these things that's kind of,
Speaker 3: as you put it, hovering in the background, and every
Speaker 3: time it pops up, there's usually some amazing statistic attached
Speaker 3: to it. One of the things that's come up a
Speaker 3: few times now, I think, is this idea that China
Speaker 3: has surpassed Germany as the biggest exporter of cars. I
Speaker 3: think that happened last year or in a fairly recent quarter,
Speaker 3: and it seems to be on track to surpass Japan
Speaker 3: as well. So that's a pretty amazing development.
Speaker 1: It's a really extraordinary development. And I think it's like,
Speaker 1: you know, we talked about this with brand Setser for example,
Speaker 1: it came up and like it really seems to have
Speaker 1: caught a lot of people by surprise, and even as
Speaker 1: recently as like twenty eighteen or twenty nineteen, The ability
Speaker 1: of China to become a auto export powerhouse was not
Speaker 1: on a lot of people's radar.
Speaker 4: Absolutely.
Speaker 3: And I think the other reason it keeps coming up
Speaker 3: in conversations and is a particular interest to US is
Speaker 3: because it relates a lot to this idea of the
Speaker 3: new Industrial Policy and the idea of nurturing domestic manufacturers
Speaker 3: and tech sectors of one sort or another. And it
Speaker 3: also lands squarely into some of the tensions we've seen
Speaker 3: between Europe and the US over the Inflation Reduction Act.
Speaker 1: Yeah, I'm thinking about the episode that we recorded in
Speaker 1: Pennsylvania or this spring with Dan Long where we really
Speaker 1: talked about the Inflation Reduction Act. And you know, the
Speaker 1: US has this incredible EV company called Tesla, but what
Speaker 1: we don't really have nearly as much to the degree
Speaker 1: is battery tech, which there's the Inflation Reduction Act is
Speaker 1: trying to foster and so forth. And so there really
Speaker 1: is a lot here with like this sort of like
Speaker 1: global sort of like remaking of the entire like auto landscape.
Speaker 3: Potentially, right, And I think the domestic supply chain is
Speaker 3: probably where the US differs quite a bit to China,
Speaker 3: and I think it would be really interesting to dive
Speaker 3: into how the Chinese EV landscape is developing, and how
Speaker 3: it compares and contrasts with the rest of the world.
Speaker 1: And how the Yeah, how competitive are these How good
Speaker 1: are these cards? Could they one day be on the
Speaker 1: roads across the United States? Are is the European industry
Speaker 1: going to be totally decimated by lower cost competitive all
Speaker 1: these so many interesting topics, labor angles, labor costs would
Speaker 1: cost so much here. Probably do several episodes over time
Speaker 1: on this topic.
Speaker 3: But this is the first.
Speaker 1: But this is the first word just sort of like
Speaker 1: looking at it directly. So I'm very excited about our guest.
Speaker 1: We have the perfect guest to sort of welcome us
Speaker 1: to this topic. We're gonna be speaking with Corey Kanter.
Speaker 1: He is a senior associate for electric vehicles right here
Speaker 1: at Bloomberg ne EF done a lot of research recently
Speaker 1: put out a big report on the state of the
Speaker 1: global EV market. Corey, thank you so much for coming
Speaker 1: on the podcast.
Speaker 4: Thanks show, Tracy. It's great to be here and great
Speaker 4: always a great time to talk about electric vehicles. It's
Speaker 4: always a great always news about electric vehicles. Well, you've
Speaker 4: sold us.
Speaker 2: Yeah, we're sold.
Speaker 1: We're so I want to actually start with you know, again,
Speaker 1: there's a million different angles. But like we mentioned Tesla
Speaker 1: in the intro, it's like, Okay, one thing the US
Speaker 1: definitely has is an extremely successful domestic EV company. But
Speaker 1: there's also like this Chinese EV company that's like is
Speaker 1: it bigger than Tesla? Like or is it close to it?
Speaker 2: Or like what is it?
Speaker 4: It's bigger than Tesla? And whoa. Folks that Bloomberg are
Speaker 4: probably really familiar with BYD given that Warren Buffett invested
Speaker 4: back in two thousand and eight, and since then, folks
Speaker 4: at Bloomberg and in general have been tracking BID's progress.
Speaker 4: BID last year had more electric vehicle sales than Tesla,
Speaker 4: and it's been impressive how much they've grown in a
Speaker 4: short period of time. So if we go back to
Speaker 4: before the pandemic, a twenty nineteen BID had about two
Speaker 4: hundred and twenty thousand electric vehicle sales, and in about
Speaker 4: three years it grew by nine times. So last year
Speaker 4: is about one point nine million electric vehicle sales compared
Speaker 4: that to Tesla last year was one point three million.
Speaker 4: One kind of key takeaway when we talk about EV's
Speaker 4: on the BNF team. It's really a two horse race
Speaker 4: at the top between Tesla and BID. And there's some
Speaker 4: differences that we can get into between the two companies. Ye,
Speaker 4: but Bid is winning right now in terms of total sales.
Speaker 3: Just before we get into more of the Bid versus
Speaker 3: Tesla idea, can we talk a little bit about the
Speaker 3: Chinese EV landscape to set the stage, because my impression was,
Speaker 3: and again I guess it's been you know, over a
Speaker 3: year a year and a half since I left Hong Kong,
Speaker 3: but my impression was, there is a lot of sometimes
Speaker 3: irrational capital flowing into the space. There was talk of
Speaker 3: a Chinese EV bubble. No one was quite sure whether
Speaker 3: or not these companies were going to be viable on
Speaker 3: a standalone basis. But fast forward to today, it seems
Speaker 3: like we are starting to see some differentiation between winners
Speaker 3: like Bid and maybe some losers who aren't going to
Speaker 3: be able to compete.
Speaker 4: Yeah, and to give you know, listeners a kind of
Speaker 4: sense of how big that Chinese global EV market is.
Speaker 4: Last year, globally there was about ten point five million
Speaker 4: electric vehicle sales. China was about sixty percent of that,
Speaker 4: so around six million or so, and it's a much
Speaker 4: more competitive market. When I talk to folks here in
Speaker 4: the US, Tesla really is far and away the leader.
Speaker 4: In China, you have everyone, and not just you know,
Speaker 4: new automakers like Neo who are out there selling EV's,
Speaker 4: but even GM has this really small mini in venture
Speaker 4: car that sells hundreds of thousands of units. So, whether
Speaker 4: traditional or older OEMs or new entrants, it is a
Speaker 4: competitive market and growing. But BID has really started to
Speaker 4: affirm itself in the last three years as the market
Speaker 4: leader there so much so that they've begin to look
Speaker 4: into expanding into other markets. And we'll touch on that
Speaker 4: when it gets to Europe. But it is a more
Speaker 4: competitive space in China, and we do a lot of
Speaker 4: research on the market in particular. But you know, you
Speaker 4: don't just have BID dominating. You have now more consolidation
Speaker 4: than maybe a couple of years ago in twenty nineteen,
Speaker 4: just because you have more of those winners. Again, BID
Speaker 4: for a long time was consistent at about two hundred
Speaker 4: thousand EV sales a year. It was really only after
Speaker 4: the pandemic when they really accelerated.
Speaker 1: Well, what did they do what catalyzed so to speak,
Speaker 1: that sales acceleration decades.
Speaker 4: I think of battery knowledge. So BID before being an
Speaker 4: EV company, is a battery manufacturing company, and they did
Speaker 4: a lot of work in the electric bus space. So
Speaker 4: people may be familiar with BID in the US because
Speaker 4: they do have electric buses here that they're building outside
Speaker 4: of LA in California. So globally they've been building a
Speaker 4: lot of those electric buses in places like the US
Speaker 4: but also Latin America. They've been building that kind of
Speaker 4: global brand and dominance. And then they switch over the
Speaker 4: passenger vehicles. And one big decision at BID made in
Speaker 4: twenty twenty one and then they actually followed through with
Speaker 4: it in twenty twenty two, is that they said we're
Speaker 4: no longer going to sell gasoline cars. We're going to
Speaker 4: end internal combustion engine vehicle sales. They announced that in
Speaker 4: the back half of twenty twenty one, and then they
Speaker 4: actually followed through in twenty twenty two. So you have
Speaker 4: a lot of automakers throwing out ice phase out targets,
Speaker 4: internal combustion engine phase out targets, but they set a
Speaker 4: target and then they said, you know what, We're just
Speaker 4: going to go solely in on electric now. They'd be clear.
Speaker 4: There are some of those hybrid vehicles. Yeah, but they're
Speaker 4: no longer selling purely gas cars. They're either both ICE
Speaker 4: and EV or fully electric.
Speaker 3: So you touched on it just there. But can you
Speaker 3: talk a little bit more about how important the domestic
Speaker 3: supply chain is to the China EV success story? I
Speaker 3: guess because this is one thing that I hear consistently,
Speaker 3: this idea that part of the reason why China's strategy
Speaker 3: of building up this industry seems to be working so
Speaker 3: far is because it has done so in a very
Speaker 3: conscious manner where it's basically built out, you know, from
Speaker 3: batteries to other types of components to.
Speaker 4: Go along with this. Yeah. So China, if you go
Speaker 4: back to twenty fifteen, they weren't making up, you know,
Speaker 4: close to sixty percent of the global passenger EV market.
Speaker 4: They were subsidizing, putting in policies in place restricting gas
Speaker 4: link car registration to make it more appealing for consumers
Speaker 4: to actually switch to electric. And then on top of that,
Speaker 4: they were going directly to the various auto companies and
Speaker 4: giving subsidies for each EV that was sold, so as
Speaker 4: opposed to here in the US, for example, where those
Speaker 4: consumers are getting the credit to purchase evs, they're going
Speaker 4: more so to the companies themselves than encouraging those sales.
Speaker 4: It's you know, policy wonkery. But in addition, you know,
Speaker 4: you do that five, six, seven years and it begins
Speaker 4: to build up that demand for electric vehicles. This doesn't
Speaker 4: just happen overnight, which is a useful lesson I think
Speaker 4: to take away for the automakers here struggling that you're
Speaker 4: not going to just flip a switch with the IRA
Speaker 4: passing and next year suddenly EV's are sold everywhere. You
Speaker 4: need a long time to invest in that kind of
Speaker 4: battery manufacturing side, which you know, to the point I
Speaker 4: made earlier byd had the battery manufacturing expertise. Tesla has
Speaker 4: been in the game for a while now with partnering
Speaker 4: with Panasonic on the battery manufacturing side. I think for
Speaker 4: too long many automakers have sheared away from the battery portion,
Speaker 4: just like they have from charging, and so I think
Speaker 4: that's the big lesson to takeaway. China invested on the
Speaker 4: battery side, and the auto companies are understanding that that's
Speaker 4: key to the core EV product.
Speaker 1: God a billion questions already, this is just so good.
Speaker 1: But you know, just going back to like the sort
Speaker 1: of like BYD versus Tesla framework, Hey, can you just
Speaker 1: reiterate the number unit numbers, but more importantly, like how
Speaker 1: apples to apples are we talking about, because Tesla is
Speaker 1: all ev YD does have hybrid and in terms of
Speaker 1: whether the quality of the cars, the build quality, like
Speaker 1: and maybe you could speak a little bit like in
Speaker 1: markets where they both exist and competing, can you just
Speaker 1: talk a little bit more about how apples to apples
Speaker 1: we should be thinking about these two companies in comparison.
Speaker 4: Yeah, and I think it's it's important to be fair
Speaker 4: to Tesla, right, So let's go back to the top
Speaker 4: line numbers for last year was one point nine one
Speaker 4: point a five one point nine million in bilb for
Speaker 4: BYD and Tesla was about one point three. But BYDS
Speaker 4: split between hybrid and BEV battery electric vehicle is about
Speaker 4: fifty to fifty. Okay, So from that standpoint, if you
Speaker 4: say throughout the hybrids and we just want to look
Speaker 4: at fully electric, Tesla is still in the lead. You know,
Speaker 4: one point three million versus around nine hundred thousand or
Speaker 4: so of the kind of fully electric BYD models. Another
Speaker 4: big difference is Tesla has your four currently your X,
Speaker 4: your Y or three, and your model as cyber truck.
Speaker 4: We will see when that comes. I've been waiting for
Speaker 4: that for a long time. BYD has many different models
Speaker 4: close to thirty. You know, we've tracked last year. So
Speaker 4: they have different segments, different sizes, both battery electric and
Speaker 4: hybrid versions of the same vehicle type. So again their
Speaker 4: strategy has been kind of flood the zone for the
Speaker 4: different segments, and you know there are some advantages to that.
Speaker 4: You can reach more consumers, different price points, so some
Speaker 4: of bids. There was this really cool announcement that they're
Speaker 4: aiming at an eleven thousand dollars car in Brazil in
Speaker 4: a couple of years, so reaching that lower. Tesla's are
Speaker 4: not eleven thousand dollars currently. Different ranges too, Right in
Speaker 4: the US, we expect our vehicles more like three hundred
Speaker 4: mile range. In China, you know, you could have shorter
Speaker 4: range gvs about one hundred mile one hundred and fifty
Speaker 4: mile depending that mini mini car segment, which is really
Speaker 4: cool to follow that you would never really catch on
Speaker 4: in other markets. So you can slice them and dice it.
Speaker 4: Many different ways to say whether Tesla or BID who's
Speaker 4: actually winning. I think the important thing is that they're
Speaker 4: far and ahead of other automakers that we think about.
Speaker 4: Volkswagen GM forward over here in terms of just thinking
Speaker 4: about how diverse of an EV lineup you can have
Speaker 4: and then actually executing it. Anytime an automaker is going
Speaker 4: to go nine times as high in sales from a
Speaker 4: couple of years ago, you're going to take notice. Even
Speaker 4: if you doubled, right, if BYD had gone from the
Speaker 4: two hundred thousand to five hundred thousand, we would you know,
Speaker 4: make a note of that at BAF. But to grow
Speaker 4: at that rate in such a short period of time,
Speaker 4: you know, maybe it's unsustainable to say that they're going
Speaker 4: to grow by another nine times in the next three years.
Speaker 4: They're already seeing a little bit of pushback in Europe.
Speaker 4: In India this week, actually they were rejected from having
Speaker 4: a new battery plant for national policy reasons. But BYD
Speaker 4: is going for it. They're going for it in different markets,
Speaker 4: are going for it in markets that haven't seen evs,
Speaker 4: like Latin America, which is exciting.
Speaker 3: You know, you mentioned BYD's Brazilian ten thousand EV and
Speaker 3: I think they have some sort of partnership with Toyota
Speaker 3: as well to build something. And I wanted to ask
Speaker 3: just more generally, it seems like there are quite a
Speaker 3: few partnerships between Chinese EV manufacturers and foreign car makers
Speaker 3: of one form or another. How important is that dynamic too,
Speaker 3: I guess how quickly the Chinese EV industry has been
Speaker 3: able to ramp up.
Speaker 4: Yeah, that's a really good question and one that I
Speaker 4: can frame and not necessarily have the best comment on.
Speaker 4: In the sense that you look at, for example, for
Speaker 4: the ncatl over here right, you're having the Chinese manufacturer
Speaker 4: knowledge and really able to help a US or Western
Speaker 4: automaker kind of advance their EV development, maybe where they've
Speaker 4: been lagging, or even moving into new battery chemistry technologies
Speaker 4: like LFP new in the sense of new for the West.
Speaker 4: In terms of entering China as a Western automaker, you
Speaker 4: have to often create what are called joint ventures, so
Speaker 4: these partnerships with ae automaker to be able to access
Speaker 4: that market. Now, Tesla, for example, didn't have to do that.
Speaker 4: They were just, you know, after jumping through the necessary hurdles,
Speaker 4: able to sell on their own. But other automakers. China
Speaker 4: has used that kind of joint venture partnership in a
Speaker 4: weird twist, kind of like the US has set these
Speaker 4: barriers in the post Inflation Reduction Act world to say
Speaker 4: you have to build here to be here. Yeah, it's
Speaker 4: almost copying what China did because it wasn't easy for
Speaker 4: automakers to get into the Chinese EV market specifically. I
Speaker 4: hope that answers your question a little bit. I know
Speaker 4: there's more nuances.
Speaker 3: No, I was going to say. You started off saying
Speaker 3: I might not be able to ask that question, and
Speaker 3: then went into you know, great detail, So that was perfect.
Speaker 1: You know, you mentioned the breadth of offerings that BYD
Speaker 1: has and maybe like in the US, like they're probably
Speaker 1: just is not much of a market anywhere for a
Speaker 1: car that only has one hundred miles or fifty miles
Speaker 1: or something like that. But you know, I know, like
Speaker 1: in terms of exports, like the big anxiety currently like
Speaker 1: maybe in a few years all the US compoty shoul
Speaker 1: freak out, but I know, like there's more anxiety in.
Speaker 4: Europe and stuff. Is that in part?
Speaker 1: Like are the markets or the domestic markets in China,
Speaker 1: And like I'm picturing just like a tiny little car
Speaker 1: in Paris as being something that you would never see
Speaker 1: here in the US, but maybe you see it in China.
Speaker 1: Like is there enough like similarity in the sort of
Speaker 1: like domestic markets of China and some places in Europe
Speaker 1: such that there's an advantage where the card that they
Speaker 1: sell domestically also have like an audience in Europe the
Speaker 1: way they might not in the US.
Speaker 4: There's definitely been concern from the European automakers around BYD
Speaker 4: entering or just even a more competitive kind of tavy offerings. Again,
Speaker 4: because BID has the expertise on the EV side, they're
Speaker 4: coming in with attractive models and I believe it was
Speaker 4: an article either earlier this year looking at Norway for example,
Speaker 4: and the consumers being interested just because the cars are
Speaker 4: solid quality and compared to automakers that may be struggling
Speaker 4: with software. You know, BYD is working through or has
Speaker 4: worked through some of those issues. I don't have the
Speaker 4: stat right at hand, but it has been attractive enough
Speaker 4: where the European folks have said, on the one hand,
Speaker 4: we have Ira, you know in the US, squeezing us
Speaker 4: out of the US market. On the other hand, we
Speaker 4: have these Chinese new entrants here that are making us
Speaker 4: nervous about our ability to kind of maintain home court
Speaker 4: advantage in Europe. So they've taken notice of it. Have
Speaker 4: the European automakers been able to respond in the way
Speaker 4: that they need to? Not necessarily and if you know,
Speaker 4: China is seen or the you know BYD for example,
Speaker 4: as a this is a cool, positive new automaker coming
Speaker 4: in and not the kind of geopolitical concerns. You know,
Speaker 4: European automakers could be squeezed out or squeezed down. You know,
Speaker 4: you're not going to see people lose all the market share,
Speaker 4: but even having that kind of trimmed off the top
Speaker 4: by now entrant. One thing I like to think about
Speaker 4: in general, for the global EV spaces, with Tesla MBYD
Speaker 4: growing at the rate that they are, the overall passenger
Speaker 4: car sales PIE doesn't grow that much year of the year.
Speaker 4: You know, it does fluctuate in previous years. It was
Speaker 4: higher closer to one hundred million annual sales units last
Speaker 4: year more in the seventy to seventy five million range.
Speaker 4: But the point is that if you're having EV's making
Speaker 4: up more of that, it has to come from somewhere.
Speaker 4: It's not kind of this endlessly growing pie of car sales, right,
Speaker 4: And so if you're a traditional, if you're a Toyota,
Speaker 4: if you're a Volkswagen, you know you're going to start
Speaker 4: to see that margin come down if you're not releasing
Speaker 4: EV's that are competitive and exciting for consumers.
Speaker 3: Wait, you mentioned geopolitical concerns, and I'm trying to think
Speaker 3: how to phrase this question, but you know, if we
Speaker 3: saw a big boom in China EV's in sort of
Speaker 3: twenty nineteen twenty twenty, around that timeframe, that was also
Speaker 3: peak sort of deglobalization fear time, right, Like lots of
Speaker 3: talk about well, maybe we need to reorient supply lines.
Speaker 3: Trump's trade war with China was still ongoing in twenty nineteen.
Speaker 3: Why hasn't that played more of a role in this dynamic,
Speaker 3: Like shouldn't there be automakers who are looking at China
Speaker 3: and going, well, wait a second, maybe we don't want
Speaker 3: to partner too much, you know, at least according to
Speaker 3: the deglobalization argument.
Speaker 4: It's a complicated story because I think there is in
Speaker 4: the way I would kind of phrase it and think about,
Speaker 4: is the partnership that GM and FOURD and other automakers
Speaker 4: have here with Tesla around DV charging. There's an element
Speaker 4: of you have the knowledge, you have the expertise, you
Speaker 4: want to kind of gain from that experience. And there's
Speaker 4: been reports I believe it was and I don't want
Speaker 4: to name the wrong automaker of continued partnerships this week
Speaker 4: with SAIC kind of reports on a potential potential platform partnership.
Speaker 4: But to the broader point, you know, it's coopetition a
Speaker 4: little bit. It's you're going to gain some of that
Speaker 4: knowledge and then try and leap frog it. From our purview,
Speaker 4: we've seen automakers in Japan, for example, looking to go
Speaker 4: to new battery technologies like solid state, so you can
Speaker 4: kind of leapfrog where China is and it's kind of
Speaker 4: LFP battery chemistry, which is a kind of cheaper, shorter range,
Speaker 4: beneficial chemistry for those who aren't familiar. So learning from
Speaker 4: Chinese automakers, but I would say even the auto industry
Speaker 4: in general, there's always this kind of domestic sense of pride,
Speaker 4: whether you're talking about BMW and Volkswagen in Germany or
Speaker 4: GM forward and now Stilantis here. The Big three in
Speaker 4: the US. So some of it is new, and we
Speaker 4: could talk about IRA related and how that policy was constructed,
Speaker 4: but some of it is very old. And I think
Speaker 4: that the new thing here is that China has been
Speaker 4: so successful or some of these Chinese companies have been
Speaker 4: successful in you know, passing Germany, in you know, competing
Speaker 4: with Japan, and it's because they've embraced this ev opportunity,
Speaker 4: both through kind of smart subsidy planning but also the
Speaker 4: companies doing the work.
Speaker 1: Let's get to the Inflation Reduction Act because, as you
Speaker 1: pointed out, like one of the advantages that it sounds
Speaker 1: like the Chinese companies have is like deep battery experts.
Speaker 4: Yeah, and it makes sense.
Speaker 1: I mean, that's the core of an electric vehicle, right,
Speaker 1: they don't even have that many parts. Right, It's basically
Speaker 1: like the battery is what the whole is, the whole
Speaker 1: game in town. And we know that thanks to the
Speaker 1: Inflation Reduction Act. It's like every day there's a new
Speaker 1: press release about a new battery factory. Just talk us
Speaker 1: a little bit, like walk us through the economics of
Speaker 1: how the IRA changes the game for US battery manufacturing.
Speaker 4: Yeah, So a good way to think about it is
Speaker 4: at BNF we put out, well, my colleagues does great
Speaker 4: work on what we call the Lithium ion Battery Price Survey,
Speaker 4: So just how much does a battery cost on a
Speaker 4: kind of volume weighted average, And last year that number
Speaker 4: was about one hundred and fifty one dollars per kill
Speaker 4: a wide hour. So why that's important is battery costs
Speaker 4: need to come down given that they make up such
Speaker 4: a large portion of the EV, in order for electric
Speaker 4: vehicles to be one more affordable for consumers but more
Speaker 4: profitable for automakers. So the IRA has two EV related
Speaker 4: tax credits. The first is what everyone seems to know about,
Speaker 4: the seventy five hundred dollars you know for manufacturer in
Speaker 4: North America for the final assembly all the critical mineral
Speaker 4: requirements as well as the battery component requirements. That's you know,
Speaker 4: the consumer this year getting that seventy five hundred dollars.
Speaker 4: Then there's the battery production tax credit, and I don't
Speaker 4: know if as many people are as familiar with it
Speaker 4: for policy wunks, that's the forty five X credit That
Speaker 4: is about forty five dollars per kilowot hour production tax credit.
Speaker 4: So what that means is if GM and LG they
Speaker 4: have ULTM, they set up a battery manufacturing plant here,
Speaker 4: for every kilowot hour that they produce of batteries, they're
Speaker 4: going to get a forty five dollars tax credit that
Speaker 4: goes towards the joint venture. And they could do all
Speaker 4: the tax magic work with what they will, but really
Speaker 4: what that means is about thirty percent of that one
Speaker 4: hundred and fifty one dollars per kilo WoT hour number
Speaker 4: is going to be subsidized or paid back in some
Speaker 4: way by the US government over time. And so what
Speaker 4: that means, and the way the credit is designed that's
Speaker 4: really smart, is it starts at about one hundred percent
Speaker 4: of that value, and then later in the decade it
Speaker 4: declines to you know, seventy five percent, fifty percent, and
Speaker 4: then phases out. So if you are an EV maker
Speaker 4: or a battery manufacturer, you want to establish that battery
Speaker 4: production plant yesterday, and then the next best thing to
Speaker 4: you yesterday is in a couple of years. So when
Speaker 4: you see those announcements, typically it's about two years from
Speaker 4: when you break ground to that kind of fully ramped
Speaker 4: up production, so none of the kind of impact of
Speaker 4: the IRA is necessarily seen today through the battery production
Speaker 4: tax credit. We look at the back half of next
Speaker 4: year into twenty twenty five as when you actually see
Speaker 4: the kind of announcements made since the law pass coming
Speaker 4: into fruition and hopefully that's passed on to consumers. Again,
Speaker 4: it depends on what automakers will do, but it's a
Speaker 4: powerful tool to kind of level the playing field with
Speaker 4: China or Europe. And we've even seen automakers move battery
Speaker 4: manufacturing to the US instead of Europe. Tesla was a
Speaker 4: good example. They were, you know, were building up in
Speaker 4: Germany and then you know they're putting more of a
Speaker 4: focus on here because of how potent that tax credit is.
Speaker 3: So this is why Germany's mad clear. But just to
Speaker 3: hit this point home, because I mean, it seems like
Speaker 3: domestic policy was very important for China's EV industry and
Speaker 3: it could become very very important for America's EV industry.
Speaker 3: What are the key differences and similarities between how these
Speaker 3: two countries are pursuing that type of policy. Like, I
Speaker 3: guess there's tax credits on either side, but comparing contrast
Speaker 3: for US.
Speaker 4: Yeah, I'd say the similarity is the subsidization and the
Speaker 4: tax credits now both focused smartly on the battery side
Speaker 4: and the ev side. China did have more of the
Speaker 4: restrictions in terms of making it more difficult to register
Speaker 4: gasoline cars, which over time encourages consumers to move towards electric.
Speaker 4: When you have so many cars being sold, you want
Speaker 4: to be able to get them registered. In the US,
Speaker 4: the version of that would be through stronger fuel economy standards,
Speaker 4: which the Biding Administration has talked about, or California having
Speaker 4: an internal combustion engine phase out. One thing that Europe
Speaker 4: has done that we haven't seen in China is having
Speaker 4: a twenty thirty five internal combustion engine new sales target,
Speaker 4: so fully electric or hydrogen fuel cell for those vehicles
Speaker 4: as well. You see US states doing that as well,
Speaker 4: but outside of California, the rest of the US isn't
Speaker 4: necessarily on that kind of growth trajectory. So comparative, if
Speaker 4: we had this conversation maybe like two years ago, you
Speaker 4: would say the US from a policymaking standpoint, is far
Speaker 4: behind China Europe. Now because of the Inflation Reduction Act,
Speaker 4: the US is pulled within you know, where they need
Speaker 4: to be. It's now just keeping those policies in place
Speaker 4: and automakers seeing the advantage in the opportunity here.
Speaker 1: So many questions still, there's two questions and I want
Speaker 1: to forget I want to make sure you don't forget them.
Speaker 1: But you know you mentioned charging and I'm curious there
Speaker 1: was that deal a few weeks ago there was announced
Speaker 1: where like GM and four they're like, we're going to
Speaker 1: adopt Tesla's charging standard. Yeah, can you just sort of
Speaker 1: real quickly explain like what the significance of that agreement is,
Speaker 1: how it benefits Tesla. Do they get like a penny
Speaker 1: every time there's a charge, and how charging works in China,
Speaker 1: Like is there just a nationwide standard there?
Speaker 4: Yeah, there's a different standard than China, and there's a
Speaker 4: different standard than Europe, and now there will be a
Speaker 4: different standard in the US. Now. The huge deal in
Speaker 4: terms of ultimately all these evs are charging on you know,
Speaker 4: similar ish batteries, but it's more so what the plug
Speaker 4: looks like and the US charging network compared to China.
Speaker 4: China beyond laps the US in terms of annual public
Speaker 4: charging installation, and they have for some time now why
Speaker 4: they deal with Tesla, GM, Ford and then it seems
Speaker 4: like a new automaker every week, Nissan jumped on, Volvo
Speaker 4: jumped on, Rivian jumped on. Is really handing the not
Speaker 4: the keys to the car necessarily, but a lot of
Speaker 4: your potential success over to Tesla. What Tesla gets out
Speaker 4: of it is they become the premier charging network and
Speaker 4: they've already been outdoing their competitors. You know, it's not
Speaker 4: a slammed on case that this is going to be
Speaker 4: as successful yet. I think the hesitation is maybe Tesla
Speaker 4: hasn't had to manage It's one thing when you have,
Speaker 4: for models, for example, to kind of balance on your
Speaker 4: charging network. Now you're having dozens, right. GM has a
Speaker 4: bunch of models for it has a bunch of models.
Speaker 4: But like we were saying before about batteries, batteries and
Speaker 4: charging our core to the EV experience. And I think
Speaker 4: for a long time, GM and Ford and others said
Speaker 4: we're going to trust these other charging companies to handle
Speaker 4: something that's core to our product, and Ford eventually got
Speaker 4: fed up, and these other automakers have followed. In terms
Speaker 4: of Tesla getting a licensing fee, you know, we haven't
Speaker 4: seen the terms of the agreement, so we don't fully
Speaker 4: know what they were promised. But even without knowing those details,
Speaker 4: consumers now see Tesla as the premium charging network and
Speaker 4: that will benefit them by having more uptake on their
Speaker 4: charging network, and they've been building it out fairly quickly.
Speaker 3: Wait, I have an even simpler question, which is what
Speaker 3: does charging infrastructure look like in China? Because this was
Speaker 3: always thought to be one of the impediments in the US,
Speaker 3: this idea that you know, you can buy an evy,
Speaker 3: but if you're going to do some long road trip,
Speaker 3: it might be challenging to find the requisite charging stations.
Speaker 3: Is it different in China?
Speaker 4: Yeah, so, Tracy, again, I guess on that one. I
Speaker 4: would definitely put posit it to our China specific expert
Speaker 4: on the nitty gritty details. What I can say, like
Speaker 4: we discussed before, is that the actual vehicle needs are different.
Speaker 4: So when you have various different ranges, and in general globally,
Speaker 4: a lot of charging is done at home, So when
Speaker 4: you have smaller batteries in smaller cars, it's a different
Speaker 4: pull on the grid there than it is here in
Speaker 4: the US. But just from a pure kind of addition standpoint,
Speaker 4: China has been far more focused and able to scale
Speaker 4: up the total number of EV chargers. I wish you
Speaker 4: have the numbers in front of me, but I think
Speaker 4: it's I'm not even going to throw it out there.
Speaker 4: But again to kind of restate, China has been a
Speaker 4: lot more on top of building out that EV charging network.
Speaker 4: I think in the US you haven't had the federal
Speaker 4: money up until really the last year or so. And
Speaker 4: you guys can correct me if I'm wrong, but as
Speaker 4: far as I know, a lot of that, you know,
Speaker 4: NEV funding National EV Charging infrastructure as a part of
Speaker 4: the infrastructure law passed a couple of years ago, hasn't
Speaker 4: actually rolled out yet. It's been through the RFP process
Speaker 4: and the state's kind of building out their plans for
Speaker 4: what charging looks like, but the actual chargers haven't been deployed.
Speaker 4: And maybe it's a good thing, because I think a
Speaker 4: lot of states don't know if they should be going,
Speaker 4: you know, with Tesla standard or still the CCS Combined
Speaker 4: Charging Standard that the other auto makers had agreed to
Speaker 4: almost ten years ago, before you know, switching over and
Speaker 4: switching sides to Tesla.
Speaker 1: I like how you said you could correct me if
Speaker 1: I'm wrong, is if I would.
Speaker 2: Have any like, actually, I don't think you got that
Speaker 2: quite right.
Speaker 1: One of the big themes, and this is something that
Speaker 1: comes up all the time, and we've already talked about
Speaker 1: lots on this episode just now, is just like, you know,
Speaker 1: building up knowledge within a company, whether it's building up
Speaker 1: how to put a car together, how to put a
Speaker 1: charging network together, how to make a battery, et cetera.
Speaker 1: And so something I'm curious when you talk about, like
Speaker 1: some of these by D experts are really cheap just
Speaker 1: on the dollar basis, Like, as you've mentioned, eleven thousand
Speaker 1: dollars cars very cheap. How much of that is they've
Speaker 1: just gotten really good at bending the cost curve because
Speaker 1: they've been doing it a lot, versus something like their
Speaker 1: labor costs are cheaper because it's in China.
Speaker 4: Yeah, it's probably a mix of both. I think, you know.
Speaker 4: Having the it was interesting I was looking at a
Speaker 4: little bit of BYD history just before coming on. They
Speaker 4: were founded as a whole company in nineteen ninety five,
Speaker 4: and then they bought, you know, acquired an auto business
Speaker 4: and built it up starting in two thousand and three.
Speaker 4: And again they've had the battery expertise and obviously they
Speaker 4: were selling gasoline cars for a long time, but having
Speaker 4: that battery knowledge fifteen years before you start to see
Speaker 4: that exponential, strong growth. From twenty nineteen onwards, you're seeing
Speaker 4: other automakers who are in Tesla struggling with the growth
Speaker 4: curve of how do you build, you know, bend that
Speaker 4: cost curve, how do you begin to make a profit
Speaker 4: on electric vehicles? And even taking Rivian as a shorter
Speaker 4: term example, you could see how a newer EV company
Speaker 4: that started producing a couple of years ago is maybe
Speaker 4: only starting to hit a stride at a low volume,
Speaker 4: maybe in the last quarter or so. So these things
Speaker 4: take time, and that's without you know, switching over from
Speaker 4: a gasoline product. One thing that BYD did do, and
Speaker 4: I'm interested to see which automakers follow suit, is there
Speaker 4: is an element of let's just go for it. Let's
Speaker 4: just put the gas car behind us fully and commit
Speaker 4: to being an electric vehicle company. I think other car
Speaker 4: companies want to balance kind of shareholder interests and say
Speaker 4: we want to keep making money while we're figuring this
Speaker 4: EV thing out. By D maybe it's because of the
Speaker 4: knowledge and expertise, but to take the leap from we're
Speaker 4: making gas cars and evs to going fully electric. It
Speaker 4: came fairly quickly, but they've reaped some of those benefits
Speaker 4: and now moving forward, the questions we get often is
Speaker 4: you know who will be in second place? Where who
Speaker 4: will surpass Tesla in the US, And now the two
Speaker 4: horses in terms of Tesla and BYD are so far
Speaker 4: out of the barn. It's only going to They're only
Speaker 4: going to gain more expertise and knowledge. I mean, Tesla
Speaker 4: announced earlier this year their next generation vehicle that will
Speaker 4: compete with BYD in that kind of twenty five thousand
Speaker 4: dollars range. For other automakers, if Tesla and BYD are
Speaker 4: in those kind of cheaper categories where you're going to
Speaker 4: see a lot of volume sales in the future, you
Speaker 4: know you're already behind or you're going to be further
Speaker 4: and further behind. As these automakers are investing. It's a
Speaker 4: trick thing for other auto makers to figure out. But
Speaker 4: if they don't, there's a bigger problem if BYD Inteslinae
Speaker 4: keep on taking more and more of that market share.
Speaker 3: So just to press on this point, because it's something
Speaker 3: that's come up, I think in multiple conversations we've had
Speaker 3: with like Brian Deese and Jared Bernstein and certainly Dan
Speaker 3: Wong and Adam Ozomech. But there's this idea that Okay,
Speaker 3: you know, US policymakers can say that we want to
Speaker 3: build up a certain industry within the US, but if
Speaker 3: we're not able to do so in an efficient way
Speaker 3: that can compete with you know, other efficient industries in
Speaker 3: places like China, then it could still be problematic. So
Speaker 3: I guess my question is, like how much does price
Speaker 3: point and branding and origin actually matter for the EV market?
Speaker 3: Could we, for instance, have an American electric vehicle market
Speaker 3: where you know, there are these Chinese, these cheaper Chinese
Speaker 3: imports available, but Americans still have a preference for Tesla
Speaker 3: and other domestic manufacturers.
Speaker 4: Yeah, and you even see the potential kind of Tesla
Speaker 4: brand premium. You know, Tesla does very well in the
Speaker 4: Chinese market, even despite BYD and these other kind of
Speaker 4: more competitive offerings. One thing on the kind of China point. Volvo,
Speaker 4: which is manufacturing many of its vehicles in China, you know,
Speaker 4: is in the US market, and there is a kind
Speaker 4: of brand premium there they unveiled earlier this week. In
Speaker 4: the past couple of months, the e X thirty, which
Speaker 4: is going to be at a thirty five thousand dollars
Speaker 4: price point without any subsidy because of course Chinese produced
Speaker 4: evs won't receive any Inflation Reduction Act credits. That's coming
Speaker 4: out next summer and his plan to come out, so
Speaker 4: you know whether or not it's byd there are going
Speaker 4: to be other Chinese built auto makers that are already here. Pollstar,
Speaker 4: you know, as a part of the Volvo Jili family,
Speaker 4: is also already here, so you know you have those
Speaker 4: cars that may be seen as more premium because of
Speaker 4: the kind of Volvo badge. Tesla's going to contain all
Speaker 4: those Chinese company. Yeah, Volvo is basically Swedish that was
Speaker 4: acquired by a Chili, so there is a subsidiary of
Speaker 4: a subsidiary.
Speaker 1: I want to go back to the tension that the
Speaker 1: US legacy automakers face right now, and you just got
Speaker 1: to It's like they want to make money right now,
Speaker 1: and one way to make money is just selling ice vehicles.
Speaker 1: They also want to be there for the future and
Speaker 1: they are investing in EV's but it's clearly a tension
Speaker 1: because it's going to be a while before they ramp
Speaker 1: up in their money making, and there's a lot of
Speaker 1: capital expenditures. But then there's this other dynamic. And actually
Speaker 1: we're recording this July twenty fifth, and just this morning
Speaker 1: GM came out with earnings and the like. Things are
Speaker 1: looking good, provided we don't have a strike.
Speaker 4: Can you talk a.
Speaker 1: Little bit about how the shift to evs at places
Speaker 1: like GM and Ford the labor tensions that involved in
Speaker 1: this pretty big switch over the work force.
Speaker 4: Yeah, and I think it's an interesting conundrum in the
Speaker 4: sense that you have basically the need to get electric
Speaker 4: vehicles out there at the lower price point. We talked
Speaker 4: before about the battery pack and how you need to
Speaker 4: improve those efficiencies, and so GM and Ford and all
Speaker 4: the other automakers are now building those battery plants here,
Speaker 4: and what does that look like for the workers. You know,
Speaker 4: you got these negotiations coming up in the fall, and
Speaker 4: you know four your contract typically we at BNEF. To
Speaker 4: give a broader context, last year, the electric share of
Speaker 4: new passenger car sales in the US was just under
Speaker 4: eight percent by mid decade. By twenty twenty five, we
Speaker 4: see that going to about twenty three percent, so nearly
Speaker 4: one in five new vehicles as electric and so from
Speaker 4: a kind of negotiation standpoint, whatever GM, forward Stillantis and
Speaker 4: UAW come to it's going to be setting the rules
Speaker 4: to the road whether or not you know, evs are
Speaker 4: in the kind of core negotiations as these. You know,
Speaker 4: Tesla says this a lot. Evs are part of an
Speaker 4: auto company. You know, Tesla is an automotive company, even
Speaker 4: though people try and put EV companies into a different bucket.
Speaker 4: So GM, Ford and the others they have to kind
Speaker 4: of balance how do we make EV's cost less while
Speaker 4: keeping you know, workers happy, while still making a profit.
Speaker 4: It's a lot of balls to juggle, So you could
Speaker 4: see why UAW wants to kind of make a stand
Speaker 4: and take the issue there. That being said, there is
Speaker 4: the counter tension that if there is a kind of
Speaker 4: prolonged issue or worker problem that Tesla is still here.
Speaker 4: They don't unionize their workers and they're still trying to
Speaker 4: get market share. So I think you'll have those two
Speaker 4: kind of issues in tension and we'll see where it lands.
Speaker 1: Now just on the sort of challenge that GM and
Speaker 1: Ford are going to have instillants, I guess in these negotiations,
Speaker 1: like part of it is like EV's don't have as
Speaker 1: many parts, right, And we sort of hit on this
Speaker 1: earlier and they're less complex. And I remember reading about
Speaker 1: this a couple of years ago. There was this great
Speaker 1: Business Week story about Germany and like the conversion. They're like,
Speaker 1: they're just simpler machines, and right, like can you talk
Speaker 1: a little bit about the sort of manufacturing aspect and
Speaker 1: like they you know, they just it's like the you know,
Speaker 1: the battery and a couple other things.
Speaker 4: Right, yeah, exactly, there's simpler machines and especially you know,
Speaker 4: we do a lot of price parity research at BNF
Speaker 4: and we it changes depending on the battery size and
Speaker 4: you know, how long range your electric vehicle will go.
Speaker 4: But we see by mid decade twenty twenty five in
Speaker 4: European markets through the late twenty twenties in the US,
Speaker 4: depending on your segment of reaching that upfront price parody.
Speaker 4: It's a lot of it is just figuring out the
Speaker 4: battery component aspect of it and building up those battery plants.
Speaker 4: But yes, there's less maintenance costs, which a lot of
Speaker 4: dealers have been concerned about the battery portion, you know,
Speaker 4: figuring out how to recycle that is going to be
Speaker 4: a key question. We don't do it any f any
Speaker 4: like labor specific research, but what I can say is that,
Speaker 4: you know, the other industry is going to look different.
Speaker 4: It's not going to be as much focused on, you know,
Speaker 4: those smaller aspects of an internal combustion engine. It might
Speaker 4: be more jobs, or more focused on the charging network,
Speaker 4: on balancing out the charging network through utilities, kind of
Speaker 4: shifting people around. But yes, it's the core kind of
Speaker 4: automotive worker. It's going to look a bit different in
Speaker 4: terms of what offerings you know, you know, what they're
Speaker 4: going to actually be producing. But it has to be
Speaker 4: different if evs are going to take off, and if
Speaker 4: you're going to meet those climate targets. You know, and
Speaker 4: EV's are a part of that story as well. We've
Speaker 4: talked about the It's interesting because evs are both kind
Speaker 4: of fun in terms of analyzing the car market. Cars
Speaker 4: are always a good time, but there is a climate
Speaker 4: benefit here too, which is why you know, you're switching
Speaker 4: over from gas cars that lose a lot of that
Speaker 4: energy to the atmosphere versus EV's that are much more efficient.
Speaker 3: I have a related question, but more from the China side.
Speaker 3: You know, we're talking about BYD's stunning rise in recent
Speaker 3: years and basically like a lot of the success story
Speaker 3: of Chinese EV manufacturing, But what are the risk factors here?
Speaker 3: Like what could slow that industry down in the foreseeable future?
Speaker 3: What would make Warren Buffett orry about his BYD position.
Speaker 4: I don't know if I'm a position to tell Warren
Speaker 4: Buffett what to or not to worry. One more stat
Speaker 4: I want to give you just on the EV dominance
Speaker 4: of BYD in Tesla and then I'll get to your
Speaker 4: question Tracy. But basically, if you look at BYD and
Speaker 4: Tesla combined last year, they were about thirty percent of
Speaker 4: all global electric vehicle sales. And you know, BID in
Speaker 4: the first quarter of this year was about twenty one
Speaker 4: percent of global EV sales and then Tesla was about
Speaker 4: sixteen point five. So they went up from full year
Speaker 4: twenty twenty two about thirty percent of the market and
Speaker 4: the first quarter this year about thirty eight percent in
Speaker 4: terms of risk. And I think the India story gets it.
Speaker 4: You know, BID has been moving really fast and operating
Speaker 4: under the radar. Now people are paying attention, and I
Speaker 4: think one thing maybe to take away from our conversation
Speaker 4: today is that if you haven't heard of BYD before,
Speaker 4: maybe go google them and look them up and see
Speaker 4: their rise. What it means is, you know there might
Speaker 4: be more of that brand value and upside, but you
Speaker 4: know companies or countries could be more wary and taking
Speaker 4: them seriously as a competitor. In terms of the overall
Speaker 4: issues with the EV market in China and elsewhere, I
Speaker 4: think it's the same challenges of getting consumers to buy,
Speaker 4: you know, a newer product. The charging concerns even you
Speaker 4: know outdid side of the US remain paramount. How do
Speaker 4: you reach consumers who may want to go further in
Speaker 4: newer markets? How do you trust a new brand that
Speaker 4: you may not have seen before, like in Europe. But
Speaker 4: again China has U and Chinese companies have done quite
Speaker 4: well by getting out and getting that early move advantage.
Speaker 4: We haven't talked too much about CATL today, but they
Speaker 4: are an important part of this tell us.
Speaker 1: We've talked we CETL has come up on some of
Speaker 1: our battery episodes, but in the context of this specific conversation,
Speaker 1: what should listeners know about.
Speaker 4: C ATL CTL has a lot of battery know how
Speaker 4: and wherewith all their the leading battery manufacturer globally. They
Speaker 4: have partnerships with Ford, and that's going to allow Ford
Speaker 4: to be able to, assuming that the factory is built
Speaker 4: and all goes well, to sell vehicles with lithian ion
Speaker 4: phosphate LFP that may go a shorter range than the
Speaker 4: traditional batteries you see here, but offers, you know, more
Speaker 4: variety in terms of what consumers can expect. I think
Speaker 4: it's going to be kind of interesting in a couple
Speaker 4: of years. You know, maybe savvy consumers will say, hey,
Speaker 4: I bought a Ford Maki with LFP, or oh I
Speaker 4: have a long range Maki that has a traditional NMC
Speaker 4: which is you know, wonky battery talk that acts differently.
Speaker 4: But ultimately, because of Ford's partnership and licensing that technology,
Speaker 4: they have access to it. And there's a great Bloomberg
Speaker 4: piece by BN, a great reporter who looked at the
Speaker 4: kind of history of LP which has moved between US
Speaker 4: and China, who actually kind of has been investing in it.
Speaker 4: But CATL has been a kind of pioneer in that space,
Speaker 4: and Tesla wants to partner with them. Everyone's trying to
Speaker 4: figure out and this is maybe a good time to
Speaker 4: drop an IRA provision around foreign entities of concern which
Speaker 4: is the kind of last shoe to drop around the
Speaker 4: EV tax credit, the seventy five hundred, basically within the
Speaker 4: Inflation Reduction Act. Senator Mansion was adamant that cars basically
Speaker 4: from these foreign entities of concerns shouldn't be subsidized. So
Speaker 4: Ford Caatl's arrangement is a way of maybe getting around
Speaker 4: that provision. It hasn't been defined by the Treasury Department yet,
Speaker 4: but I know when we speak to clients there's a
Speaker 4: lot of anxiety around if we have a small portion
Speaker 4: of our EV battery that comes from China or or
Speaker 4: really China, Russia and Iran are thrown in the kind
Speaker 4: of foreign nentities concerned kind of thought process. But really
Speaker 4: this is about China. Folks are concerned about does that
Speaker 4: mean we won't have an EV subsidy anymore? You know,
Speaker 4: how low of a threshold does it take to trigger
Speaker 4: that provision. It's something for folks to keep an eye on. Automakers,
Speaker 4: Joe to your earlier point, are really beginning to look
Speaker 4: at their supply chain. And we've seen many announcements by
Speaker 4: GM and four to say, oh we're going to be
Speaker 4: sourcing you know, these metals from here, and so this
Speaker 4: is one outstanding part as a big picture almost returning
Speaker 4: to our earlier point, how close do automakers want to
Speaker 4: work with China or how close can they work with China?
Speaker 4: And on flip side, you know, will China because of
Speaker 4: that kind of built up early advantage, really needs subsidies
Speaker 4: to compete here, it's an ongoing story. It's going to
Speaker 4: be a lot of honestly a lot of fun to
Speaker 4: watch it unfold here.
Speaker 1: I just have one last question, and you know, Tracy
Speaker 1: asked about risks, and so that was.
Speaker 2: Where my head went to.
Speaker 1: You know, like battery tech is not settled right like
Speaker 1: you even just described it just now. There's like multiple
Speaker 1: different kinds maybe solid state batteries that can be some
Speaker 1: great breakthrough even though supposedly like they've been working on
Speaker 1: that for like a hundred years or something like that.
Speaker 1: And then you have other entities that are not even
Speaker 1: one hundred percent sold on evs. I think like Toyota,
Speaker 1: for example, is not actually like completely convinced that evs
Speaker 1: are the future. I think there's still have a dipping
Speaker 1: a toe in hydrogen powered vehicles and there's some optimism there.
Speaker 2: I think Joe Manchin likes.
Speaker 1: Hydrogen powered vehicles. Can you just talk a little bit about, like,
Speaker 1: when you think about risks, the possibility that like we
Speaker 1: don't actually know yet or maybe we do, but the
Speaker 1: possibility that the future is sort of uncertain about what
Speaker 1: we'll be driving.
Speaker 4: Yeah, I think that's what makes the EV space really exciting.
Speaker 4: One analogy I like to use a lot when speaking
Speaker 4: with subscribers to be any fit is when you look
Speaker 4: at the current automotive market, you're really relying on a
Speaker 4: few different gasoline types. Right in Europe they have more diesel.
Speaker 4: I was just in Europe, you know, we filled up
Speaker 4: on diesel when taking a nice little drive through Portugal.
Speaker 4: In the US you have ethanol, you know, different mixes
Speaker 4: of gasoline. But that's it. The EV industry, if done correctly,
Speaker 4: can have many different battery types. A common criticism of
Speaker 4: evs is that you're using cobalt in NMC batteries. With
Speaker 4: LFP there's no cobalt and no nickel. Lithium is the
Speaker 4: kind of key mineral in many of these EV batteries
Speaker 4: and will continue to be important moving forward. But what's
Speaker 4: exciting about this is we don't know what the future
Speaker 4: looks like. If automakers can kind of leap frog into
Speaker 4: solid state or other type of battery chemistries, you know,
Speaker 4: you can create new supply chains and a potential new
Speaker 4: competitive advantage even if you're behind, you know, like a
Speaker 4: Toyota or other you know, Japanese automakers have been that
Speaker 4: being said, I think the big takeaway from our conversation
Speaker 4: and watching both Tesla and BYD is that you can't
Speaker 4: completely make up ground because Tesla and BID are also
Speaker 4: looking into the same next gen battery technologies. You know,
Speaker 4: certain automakers may say, oh, we're looking into this, We're
Speaker 4: going to leap frog. It's easier said than done, and
Speaker 4: ultimately producing evs at scale is a challenge. Making cars
Speaker 4: is not easy, but if you kind of work through
Speaker 4: the process and you really focus on it, these two
Speaker 4: companies show that there is you know, success waiting and
Speaker 4: improvements to be made. So, you know, sum up on
Speaker 4: the question, there is a lot uncertain and really you know,
Speaker 4: there's recessions. There's other black Swan events. Even Russia's invasion
Speaker 4: of Ukraine had an impact on the commodity costs of
Speaker 4: the materials that went into batteries, increasing the overall battery
Speaker 4: cost in our survey for the first time in the
Speaker 4: ten years that we had been doing it between twenty
Speaker 4: one and twenty twenty two. But there's also potential upside
Speaker 4: moving forward, and that's something that we on the EV
Speaker 4: team at BNEF track every quarter, every week, every day.
Speaker 1: Corey Kanter Bloomberg and you thank you so much for
Speaker 1: coming on odd lots. We really needed to do that
Speaker 1: episode that I.
Speaker 3: Learned a lot, thanks for that was super interesting.
Speaker 2: Yeah, that was great, Tracy.
Speaker 1: I really enjoyed that conversation.
Speaker 2: I learned a lot.
Speaker 1: You know, I want to just in terms of my thoughts,
Speaker 1: I kind of like want to start like at the
Speaker 1: very last point that Corey made that like, you know,
Speaker 1: this is such a key theme for us, the sort
Speaker 1: of like learning by experience, learning by doing, et cetera.
Speaker 1: And this idea that like even if the future of
Speaker 1: like battery tech is still TBD and it's probably going
Speaker 1: to keep evolving for the rest of our lives, that
Speaker 1: like it's really hard to just leapfrog anyone. Like if
Speaker 1: you have the experience already building high performance EV batteries,
Speaker 1: you're probably going to be better at it than some
Speaker 1: other entity that's starting today who like imagines they're going
Speaker 1: to leapfrog you.
Speaker 3: Well, I learned a new word, which is coopetition, and
Speaker 3: maybe that maybe that speaks to some of the idiosyncrasies
Speaker 3: around battery making as an industry. But this idea that
Speaker 3: you know, if you can't leap frog your way into
Speaker 3: this technology, then maybe it makes sense to partner with
Speaker 3: a company that has some expertise in it, even if
Speaker 3: they are ostensibly in a country with which you might
Speaker 3: have some sort of trade or geopolitical tensions at the moment.
Speaker 1: Well, and also to Corey's point, like, you know, a
Speaker 1: big story for the rest of the world and China
Speaker 1: in particular over the last several decades was the sort
Speaker 1: of their importation of America, know how of like various
Speaker 1: tech right and like companies setting up domestic jvs and
Speaker 1: that tech transfer process, et cetera. Historically that hasn't gone
Speaker 1: in the other direction so much. But the US is
Speaker 1: behind on battery tech. There are these subsidies and so
Speaker 1: to the extent that like the US is sort of
Speaker 1: like our shot is like sort of partnering with foreign
Speaker 1: non US battery makers, like importing that, know how, learning
Speaker 1: from them. That seems like part of how the US could,
Speaker 1: at least in theory, be a major player.
Speaker 3: Yeah, but it is going to be interesting to see
Speaker 3: whether or not it continues in the current landscape. So yes,
Speaker 3: it kind of makes sense for the past few years.
Speaker 3: But with the IRA underway, with some of the tensions
Speaker 3: arising in Europe, I do wonder whether or not those
Speaker 3: types of partnerships that have really helped sort of spring
Speaker 3: load or jumpstart China's EV industry whether or not they're
Speaker 3: going to continue at the same pace that they have previously.
Speaker 1: Yeah, there's so much money in it, Like it's just like, no,
Speaker 1: that's like everything. Every time I hear about how they
Speaker 1: design the IRA, it's like they're just like absolutely spray
Speaker 1: hosing cash at all this and so I feel like
Speaker 1: when you see all these announcements, it's like no one
Speaker 1: wants to avoid that money. Everyone everyone wants to get
Speaker 1: in front of it. Like I'm imagining those like boxes
Speaker 1: where the dollars fly.
Speaker 3: Around and everyone just sort of like everyone grabbing.
Speaker 2: That's sort of how I think of like IRA's.
Speaker 3: Joe's mental framework of industrial policy.
Speaker 1: Like a telephone booth of swirling dollars and all these companies.
Speaker 2: Trying to catch it.
Speaker 3: Shall we leave it there?
Speaker 2: Let's leave it there?
Speaker 3: Okay, this has been another episode of the All Thoughts podcast.
Speaker 3: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 3: Tracy Alloway.
Speaker 1: And I'm Joe Wisenthal. You can follow me on Twitter
Speaker 1: at the Stalwart. Follow our guest Corey Canter. He's at
Speaker 1: Corey b cantor check out all of his work, great
Speaker 1: stuff by him and his team over at Bloomberg and
Speaker 1: ef really tracking this data well. Follow our producers Carmen
Speaker 1: Rodriguez at Carmen Arman and dash Ol Bennett at dashbot.
Speaker 1: And check out all of our podcasts onto the handle
Speaker 1: at podcasts. And for more Oddlots content, go to Bloomberg
Speaker 1: dot com slash odd Lots, where we post transcripts. We
Speaker 1: have a blog and a newsletter. And check out the Discord.
Speaker 1: We have a whole room. We talk about transport, we
Speaker 1: talk about energy, all of these topics. Actively discuss twenty
Speaker 1: four to seven Discord dot gg slash od lots.
Speaker 3: Yeah, and if you enjoy odd Lots, if you like
Speaker 3: conversations about Chinese ev and competition with the rest of
Speaker 3: the world. Then please leave us a positive review on
Speaker 3: your favorite podcast platform. Thanks for listening.
Speaker 1: Benea