WEBVTT - Are EVs or Hybrids the Answer? 0:00:02.600 --> 0:00:07.360 You're listening to Asia Centric from Bloomberg Intelligence, the podcast 0:00:07.400 --> 0:00:10.480 that pulls back the curtain non global business so you 0:00:10.600 --> 0:00:15.080 can invest better across the Pacific rim. I'm Tom Corbett 0:00:15.120 --> 0:00:16.320 in Hong Kong. 0:00:16.400 --> 0:00:19.200 And I'm John Lee. The glow is fading on the 0:00:19.239 --> 0:00:24.280 once hot electric vehicle market. Demand is dropping, competition is growing, 0:00:24.680 --> 0:00:27.480 consumers are skeptical, and the outlook concertain. 0:00:27.800 --> 0:00:31.680 Tesla has become the poster child for the industry's struggles, 0:00:31.680 --> 0:00:36.400 with slowing sales, a tumbling stock price, and China's economic 0:00:36.479 --> 0:00:40.840 woes all converging into a grim picture. But other EV 0:00:41.000 --> 0:00:45.000 makers are also struggling and the road ahead could be rough. 0:00:45.520 --> 0:00:48.040 Is this just a rough patch for the EV industry? 0:00:48.440 --> 0:00:52.040 A hybrid cause the answer? And which automakers can take 0:00:52.080 --> 0:00:53.200 advantage of this trend. 0:00:53.840 --> 0:00:57.840 Let's sort it all out with Steve Mann, Global Director 0:00:57.920 --> 0:01:02.480 of Industrials and Automotive Search at Bloomberg Intelligence. He's been 0:01:02.520 --> 0:01:06.319 covering the industry for more than twenty years. He joins 0:01:06.360 --> 0:01:09.720 us from Princeton, New Jersey. Steve, great to have you 0:01:09.800 --> 0:01:11.039 back on Asia Centric. 0:01:11.640 --> 0:01:13.959 Thanks for having me, Steve. 0:01:14.000 --> 0:01:17.679 Demand for electric vehicles seems to be weaker than expected 0:01:17.760 --> 0:01:20.440 in many parts of the world. Do you think there's 0:01:20.480 --> 0:01:23.959 a consumer backlash against evs, especially in the US. 0:01:25.280 --> 0:01:28.000 I think the ship have sailed for EV's. I think 0:01:28.120 --> 0:01:32.240 evs are here to stay, especially the battery electric vehicles. 0:01:32.680 --> 0:01:35.520 I'm a little bit more optimistic than the street and 0:01:36.040 --> 0:01:38.920 a lot of rhetoric you're hearing out there. I think 0:01:38.959 --> 0:01:42.400 it's the right solution for the long term, but it's 0:01:42.440 --> 0:01:45.479 gonna take time to get to know the numbers we're 0:01:45.520 --> 0:01:48.840 seeing in China, where you have twenty five percent penetration, 0:01:49.440 --> 0:01:52.000 Over the US you only have about seven or eight, 0:01:52.440 --> 0:01:54.520 so it's going to take time to get there. If 0:01:54.560 --> 0:01:57.840 you're talking about the US, there's not as many regulations 0:01:57.840 --> 0:02:00.680 to push battery EV sales as there is in China. 0:02:01.160 --> 0:02:04.640 But if you look at the Inflation Reduction Act, it's 0:02:04.680 --> 0:02:09.800 something that I think will help drive greater affordability and 0:02:09.919 --> 0:02:12.800 hopefully higher sales, especially in the second half of the decade. 0:02:13.600 --> 0:02:16.440 But Stave lots of car companies have spent a lot 0:02:16.480 --> 0:02:20.000 of money building EV capacity. Do you think there's going 0:02:20.080 --> 0:02:22.400 to be enough demand to meet all the new v's 0:02:22.480 --> 0:02:24.160 hitting the market of the next few years. 0:02:25.080 --> 0:02:27.360 I think so. I think if you look at some 0:02:27.480 --> 0:02:31.320 of the trends that we're seeing. EV sales is still growing. 0:02:31.400 --> 0:02:34.040 It's not dropping, obviously, it's not growing as fast as 0:02:34.080 --> 0:02:37.320 it used to be. And the main reason for this 0:02:37.560 --> 0:02:42.400 is affordability. If you look at what BMW's offering, Mercedes offering, 0:02:42.440 --> 0:02:45.960 all these luxury automakers are offering, the prices are just 0:02:46.080 --> 0:02:49.560 too high for the mass market. Most of these evs 0:02:49.639 --> 0:02:52.840 are over fifty thousand. The only ones that are offering 0:02:53.040 --> 0:02:55.440 cheaper evs is actually Tesla, and that's why you see 0:02:55.440 --> 0:03:00.360 their sales much better than other automakers. So if you 0:03:00.400 --> 0:03:03.040 look into the future just a bit, not too far 0:03:03.120 --> 0:03:07.680 away into twenty twenty five, twenty twenty six, most automakers 0:03:07.760 --> 0:03:11.240 are actually rolling out what we call sub thirty thousand, 0:03:11.560 --> 0:03:16.080 anything that's below thirty thousand US dollar evs, compact ev 0:03:16.320 --> 0:03:20.280 subcompact EV's that's going to resonate a lot more with 0:03:20.400 --> 0:03:23.440 the masses. And I think that's when you know we're 0:03:23.440 --> 0:03:26.440 going to see a cyclical recovery, if I can call 0:03:26.480 --> 0:03:26.799 it that. 0:03:27.400 --> 0:03:30.000 Steve Mann, what the industry is going through right now 0:03:30.120 --> 0:03:33.520 is kind of a plot twist that really few anticipated 0:03:33.760 --> 0:03:38.400 how much of the industry's troubles and maybe specifically Tesla's 0:03:38.520 --> 0:03:42.040 challenges are self inflicted or was all this inevitable? 0:03:42.960 --> 0:03:46.240 My point of view is competitive landscape is changing. I 0:03:46.320 --> 0:03:50.360 want to think Tesla is probably one of the strategy 0:03:50.640 --> 0:03:53.640 during this downturn is really to squeeze some of their 0:03:53.640 --> 0:03:57.560 competitors out of the market. I mean, there's different debates 0:03:57.800 --> 0:03:59.960 arguments around it. You know, you're based in Hong Kong. 0:04:00.360 --> 0:04:02.000 I think the folks in that side of world is 0:04:02.000 --> 0:04:04.600 going to have a different perspective because the competition is 0:04:04.640 --> 0:04:08.960 so intense in China with buid was jely with a 0:04:08.960 --> 0:04:13.400 whole host of local automakers rolling out very affordable EV's 0:04:13.480 --> 0:04:17.040 over there. In the US is quite different. You hear 0:04:17.200 --> 0:04:20.760 for kind of pulling back investments. GM is kind of 0:04:20.800 --> 0:04:25.640 delaying some of their rollouts, but they're still maintaining some 0:04:25.680 --> 0:04:29.080 of the medium termed long term targets of launching these 0:04:29.240 --> 0:04:32.240 what I call a more affordable, budget friendly evs in 0:04:32.320 --> 0:04:35.360 twenty twenty five, twenty twenty six. And also, I want 0:04:35.400 --> 0:04:38.599 to say the EV supply chain in the US, and 0:04:38.640 --> 0:04:41.880 I would say in Europe as well, it's actually expanding. 0:04:42.200 --> 0:04:45.600 This trade spat that's been going on between China and 0:04:45.680 --> 0:04:49.200 the West is actually having a benefit. There's all these 0:04:49.240 --> 0:04:53.000 negative rhetoric around trades, bad tariffs going up. I think 0:04:53.080 --> 0:04:55.920 in the political world we call it geopolitics, but this 0:04:56.000 --> 0:04:59.920 is real business competition. What you're seeing actually with this 0:05:00.080 --> 0:05:03.799 trace bad is the US with the Inflation Reduction Act 0:05:04.480 --> 0:05:07.440 is actually helping. It's leading to a lot of investments 0:05:07.440 --> 0:05:10.240 in the US one hundred and sixty billion dollars of 0:05:10.400 --> 0:05:14.240 investment in the US to actually expand the ev supply 0:05:14.360 --> 0:05:17.960 chain over time. That's going to drive cost down and 0:05:18.040 --> 0:05:20.080 make these cars evs more affordable. 0:05:21.360 --> 0:05:24.080 Is it just a matter of affordability, Steve? You alluded 0:05:24.839 --> 0:05:28.719 just a short time ago to the American all wakers 0:05:29.120 --> 0:05:32.960 scaling back, perhaps limiting their investment in evs. Is there 0:05:33.120 --> 0:05:37.360 just a skepticism about EV's in the US that doesn't 0:05:37.400 --> 0:05:39.120 exist in China or in Europe? 0:05:39.560 --> 0:05:42.240 There is. If you look at the three regions, you 0:05:42.360 --> 0:05:47.159 have the Chinese adopting EV's a much faster rate. US 0:05:47.279 --> 0:05:49.600 is actually on the other side of the spectrum. It's 0:05:49.640 --> 0:05:52.839 the slowest, and then EUS kind of in the middle. 0:05:53.040 --> 0:05:55.320 And you can see that by the numbers, twenty five 0:05:55.360 --> 0:05:59.440 percent penetration rate in China, you got eight percent in 0:05:59.480 --> 0:06:02.960 the USA. In around low teens thirteen percent in Europe. 0:06:03.080 --> 0:06:07.120 So I think Tom, you're right, there is right now. 0:06:07.240 --> 0:06:11.200 The main hurdle is affordability. I think once we have 0:06:11.279 --> 0:06:13.839 more affordable EV's in a row, it's going to draw 0:06:13.839 --> 0:06:17.400 a lot more consumers into the space. Another problem is 0:06:17.440 --> 0:06:20.440 going to show up, for example, charging. You know, I 0:06:20.440 --> 0:06:24.200 think charging infrastructure needs to catch up as well. There's 0:06:24.240 --> 0:06:26.359 not a lot of spending on this side of the 0:06:26.400 --> 0:06:29.160 world for charging, especially from the government. 0:06:29.720 --> 0:06:32.839 But Steve, you don't believe in the weather argument there, 0:06:32.839 --> 0:06:35.840 Like it's okay for early adopters in California with warm 0:06:35.880 --> 0:06:38.320 weather to buy evs, but if you're sitting in say 0:06:38.400 --> 0:06:42.280 like Minnesota, cold winters, it's less battery efficient. 0:06:43.040 --> 0:06:46.560 Yeah, I think there's a number of issues that the 0:06:46.720 --> 0:06:51.520 US has to face. The consuming here are probably not 0:06:51.680 --> 0:06:54.719 used to having EV's. They're not as if I can say, 0:06:54.839 --> 0:06:59.159 not as educated on how to manage or how to 0:06:59.240 --> 0:07:04.560 maintain any Look you have for example in Scandinavia, Norway, 0:07:04.880 --> 0:07:07.520 you know, some of the coldest weather on Earth, but 0:07:07.839 --> 0:07:11.000 their battery EV penetration rates are in the eighties and 0:07:11.080 --> 0:07:13.960 ninety percent. So you know, I think the consumer over 0:07:14.040 --> 0:07:18.040 time will understand how evs operate and we'll be more 0:07:18.160 --> 0:07:20.520 educated in keeping ownership of an EV. 0:07:21.920 --> 0:07:24.080 So, Steve, sounds like you believe that evs are just 0:07:24.200 --> 0:07:26.840 hitting a rough patch, but I know your Global Autos 0:07:26.880 --> 0:07:29.680 team has done quite a few surveys. This seems to 0:07:29.720 --> 0:07:33.720 be a surprising demand for hybrid cars. Are you surprised 0:07:33.720 --> 0:07:34.040 by that? 0:07:35.000 --> 0:07:38.560 No, I think hybrid is a very good solution to 0:07:38.760 --> 0:07:42.360 address some of the attitudes. You know, we talked about 0:07:42.480 --> 0:07:46.360 educating the use of battery evs. I think these plugin 0:07:46.440 --> 0:07:49.640 EV's is a good transition. I'm based in Princeville. The 0:07:49.680 --> 0:07:53.000 whole section of the parking lot that's that's electrified. I 0:07:53.000 --> 0:07:55.840 don't have charging points, and you see a lot of 0:07:55.840 --> 0:07:58.320 battery EV's. You see a lot of phgvs plug in 0:07:58.440 --> 0:08:02.760 hybrid electric vehicles out there, and I think consumer that 0:08:02.800 --> 0:08:06.880 are buying the PHVs today will actually graduate to battery 0:08:06.920 --> 0:08:10.240 evs in a few years because I think they need 0:08:10.280 --> 0:08:12.560 to get used to how to set up their schedule, 0:08:12.920 --> 0:08:15.720 charge your vehicles for the number of hours that they need, 0:08:16.120 --> 0:08:19.040 and then have that fit that into their lifestyle. 0:08:19.800 --> 0:08:23.320 So if we do see continued demand for hybrid cause 0:08:23.760 --> 0:08:26.280 at least in the need term, which car makers do 0:08:26.320 --> 0:08:28.640 you think are best suited? Is it Toyota, because that's 0:08:28.680 --> 0:08:29.400 who I'm thinking. 0:08:30.240 --> 0:08:33.800 Yeah, I think Toyota is the one that's going to 0:08:33.840 --> 0:08:37.760 be most beneficial to this. And the reason why is 0:08:37.800 --> 0:08:40.720 they really own the technology. If you look at the 0:08:40.920 --> 0:08:45.160 number of patents that are out there on hybrid vehicles, 0:08:45.760 --> 0:08:49.160 most of them are owned by Toyota. They invented hybrid vehicles. 0:08:49.200 --> 0:08:53.600 It's interesting go back in history a little bit. Hybrid 0:08:53.640 --> 0:08:58.320 vehicles actually started with forklift trucks that Toyota made. For 0:08:58.400 --> 0:09:01.520 the listeners out there, forkliff trucks are actually material handling 0:09:01.559 --> 0:09:06.960 equipment that are in warehouses, that are in factories, and 0:09:07.120 --> 0:09:10.720 those typically run on battery plus some kind of fuel. 0:09:10.920 --> 0:09:13.440 They've been owning that technology for long time now. Just 0:09:13.440 --> 0:09:16.439 to put it into a greater context, Toyota has twenty 0:09:16.440 --> 0:09:21.160 four thousand patents on hybrids. Tesla has probably half the 0:09:21.440 --> 0:09:24.680 number of patents on evs. So you can imagine how 0:09:25.400 --> 0:09:28.760 Toyota dominates the hybrid vehicle. So that's why I want 0:09:28.800 --> 0:09:31.400 to say Toyota is going to be a long term 0:09:31.440 --> 0:09:35.240 winter and that's also why they're really advocating for hybrid 0:09:35.320 --> 0:09:37.640 because even though they own the pattern they've opened up 0:09:37.640 --> 0:09:41.120 the patents for others to use. The supply chain is 0:09:41.160 --> 0:09:43.200 actually owned by Toyota and Stick. 0:09:43.240 --> 0:09:46.640 That's an amazing turnaround in the narrative for Toyota. I 0:09:46.720 --> 0:09:49.640 remember having you on our podcast one year ago. You 0:09:49.679 --> 0:09:52.520 weren't criticizing, but there was a lot of analysts really 0:09:52.559 --> 0:09:56.079 criticizing Toyota management. They're calling them dinosaurs. You know, the 0:09:56.559 --> 0:09:59.119 CEO had to step down because they weren't as aggressive 0:09:59.520 --> 0:10:03.760 into making evs. But maybe the big bed on hybrids 0:10:03.880 --> 0:10:05.960 was the right strategy. Do you think that's the case. 0:10:06.720 --> 0:10:09.240 I think if you look at battery EV's today, they're 0:10:09.280 --> 0:10:12.320 still expensive. If you look at the global auto fleet, 0:10:12.440 --> 0:10:14.679 it's there going to be a mix. It's not going 0:10:14.760 --> 0:10:18.520 to be one hundred percent bvs because you know, we've 0:10:18.559 --> 0:10:21.920 discussed some of the challenges facing the BV market, right, 0:10:22.280 --> 0:10:25.960 it's not just price, is charging points. I don't think 0:10:26.000 --> 0:10:29.600 every country is able to build out the infrastructure say 0:10:29.760 --> 0:10:32.640 China has today, or the US has today, and to 0:10:32.679 --> 0:10:36.120 a certain extent, the European have a pretty good charging infrastructure. 0:10:36.160 --> 0:10:38.680 Not every country is going to get to that point. 0:10:39.280 --> 0:10:42.480 So I think there's going to be a mix of 0:10:43.080 --> 0:10:48.200 battery evs, hybrid vehicles, and even the traditional gasoline petrol cars. 0:10:48.760 --> 0:10:52.160 What I'm saying is that the penetration rate for BV 0:10:52.280 --> 0:10:56.600 is still low and there's room to grow, and we're 0:10:56.679 --> 0:11:00.559 just going through a temporary rough patch. And we get 0:11:00.679 --> 0:11:04.720 more affordable vehicles out there, it's going to attract another 0:11:04.800 --> 0:11:08.280 group of buyers that the automakers, the EV maker haven't 0:11:08.320 --> 0:11:09.520 even penetrated. 0:11:10.800 --> 0:11:15.680 What about used evs STEVE, both from a depreciation standpoint 0:11:15.800 --> 0:11:20.040 and from an environmental disposal standpoint, is that a challenge 0:11:20.040 --> 0:11:22.199 the industry can easily overcome. 0:11:23.760 --> 0:11:29.400 That's interesting, Tom, because that hasn't been really discussed a 0:11:29.440 --> 0:11:34.160 lot in the industry because there isn't that many EV's 0:11:34.440 --> 0:11:38.520 battery EV's out there anyway. But there are discussions and 0:11:38.679 --> 0:11:43.760 one of the things that the industry is exploring, especially 0:11:43.840 --> 0:11:47.880 when these EV's get to be ten, fifteen, maybe even 0:11:47.920 --> 0:11:50.960 twenty years old, these batteries are decommissioned. One of the 0:11:51.080 --> 0:11:54.120 ideas out there is really to use those batteries for 0:11:54.240 --> 0:11:58.680 distributed power generation, meaning they can use those batteries, deploy 0:11:58.800 --> 0:12:04.079 them in various geographies near the power grids, and what 0:12:04.120 --> 0:12:08.360 these batteries can do is actually during peak hours they 0:12:08.400 --> 0:12:11.920 will release power to the grid, supplementing the grid, and 0:12:12.040 --> 0:12:15.360 during non peak hours, which is typically during nighttime, they 0:12:15.400 --> 0:12:19.400 can actually store electricity that keeps power plants more efficient, 0:12:19.679 --> 0:12:22.000 you know, no waste energy because power plants needs to 0:12:22.040 --> 0:12:26.160 produce at the same level of power twenty four to seven. 0:12:26.880 --> 0:12:30.120 So Steve Fu could bring the conversation to China. There 0:12:30.120 --> 0:12:33.240 seems to be a massive EV price war going on. 0:12:33.600 --> 0:12:35.520 You know, some of the Chinese EV makers are cutting 0:12:35.600 --> 0:12:38.360 prices by about thirty to forty percent. I hear that 0:12:38.400 --> 0:12:42.040 some evs are even cheaper than the traditional internal combustion 0:12:42.160 --> 0:12:45.320 engine cars. Are you worried about what's going on there? 0:12:46.280 --> 0:12:50.240 I am very worried because you can't spiral out into losses. 0:12:50.480 --> 0:12:53.960 I think, you know, what we're seeing today in the 0:12:54.000 --> 0:12:58.080 auto industry has happened before in previous cycles where you 0:12:58.120 --> 0:13:01.160 have price wars. But I actually do see a light 0:13:01.200 --> 0:13:03.760 at the end of the time over here. If you 0:13:03.840 --> 0:13:08.440 look at lithium prices, it's starting to tick up. And 0:13:08.520 --> 0:13:12.480 I'm hoping that lithium prices coming back to a little 0:13:12.480 --> 0:13:16.160 bit more reality because right now lithium prices are pretty 0:13:16.240 --> 0:13:18.400 much at all time low. I haven't seen this low 0:13:18.559 --> 0:13:21.800 in the past. Now liftium prices is coming back, lithium 0:13:21.880 --> 0:13:25.440 carbonate supply is drinking around the world, So I think 0:13:25.520 --> 0:13:28.400 that's going to be a catalyst for the automakers actually 0:13:28.480 --> 0:13:31.319 to stop price cuts. But you brought up an interesting 0:13:31.360 --> 0:13:34.439 point like if you look at Tesla, prices have been 0:13:34.480 --> 0:13:37.640 cut by twenty five percent over the past eighteen months, 0:13:38.320 --> 0:13:40.520 and a lot of that is driven by China. 0:13:40.280 --> 0:13:42.680 Because the start of the price cuts, right. 0:13:43.120 --> 0:13:45.840 Yeah, Yeah, Like I said earlier, I think one of 0:13:45.880 --> 0:13:49.640 the strategy that it's not talked a lot about is 0:13:49.679 --> 0:13:52.000 one of the strategy that Tesla is doing. It's probably 0:13:52.040 --> 0:13:55.360 trying to squeeze out some of the competitor during a 0:13:55.400 --> 0:13:59.920 cyclical downturn on evs. But that's another conversation. I think, John, 0:14:00.200 --> 0:14:03.320 You're bringing up these price cuts and how these some 0:14:03.360 --> 0:14:06.960 of these companies are still able to make some profit 0:14:07.520 --> 0:14:11.160 is actually pretty amazing. You know, Vertical integration is something 0:14:11.200 --> 0:14:15.240 we actually need to discuss here. Vertical integration in the 0:14:15.280 --> 0:14:20.080 auto industry actually hasn't been used. You know, that type 0:14:20.080 --> 0:14:23.960 of strategy in manufacturing and auto production hasn't been used 0:14:24.000 --> 0:14:28.440 since Henry Ford over one hundred years ago. And if 0:14:28.440 --> 0:14:31.240 you look at how Tesla and even the Chinese automakers 0:14:31.240 --> 0:14:33.760 are doing. They're actually taking a page out of Henry 0:14:33.840 --> 0:14:39.600 Fort's Vertical Integration manual. And because this is a newer technology, 0:14:39.720 --> 0:14:44.640 EV is still relative of newer technology compared to gasoline cars. 0:14:45.280 --> 0:14:48.520 And a lot of these automakers are building evs are 0:14:48.560 --> 0:14:52.560 actually extending to improve connectivity of the vehicle, to improve 0:14:53.080 --> 0:14:59.080 the consumer experience in the vehicles using various connectivity tools, 0:14:59.360 --> 0:15:05.560 right streaming music, streaming videos, personal assistance in the vehicles. 0:15:06.120 --> 0:15:09.840 So these are really relatively higher tech for the auto 0:15:09.880 --> 0:15:14.880 industry back you know, in the late eighteen hundred, petrol 0:15:15.000 --> 0:15:19.560 cars gasoline car at that time were new technology. And 0:15:19.640 --> 0:15:22.520 what Henry Ford understood was he need to manage a 0:15:22.640 --> 0:15:27.480 whole supply chain to cut costs, to be flexible enough 0:15:27.640 --> 0:15:32.320 to change to consumer demand when we see new technology 0:15:32.480 --> 0:15:35.360 coming into the market. That vertical integration at the end 0:15:35.400 --> 0:15:38.560 of the day will help companies maintain costs and react 0:15:38.600 --> 0:15:41.920 and it just costs much quicker. And that's what the 0:15:42.040 --> 0:15:45.840 Chinese automakers have done, and that's what Tesla has done. 0:15:46.000 --> 0:15:47.960 And your friend to BYD. 0:15:48.040 --> 0:15:51.880 Yeah, yeah, especially BYD. They built their own batteries. They 0:15:51.920 --> 0:15:54.640 pretty much built a lot of the motors and verters 0:15:54.680 --> 0:15:58.360 in house. That's exactly what Tesla is doing. But if 0:15:58.360 --> 0:16:01.440 you look at the legacy automakers, they're still using the 0:16:01.480 --> 0:16:04.680 old approach. You know, I'm going to farm out different systems, 0:16:04.720 --> 0:16:08.560 different components, and I'm going to outsource those and I'm 0:16:08.600 --> 0:16:10.360 just going to bring it in the house and assemble them. 0:16:10.360 --> 0:16:14.720 So when there's a change in taste from the consumer's perspective, 0:16:15.560 --> 0:16:19.760 when they want to cut costs quickly to compete with Tesla, 0:16:20.040 --> 0:16:22.840 they have to go through multiple layers to get there, right, 0:16:22.880 --> 0:16:25.560 they have to talk to the suppliers, tier one supplier, 0:16:25.560 --> 0:16:28.040 Tier two supplier, Tier three suppliers, they have to talk 0:16:28.080 --> 0:16:31.600 to their shipper, etc. So there's multiple layers they have 0:16:31.640 --> 0:16:33.760 to get to just to bring costs down. And that's 0:16:33.760 --> 0:16:36.480 why it's really hard for the legacy automakers to compete 0:16:36.480 --> 0:16:40.880 today with Tesla, because Tesla, with twenty five percent price cuts, 0:16:41.160 --> 0:16:44.840 they're still booking profits at the bottom line. They're booking 0:16:45.040 --> 0:16:47.920 mid teens gross margin, which is the same margins that 0:16:48.000 --> 0:16:51.120 the legacy automakers are making today. I think that's one 0:16:51.120 --> 0:16:55.680 of the reason why Tesla's valuation is higher than their 0:16:55.720 --> 0:16:56.520 peer group. 0:16:57.560 --> 0:17:01.040 Steve Man, We've talked about China, We've talked about the 0:17:01.200 --> 0:17:05.040 US and their respective electric vehicle markets. What do you 0:17:05.119 --> 0:17:08.800 think it will take to get Americans to buy a 0:17:09.000 --> 0:17:13.000 Chinese made electric vehicle A BYD or do you see 0:17:13.000 --> 0:17:13.800 that not happening. 0:17:14.800 --> 0:17:18.760 I don't see it happening. We actually had research out there. 0:17:19.440 --> 0:17:22.440 I think gasoline car is going to be really difficult. 0:17:22.760 --> 0:17:25.760 First of all, gasoline cars from China probably not going 0:17:25.840 --> 0:17:29.760 to come into the US. You know, there's debate out 0:17:29.760 --> 0:17:33.160 there if Chinese EV should be sold in the US. 0:17:33.680 --> 0:17:36.400 I really don't think so. You know, if you look 0:17:36.400 --> 0:17:39.760 at the Inflation Reduction Act, it really spurred that one 0:17:39.840 --> 0:17:43.359 hundred and sixty billion dollars investments in the EV supply chain, 0:17:43.440 --> 0:17:45.399 and I don't think the government is going to go 0:17:45.480 --> 0:17:49.639 out there and undercut that investment. Given the geopolitical situation 0:17:49.800 --> 0:17:53.560 between the US and China, I think the US is 0:17:53.760 --> 0:17:58.280 really focused on first of all, building supply chain for evs, 0:17:58.960 --> 0:18:02.600 and then the next step is how to innovate the 0:18:02.640 --> 0:18:07.040 automotive market, the EV market so that they can compete. 0:18:07.320 --> 0:18:10.480 I would say the US is a little bit behind China, 0:18:10.600 --> 0:18:13.440 especially if you look at the battery technology. I think 0:18:13.480 --> 0:18:16.480 the US really needs to catch up to be relevant 0:18:16.840 --> 0:18:18.399 in the global automotive market. 0:18:19.400 --> 0:18:22.760 Steve we talked a lot about Tesla, and Tom alluded 0:18:22.800 --> 0:18:24.880 to the fact that the share price has been really weak. 0:18:24.920 --> 0:18:28.760 It's down almost sixty percent from its all time highs now. 0:18:28.800 --> 0:18:31.320 Tesla is part of a group of you know, well 0:18:31.359 --> 0:18:33.800 known stocks called the Magnificent Seven. I think it's the 0:18:33.840 --> 0:18:36.760 smallest one. Some analysts now are starting to call it 0:18:36.760 --> 0:18:39.439 the Magnificent six or the Magnificent five. They want to 0:18:39.480 --> 0:18:43.560 exclude Tesla from this group. What does Tesla need to 0:18:43.560 --> 0:18:45.840 do to get investors excited again? 0:18:47.240 --> 0:18:50.439 I think, you know, I'm positive on the battery electric 0:18:50.520 --> 0:18:54.960 vehicle market, the BEV market. The winner and loser is 0:18:55.000 --> 0:18:58.080 still a toss up. I think Tesla has an advantage 0:18:58.320 --> 0:19:01.800 right now during a down cycle. You know, they're able 0:19:01.840 --> 0:19:06.280 to cut prices make their cars more affordable to the masses. 0:19:07.119 --> 0:19:11.320 But their biggest risk is execution. They're trying to do 0:19:11.480 --> 0:19:15.800 a lot right. They're cutting costs. They're trying to push 0:19:15.840 --> 0:19:18.639 out a new model. They dubbed it the Model to 0:19:18.800 --> 0:19:21.880 They may call it something else, but it's a compact 0:19:21.960 --> 0:19:24.920 vehicle that's going to be priced around twenty five thousand dollars. 0:19:25.280 --> 0:19:29.320 They're actually looking to start building that in Texas and 0:19:29.359 --> 0:19:32.880 then breaking ground on a new plant in Mexico. At 0:19:32.920 --> 0:19:35.359 the same time, they're trying to ramp up cyber truck. 0:19:35.640 --> 0:19:37.640 If you've seen the truck, it's not the easiest thing 0:19:37.680 --> 0:19:41.160 to build. And at the same time they're really aggressive 0:19:41.960 --> 0:19:45.199 in building out their full self driving apparatus. This is 0:19:45.280 --> 0:19:51.080 the autonomous vehicle software that supposedly, when it's complete, you 0:19:51.080 --> 0:19:54.200 can plot any Tesla at any points in the world 0:19:54.720 --> 0:19:57.760 and it's going to be able to drive itself. They're 0:19:57.800 --> 0:20:00.359 making a lot of investments in that. So there's a 0:20:00.359 --> 0:20:04.920 lot of things going on with Tesla. So execution is 0:20:05.000 --> 0:20:08.760 the risk. And I said earlier Tesla's taking advantage of 0:20:08.800 --> 0:20:12.000 the situation. Right now. They're the only EV makers that's 0:20:12.040 --> 0:20:15.520 still able to make profit in the downturn, but the 0:20:15.640 --> 0:20:19.480 rivals are catching up. GM is actually rolling out like 0:20:19.880 --> 0:20:22.880 half a dozen evs this year and next year. Some 0:20:22.960 --> 0:20:25.520 of them will be affordable. Some of them are like 0:20:25.960 --> 0:20:29.400 the Blazer EV, the new Bolt, the best selling EV 0:20:29.520 --> 0:20:32.240 for GM. They discontinued it at the end of twenty 0:20:32.280 --> 0:20:36.080 twenty three. They're totally redesigning the thing so that it's 0:20:36.160 --> 0:20:39.200 cheaper to bill that's actually coming out in twenty twenty five, 0:20:39.280 --> 0:20:43.119 twenty twenty six. You have Rivian. You know they're gonna 0:20:43.119 --> 0:20:47.240 need cash at some point, but they're also aggressively pulling 0:20:47.280 --> 0:20:50.560 their schedule ahead to roll out some of these cheaper evs. 0:20:50.800 --> 0:20:55.360 So Tesla's gonna face a few more competition, bigger competitors 0:20:55.680 --> 0:20:59.080 in twenty twenty six, twenty twenty seven. So that's why 0:20:59.320 --> 0:21:01.840 you know the winner loser, You can't really call it 0:21:01.880 --> 0:21:05.680 at the moment. Tesla actually, at this moment looks better, 0:21:05.760 --> 0:21:08.160 but we don't know a right. There's going a lot 0:21:08.200 --> 0:21:11.520 more affordable EV's rolling out that's going to be priced 0:21:11.800 --> 0:21:16.040 at the same level as Tesla, so consumer benefits, they're 0:21:16.040 --> 0:21:19.240 gonna have a lot more choices, and I think we'll 0:21:19.280 --> 0:21:22.280 see there are risks. Even though I'm very optimistic about 0:21:22.280 --> 0:21:25.359 EV market, Tesla is not the only player in town. 0:21:26.640 --> 0:21:28.720 Steve, before I let you go, I asked this question 0:21:28.720 --> 0:21:29.960 to you last year, and you didn't give me a 0:21:29.960 --> 0:21:32.520 straight answer. I asked you last year, what car did 0:21:32.600 --> 0:21:35.960 you drive. You did mention you'd used to drive a 0:21:36.040 --> 0:21:38.480 German car. I'm assuming that was a sports car. Then 0:21:38.520 --> 0:21:42.080 you did profess your respect for Japanese cars. Now you're 0:21:42.119 --> 0:21:44.840 in Princeton, did you buy American muscle? What are you 0:21:44.920 --> 0:21:45.520 driving now? 0:21:46.240 --> 0:21:49.800 So for the audience out there, I just relocated back 0:21:49.840 --> 0:21:51.879 to the US. You know, I've been in age of 0:21:52.280 --> 0:21:54.240 fifteen years. I didn't really have to own a car, 0:21:54.359 --> 0:21:57.119 but I did own a car. I own a BMW 0:21:57.200 --> 0:22:00.919 in Hong Kong and then now back in the US. 0:22:01.400 --> 0:22:04.600 We actually have two vehicles. One is an American car, 0:22:05.160 --> 0:22:10.160 a Chevrolet, a very nice car. Actually, my wife's been converted. 0:22:10.240 --> 0:22:13.320 She was not very much in tune on a Chevrolet, 0:22:13.359 --> 0:22:17.000 but after she drove it, loved at first drive, if 0:22:17.040 --> 0:22:19.120 you want to call it that way. It's a good 0:22:19.200 --> 0:22:22.520 question because I actually was thinking of buying a Prius, 0:22:22.680 --> 0:22:24.760 the plug in hybrid Prius. 0:22:24.480 --> 0:22:27.160 John oh Norius. 0:22:28.160 --> 0:22:29.080 It's a family. 0:22:29.680 --> 0:22:29.880 Yeah. 0:22:30.000 --> 0:22:33.080 Gas is not cheap, hair gas is expensive, fear, and 0:22:33.320 --> 0:22:37.240 the commutes are long. But I couldn't get one because 0:22:37.320 --> 0:22:40.080 the wait time is a year long for the Toyota Prius. 0:22:40.160 --> 0:22:44.080 So I decided to own a Mercedes. Now it's a 0:22:44.160 --> 0:22:48.600 mile hybrid. It gets around twenty two miles per the gallon, 0:22:49.040 --> 0:22:53.720 which is considered not bad not bad so that's what 0:22:53.840 --> 0:22:54.520 I drive today. 0:22:55.480 --> 0:22:56.040 Grand answer. 0:22:58.080 --> 0:23:02.879 We've been talking EV, Tesla, shine Up, and all things 0:23:03.040 --> 0:23:07.840 automotive with Steve Mann, Global Director of Industrials and Automotive 0:23:07.880 --> 0:23:11.840 Research at Bloomberg Intelligence. He has been with us from 0:23:11.920 --> 0:23:15.760 his offices in Princeton, New Jersey. Steve, exciting times, some 0:23:15.880 --> 0:23:20.359 would say, interesting times in evs and in global business. 0:23:20.800 --> 0:23:22.520 Always good to see you, a pleasure to have you 0:23:22.640 --> 0:23:24.919 back on the program, and we look forward to staying 0:23:24.960 --> 0:23:25.359 in touch. 0:23:25.920 --> 0:23:26.600