Speaker 1: US President Donald Trump has threatened tariffs on a number
Speaker 1: of goods coming into the country, and that's including autos.
Speaker 1: There's still a lot of uncertainty, but what is threatened
Speaker 1: so far is twenty five percent tariffs on all cars
Speaker 1: coming into the US as early as April, and that's
Speaker 1: in addition to a slow of other charges on Mexico
Speaker 1: Canada steel and aluminum and more to come.
Speaker 2: Tariffs threatened to raise the price of a car in
Speaker 2: the US by thousands of dollars at a time when
Speaker 2: US consumer confidence is already weakening and some economists are
Speaker 2: even seeing the risk of a recession. It also comes
Speaker 2: at a bad time for American car makers, who are
Speaker 2: already facing challenges. The tariffs also threatened companies in South
Speaker 2: Korea and Japan, major suppliers to the US. Meanwhile, China's
Speaker 2: ev makers continue to gain market share.
Speaker 1: We're listening to Asia Centric from Bloomberg Intelligence. I'm John
Speaker 1: Lee calling in from Hong Kong, and I'm.
Speaker 2: Cart Tom Treva, also in Hong Kong.
Speaker 1: Today we've got Steve Man, Global Autos and Industrials research
Speaker 1: manager from Bloomberg Intelligence. He's been a regular on the
Speaker 1: podcast and he's dialing in from Princeton, New Jersey. Steve,
Speaker 1: Welcome to the.
Speaker 3: Show, Thanks John, Thanks Katia, happy to be here.
Speaker 2: Glad to have you on to unpack all this for US. So,
Speaker 2: President Trump has threatened twenty five percent tariffs on all
Speaker 2: autos coming into the US. So maybe big picture, if
Speaker 2: these tariffs were eventually to go through, which is an
Speaker 2: if in April, what would be sort of the biggest
Speaker 2: impact that you're looking at in the auto space.
Speaker 3: I think this time around, he's really going to implement
Speaker 3: the tariffs on autos and it's going to impact every
Speaker 3: automaker as well as the global auto supply chain in
Speaker 3: a significant way because he really really want to bring
Speaker 3: some of that manufacturing back into the US. No, he's
Speaker 3: asking that question. If Tesla can produce cars a profit
Speaker 3: in the US, why can't the Big three? Right, So,
Speaker 3: you know a lot of the cars are still built
Speaker 3: in Mexico and Canada. As of twenty twenty four, three
Speaker 3: point six million vehicles that are sold in the US
Speaker 3: and are built in Mexico and Canada. That's out of
Speaker 3: sixteen million, So it's a significant chunk. And the terraffs
Speaker 3: are not only going to be applied to Mexico and Canada,
Speaker 3: it's going to be applied globally, and that's going to
Speaker 3: impact half of the auto sales in the US because
Speaker 3: half of those are are all imported from somewhere else.
Speaker 1: Steve, how much will it increase the price of buying
Speaker 1: a car in the US if these tariffs were to occur.
Speaker 3: Yeah, that's a really good question, John, because there's different
Speaker 3: ways of looking at it. If you just look at
Speaker 3: the tariff itself, the twenty five percent, we act estimate
Speaker 3: that it's going to increase prices for the consumer or
Speaker 3: the automakers will have to absorb, or the auto supplies
Speaker 3: will have to absorb about thirty five hundred dollars per vehicle.
Speaker 3: That's significant, especially you know what Katya was saying earlier.
Speaker 3: The auto market is not that healthy at the moment
Speaker 3: in the US. That demand is not that healthy. But
Speaker 3: if Trump says, oh, you're going to have to bring
Speaker 3: some of that production back in the US, wow, automakers
Speaker 3: in the supply chain will have to spend billions. We
Speaker 3: dis some quick analysis like if they have to shift
Speaker 3: just an example, about one hundred and fifty thousand units,
Speaker 3: that's about the size of a small assembly plant in
Speaker 3: the US that would cost between six hundred million if
Speaker 3: you're talking about ev to about a couple of billion
Speaker 3: dollars if you're building an suv a large pickup truck.
Speaker 3: So it's a lot of money these automakers have to spend.
Speaker 3: You know, that's going to be a huge added costs
Speaker 3: and an impact on cash flow for the automakers.
Speaker 2: So will that actually happen then? I mean, is there
Speaker 2: a world in which automakers just swallow the cost or
Speaker 2: raise the price, but don't necessarily go through the work
Speaker 2: of reconfiguring supply chains and building out plants because of
Speaker 2: course there's a human component too. I mean, will there
Speaker 2: even be people to work in these factories?
Speaker 3: Yeah? You know, Trump is a pretty dead set about
Speaker 3: bringing manufacturing back. So there's a one month delay. April
Speaker 3: second is the day, right, he's going to implement these tariffs,
Speaker 3: and that one month's delay. Look, automakers, the global auto
Speaker 3: supply chain can't really do anything in one month because
Speaker 3: the globalization of the auto industry really started in nineteen
Speaker 3: ninety four with the North American Free Trade Agreement NAFTA
Speaker 3: that was the predecessor to the current free Chair Agreement,
Speaker 3: which is the United States, Mexico Canada Free Chery Agreement,
Speaker 3: and so it took many, many decades to actually go global.
Speaker 3: To unwind all that, it's definitely going to take more
Speaker 3: than a month. So I think what Trump is really
Speaker 3: looking for within this one month is for the automakers
Speaker 3: in the supply chain to really come back and give
Speaker 3: them some concrete plans, you know, how to bring some
Speaker 3: or all manufacturing back into the US. And the plan
Speaker 3: well likely needs to come with a timeline. I'm pretty
Speaker 3: sure he probably wants a lot of this done before
Speaker 3: his term ends, because you know, is in his second
Speaker 3: term as president.
Speaker 1: And Steve, for the listener out there, how long will
Speaker 1: it take for an automaker to reshore into the US.
Speaker 1: So if they have a factory in Canada or Mexico
Speaker 1: and they decide to move it to the US, are
Speaker 1: we talking years?
Speaker 3: Yeah, it could be years, it could be months. We
Speaker 3: also looked into that. For example, GM builds the Chevy Silverado,
Speaker 3: one of the best selling pickup trucks in the US
Speaker 3: as well as Canada. For GM, you know, the option
Speaker 3: is maybe shift some of that production back into a
Speaker 3: plant that builds the Silverado. In the US. You know,
Speaker 3: if they have capacity to do so, and all they
Speaker 3: would have to do, you know, they're going to have
Speaker 3: to spend money, for sure, hundreds of million dollars. It
Speaker 3: probably just some of the equipment could be just lifted
Speaker 3: off the ground in Canada and then transfer it back
Speaker 3: into US. That could take a few months. Right, But
Speaker 3: GM's evs, all their evs are actually built in Mexico,
Speaker 3: new plants, a new assembly line. They don't have any
Speaker 3: duplication of manufacturing assembly in the US, So for them
Speaker 3: to shift that back it could take years. If they
Speaker 3: have to construct a new building, years to get the approvals,
Speaker 3: any types of approval. They're gonna have to build the plant.
Speaker 3: They have to shift the production back, so it will
Speaker 3: take a couple of year, two three years if that's
Speaker 3: the case.
Speaker 2: Which carmakers do you see being hit the most by
Speaker 2: these tariffs kind of globally?
Speaker 3: I honestly think that Trump is really targeting the Asians
Speaker 3: and the European autos. Earlier we kind of alluded to
Speaker 3: Trump may not implement the tariffs as long as they
Speaker 3: have plans to bring production back. The other thing that
Speaker 3: we have to be cognizant of is the free trade agreement,
Speaker 3: the United States Mexico Canada Agreement. This is something that
Speaker 3: Trump signed in his first term. It's his baby, right,
Speaker 3: you know, he's a businessman, and I think he will
Speaker 3: also keep his word, meaning that if the automakers meet
Speaker 3: what we call the local content rule within the USMCA.
Speaker 3: That means that so within the USMCA, as long as
Speaker 3: the value of the components of the vehicles, you know,
Speaker 3: with seventy five of the value of the component are
Speaker 3: built in US, Mexico and Canada, those vehicles are exempt
Speaker 3: from terroriffs. Obviously, he can bypass that if he really
Speaker 3: wants to. But I think that he's going to cut
Speaker 3: a break for the Big three, especially a Big three,
Speaker 3: because you know, at the end of the day, they're
Speaker 3: American automobiles. I can't see why he would disadvantage, right,
Speaker 3: the American companies. You know, his mantra is really to
Speaker 3: make America great again, So he think he really wants
Speaker 3: to have the American automat makers thrive. So I think
Speaker 3: the terriffs will at the end of the day target
Speaker 3: the Japanese, the Koreans, and the Europeans. You know, Hondas
Speaker 3: built a lot of their cars that are sold in
Speaker 3: the US and Canada, and they also import a lot.
Speaker 3: Same thing with Toyota. Toyota actually still imports a lot,
Speaker 3: especially like Lexus. There's only one model that they built
Speaker 3: in North America. Every Lexus that they sell in North
Speaker 3: America are built in Japan in Shandai. Same thing, a
Speaker 3: lot of the cars are built there in their home
Speaker 3: country and Europeans. Volkswagen has a plant here in the US,
Speaker 3: has a couple of plants in Mexico, but you know,
Speaker 3: a lot of it is important. And then even more
Speaker 3: so with the German luxuries, you know, the BMW, Mercedes
Speaker 3: and Volkswagen. I think those automakers will have to really
Speaker 3: brace for the cost hit that they're going to experience
Speaker 3: with the higher tariffs and state.
Speaker 1: On a macro front, even excluding these tariffs, there's a
Speaker 1: lot of news coming out that the US consumer is
Speaker 1: weakening and some economists are even talking about a recession
Speaker 1: in the US. Is the auto industry ready for this
Speaker 1: weakening macro picture?
Speaker 3: Yeah, John, the auto industry is already in a recession. Okay, Okay,
Speaker 3: sales have slowed. Look at Ford Ford's fourth quarter and
Speaker 3: first quarter sales. It was down in the teens. Part
Speaker 3: of it is related to some changeover on their popular vehicles.
Speaker 3: But if you listen to all the conference fourth quarter
Speaker 3: earnings calls from these companies, they are guiding down earnings.
Speaker 3: They are facing pricing pressure, and a lot of that
Speaker 3: is actually due to Stillentistalentis is based in Europe, but
Speaker 3: their biggest businesses in the US. You know, they have
Speaker 3: the Dodge brands, they have the Chrysler, they have the
Speaker 3: Jeep brands, and they can't sell vehicles. They had even
Speaker 3: new twenty twenty three models on their dealer floors. They
Speaker 3: had to cut prices left and right. They cut production
Speaker 3: just to manage inventory by a third, you know, they
Speaker 3: cut production by a third and a fourth quarter. So
Speaker 3: the US auto industry is actually in the cycle of
Speaker 3: price cutting and managing inventory and cutting production. I think
Speaker 3: you will see more of that in twenty twenty five.
Speaker 2: So if the auto industry, as you say, is already
Speaker 2: in such dire straits, you add tariffs on top of
Speaker 2: that and potentially, as you said, billions of dollars in
Speaker 2: costs to relocate. So where does that lead us in
Speaker 2: a year or two could we potentially see some of
Speaker 2: these companies fail or even more severe issues.
Speaker 3: Well, yeah, I think it's really hard for the automakers
Speaker 3: to pass those tariff related costs along with the consumer
Speaker 3: right now. You know, maybe Toyota can do it because
Speaker 3: if you look at all the brands, Toyota's actually has
Speaker 3: the smallest dealer inventory in North America. They have thirty days.
Speaker 3: A lot of them are above sixty days, some are
Speaker 3: at ninety days. Stialentists I just mentioned earlier. Some models
Speaker 3: are over one hundred days. So it'll be really, really
Speaker 3: hard for the automakers to actually pass those costs along
Speaker 3: to the consumer. And optimistically it's going to take a
Speaker 3: couple quarters to actually foolse inventories to wind down, and
Speaker 3: that assumes that there's going to be more price cuts
Speaker 3: for the consumer.
Speaker 2: Do you think investors know this or are pricing this inot?
Speaker 3: I think some of that has already been priced in.
Speaker 3: You've seen the price action on some of these stocks. GM.
Speaker 3: They GM just announced very recently accelerated stock buyback program
Speaker 3: of two billion after I think they did about ten
Speaker 3: billion last year. Really, the stock they didn't even react
Speaker 3: to it. I think the investors are reading into it that,
Speaker 3: oh maybe they're anticipating lower earnings, and so they pre
Speaker 3: empt that by announcing another accelerated stock buy back. So
Speaker 3: I think, you know, in the next couple quarters, when
Speaker 3: more news come out, I think the Lentis will still
Speaker 3: have to cut production. I believe that we're going to
Speaker 3: see increasing pricing pressure that's going to have an impact
Speaker 3: on earnings for these companies for sure in the next
Speaker 3: couple quarters.
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Speaker 1: and share. Steve, what's happening with Tesla. We have to
Speaker 1: talk about this stock. The market calap has almost halved
Speaker 1: since December, and arguably this is the one company that
Speaker 1: should benefit from tariffs, right because they make all their
Speaker 1: cars in the US. Tell us what's going on.
Speaker 3: There's a lot of noise around Tesla. It's a love
Speaker 3: and hate relationship long short, love and hate relationship with
Speaker 3: the stock. Politics aside, I really believe Tesla is at
Speaker 3: the cutting edge, right. I think they're really the only
Speaker 3: American automaker or Western automaker for that to compete with
Speaker 3: the Chinese in terms of not just EV. I mean,
Speaker 3: to me, Eve's old technology. I think the buzz is
Speaker 3: really on autonomous vehicle and AI. Tesla is at the
Speaker 3: forefront in North America, in the Western world, the only
Speaker 3: one I think for now be able to effectively compete
Speaker 3: with Tesla. But you know, Tesla is going through some
Speaker 3: pain h and again politics society. There's a lot of
Speaker 3: noise around where Tesla stands in terms of his his
Speaker 3: political stance. Uh, you know, what he's doing for the
Speaker 3: government has really raised some eyebrows for a lot of people.
Speaker 2: Musk with the Department of Government efficiency.
Speaker 3: That's right, But you know, we're very you know, we're
Speaker 3: equity analysts. His political stance does impact the stock. But
Speaker 3: you know, I think I think the other thing that
Speaker 3: a lot of people don't realize and are not talking
Speaker 3: about it is the company is going through a model change.
Speaker 3: The model. Why you've probably seen pictures of its redesigned
Speaker 3: you know, inside and out, so a lot of it inside,
Speaker 3: you know, under the cover we can't really see. But
Speaker 3: Tesla is not a GM, they don't have multiple models,
Speaker 3: so model why being their best selling model globally of
Speaker 3: any type of car. You know, if they have to
Speaker 3: shut down plants for a month, they shut down a
Speaker 3: plant in China and Shanghai for a month for that changeover,
Speaker 3: it's definitely going to impact sex. They stop producing the
Speaker 3: old one, and really they don't have another hot selling
Speaker 3: car that actually can offset. From a business perspective, I
Speaker 3: think the company is going through a model change. I
Speaker 3: think the inflection point in terms of sales is actually
Speaker 3: in the second quarter. You know, orders from China has
Speaker 3: been really good. The other thing, you know, we're talking
Speaker 3: about Ton's vehicles. Tesla we started selling their full self
Speaker 3: driving autonomous vehicle and software in China for the first time,
Speaker 3: and I think if you follow Chinese social media, the
Speaker 3: reaction has been very positive. Everybody's been wild and amazing
Speaker 3: how well that thing works in China. So second quarter
Speaker 3: I think we'll see definitely improvement. Third quarter, definitely improvement
Speaker 3: in sales.
Speaker 2: So we were just talking about politics and the impact
Speaker 2: of politics on the brand. We're hearing about things like
Speaker 2: Americans boycotting Tesla as the sale in China has also
Speaker 2: been tough just because of the competition Chinese carmakers. How
Speaker 2: serious are these kinds of threats to the company.
Speaker 3: Yeah, it's a huge threat, not just for Tesla. If
Speaker 3: we're talking about China. Let's talk about China first. The
Speaker 3: local brands are very, very strong. They've come up the
Speaker 3: curve quite rapidly over the last ten fears fifteen years
Speaker 3: on quality, and you know, they understand the consumer very
Speaker 3: well over there. If you look at the age of
Speaker 3: the consumer base on average, you're talking about thirty something
Speaker 3: for car buyers in China versus North America, you're in
Speaker 3: the fifties. So the consumer there are much more open
Speaker 3: to the tech and that's more important to them. You know,
Speaker 3: what are the apps on the vehicles? What can the
Speaker 3: vehicles do for me? What are the voice activated apps
Speaker 3: that the car can do for me? That's more important
Speaker 3: for consumers over there. And the local automakers, you know,
Speaker 3: build cars and they're very savvy, very sophisticated now in
Speaker 3: terms of building these cars that cater to that age group.
Speaker 3: So for automakers, it's really not their fault because their
Speaker 3: business have been very global. They can't just build cars
Speaker 3: just for China. They have the build cars for everybody
Speaker 3: in the world. So because of that, in terms of tech,
Speaker 3: in terms of user experience, user interface, they kind of
Speaker 3: lagged behind the Chinese and that's why, like going back
Speaker 3: to Tesla, you know, that's why they were very urgent
Speaker 3: in trying to roll out FSD. They were actually blocked
Speaker 3: for some time and rolling out FSD in China because
Speaker 3: of data privacy issues, but they were able to clear it.
Speaker 3: And I think Tesla still has a cachet in China,
Speaker 3: even though from a market share perspective it's shrinking. If
Speaker 3: you look at absolute numbers in terms of sales, they
Speaker 3: are growing. Okay, they're not grown as fast because of
Speaker 3: a lot of the choices that the consumer have there.
Speaker 3: But you know, I think Tesla, out of the Western
Speaker 3: auto makers again, they're leading the pack in building cars
Speaker 3: that cater to the consumer, the younger consumer in China
Speaker 3: and I would say probably the rest of the world.
Speaker 1: Steve, you said something surprising. You think that electric vehicle
Speaker 1: technology is already legacy. You think it's already old technology.
Speaker 1: And now you're talking about ADAS or advanced driver assistance
Speaker 1: systems as well as you know, robotaxis. How did the
Speaker 1: Chinese automakers compete or how do they fare versus Tesla
Speaker 1: in this technology?
Speaker 3: Yeah, you're right. In the EV is old technology. It's
Speaker 3: been around since the nineteen hundreds. Interesting point at Google
Speaker 3: charging stations in Chicago in the early nineteen hundred you'll
Speaker 3: see a bunch of them. It's just never got picked up.
Speaker 3: And everybody know internal commustionion engine became the standard. So
Speaker 3: automas driving is where the competition is now. It's actually
Speaker 3: where companies can generate the most profit building cars ev
Speaker 3: gasoline car razor thin margins. You can see Tesla's margin
Speaker 3: coming down very sensitive to pricing to demand. Right where
Speaker 3: the difference is automas vehicle, cyber cabs be it cyber cabs.
Speaker 3: You know Tesla rolling out their own fleet and adopting
Speaker 3: the Uber lift d D model. You can see the margins.
Speaker 3: I think they're double digits for Uber and Lyft. But
Speaker 3: if say companies like Tesla or someone else like Xpunk
Speaker 3: for example, down the road, you know they can actually
Speaker 3: license the self driving software to other automakers, and those
Speaker 3: margins are huge. You're talking about software type margins into
Speaker 3: sixties and seventy percent margins. So I think for automakers
Speaker 3: to succeed in the long term, they have to shift
Speaker 3: that business model to data, to AI, to self driving vehicles,
Speaker 3: you know. Staying put as a traditional car manufacturer, I
Speaker 3: think it's going to be a tough business. You can
Speaker 3: see with Nissan they're going through that right now. Nissan
Speaker 3: is having big problems not just on costs, but on
Speaker 3: demand for their vehicles.
Speaker 2: Yeah, we had a question here on Nissan and Honda,
Speaker 2: but before getting to that, I want to get your
Speaker 2: thoughts on how far away we are from that future
Speaker 2: that you just laid out. I mean, in the States,
Speaker 2: you don't see a lot of you know, robo taxis
Speaker 2: or self driving cars yet you know, you do see
Speaker 2: them sporadically, But how far away? How many years? Maybe
Speaker 2: it's decades, Like when could we have that?
Speaker 3: You know? Let's see. I mean Elon Musk is very ambitious,
Speaker 3: right you know, he are announced that he's going to
Speaker 3: roll out robotaxis in June. I think it's going to
Speaker 3: be in Austin, Texas, and then next one will be
Speaker 3: somewhere in California, and then you know his goal. We'll
Speaker 3: have to see if it happens. His goal is to
Speaker 3: roll out to multiple cities by year end, so it
Speaker 3: could be sooner than later. Now, the predominant taxi operator
Speaker 3: has been WEMO in the US, so WEAIMO has rolled
Speaker 3: out to a few cities around the country, and it
Speaker 3: has taken them a few years to get to those
Speaker 3: few cities. And there's a reason for that because the
Speaker 3: technology that WEIMO us is quite different than Tesla. So
Speaker 3: simply put it, Tesla's autonomous vehicle technology allows it to
Speaker 3: scale much faster than WEIMO. So Tesla uses what we
Speaker 3: call neural network, and then WEIMO still used the traditional algorithm.
Speaker 3: So neural network basically is a computer that teaches itself.
Speaker 3: As long as you feed it data, it'll learn, and
Speaker 3: it also create fictitious hypothetical driving situations that it'll learn.
Speaker 3: And so Tesla's vehicles theoretically you can PLoP it anywhere
Speaker 3: in the world and it should be able to drive itself.
Speaker 3: And actually the China Exams sample we talked about is
Speaker 3: a good example because Tesla was not able to collect
Speaker 3: any road data from its Tesla vehicles running in China.
Speaker 3: The way they taught the car or just to like
Speaker 3: familiarize the car with Chinese roads, was actually through YouTube videos.
Speaker 3: But you know, the car, once you PLoP it on
Speaker 3: a road in China, it's still able to drive itself
Speaker 3: in a very safe manner based on what I've seen
Speaker 3: on social media. Now, Waymo, Waymo's quite different. And Waymo
Speaker 3: uses algorithm millions and by billions of lines of codes
Speaker 3: to teach the system and then uses radars instead of
Speaker 3: a vision system like how you and I drive. So
Speaker 3: they have to program in, like if they're going to
Speaker 3: operate in Las Vegas, they have to program in all
Speaker 3: the road conditions, all the roads that in Las Vegas
Speaker 3: for it to operate. So for Weymo to start operating
Speaker 3: a new city, you basically have to what they call
Speaker 3: geofence it meaning that it has to learn specifically the
Speaker 3: roads of that city for it to operate. So to
Speaker 3: answer your question, if this neural network, which not only
Speaker 3: Tesla is using to teach cars how to drive, xpunk
Speaker 3: is doing the same thing. So if neural network works,
Speaker 3: and you know, maybe robotax is a lot sooner than
Speaker 3: we think, and.
Speaker 1: It sounds like robotaxi technology. It's a pretty much a
Speaker 1: two horse race between China and the US, Is that right?
Speaker 3: Stave yes, But you know, Mercedes have been doing a
Speaker 3: lot of work around self driving. They're rolling out what
Speaker 3: we call Level three plus, so it's basically autonomous driving,
Speaker 3: and I think their vehicles can only operate autonomously on highways.
Speaker 3: It's more controlled, there's less variation than you see in
Speaker 3: city driving. But I think the leaders are really the
Speaker 3: US in China at the moment.
Speaker 2: And going back to Honda and Nissan, so you'll forget
Speaker 2: what's the latest on that. There were kind of talks
Speaker 2: of merging, Nissan merging with Honda, discussions fell through. What
Speaker 2: are kind of some of the issues there?
Speaker 3: Yeah, I think based on the fact that you know,
Speaker 3: they switched out the CEO, they may be making an
Speaker 3: attempt to kind of fix things on their own. But
Speaker 3: all the stuff we just talked about, how fierce of
Speaker 3: competition is in the auto industry, not just in the
Speaker 3: US now globally. Right with China, you know, not only
Speaker 3: out selling foreign automakers, foreign brands in their home turf,
Speaker 3: they're actually going global and there's not that much room
Speaker 3: for that many players in the market. So Nissan, they
Speaker 3: haven't updated their vehicles for a while. At the same time,
Speaker 3: they've been cutting prices because they're not selling very well,
Speaker 3: they're cutting production. They're really in a spiral at the moment.
Speaker 3: They really need a cash injection at some point, so
Speaker 3: cost cutting alone is not going to help. It's more urgent,
Speaker 3: I think than a lot of people think. So they're
Speaker 3: going to need some kind of cash injection. And if
Speaker 3: Honda is not the one, I wouldn't be surprised if
Speaker 3: they're looking for other suitors at the moment.
Speaker 1: Are we going to get a big shakeout in the
Speaker 1: auto industry, especially for the legacy players because you mentioned
Speaker 1: this new technology and you need a lot of capex
Speaker 1: to spend on AI autonomous driving robotaxis. At the same time,
Speaker 1: you mentioned that Chinese automakers are gaining market share around
Speaker 1: the world, probably not the US, but outside the US.
Speaker 1: What's going to happen to all these legacy guys.
Speaker 3: I think the legacy automakers are I would say they're
Speaker 3: on notice because the competition for autos, the profit centers
Speaker 3: for autos, is not building cars. It's really about the
Speaker 3: Autonoa's vehicles. So it's not the hardware, it's really the software.
Speaker 3: Now going forward, I think it's just a matter of
Speaker 3: time that we're going to see more and more consolidation
Speaker 3: and then the industry especially like I said earlier, the
Speaker 3: Chinese are looking abroad, you know, looking at overseas, and
Speaker 3: they have very compelling product for emerging markets. That's why
Speaker 3: you see them in Southeast Asia, you see them in
Speaker 3: South America. You'll see them in countries that you know,
Speaker 3: don't have an auto industry, so they're open to Chinese,
Speaker 3: like Australia. You know, some of the best selling cars
Speaker 3: in Australia's are Chinese, the Great Wall, the Byds, you know.
Speaker 3: Typically the emerging markets in some of the other developed
Speaker 3: markets like Australia, the dominant players have been the Japanese,
Speaker 3: have been the Koreans, you know, and the Chinese are
Speaker 3: bringing in vehicles that are very jazzy. They have really
Speaker 3: cool technology that can wow consumers, can entice consumer to
Speaker 3: actually buy their vehicles. So I think the traditional automaker
Speaker 3: of walking, they need to start running instead of driving
Speaker 3: fifty kilometers per hour, they need to be start driving.
Speaker 3: They step on the accelerator driving one hundred kilometers per hour,
Speaker 3: and so to me, it's like it was really interesting GM, right,
Speaker 3: And I just saw the news GM exited Cruise. They
Speaker 3: basically shut down that operation. Cruise was actually their autonomous
Speaker 3: vehicle subsidiary. You know, that's where they put in a
Speaker 3: lot of money to develop technology. And there was an
Speaker 3: accident out west of the US a couple of years
Speaker 3: back and they set them back to a point where
Speaker 3: they just shut it down. And you know, I don't
Speaker 3: know if that's the best strategy going forward. And that's
Speaker 3: why Tesla has a higher valuation, by the way, because
Speaker 3: they're spending so much cash on that future growth and
Speaker 3: where the profit centers are for the future auto industry
Speaker 3: and for company like GM. Through pullbag tells us a
Speaker 3: lot about the longevity I'll do these companies and white
Speaker 3: Tesla and others with technologies getting higher e valuation.
Speaker 1: Okay, so automakers have to hit on the accelerator, Steve,
Speaker 1: that's a great way to end the podcast. Thanks for
Speaker 1: coming on.
Speaker 3: Oh anytime. Very interesting discussion.
Speaker 1: You've been listening to Age Eccentric from Bloomberg Intelligence. I'm
Speaker 1: John Lee in Hong Kong and.
Speaker 2: I'm card digm True but also in Hong Kong.
Speaker 1: You can find us on Apple Podcasts, Spotify, or wherever
Speaker 1: you get your podcasts. His podcast was also produced and
Speaker 1: edited by Clara Chen and thanks for listening.