Tu Le from Sino Auto Insights

[00:00:02] and Listeners. Apologies for the hiatus, as some of you may have known, I actually just recently got married and was on my honeymoon.

[00:00:10] And then unfortunately, right after that, I got sick. So apologies for the last few weeks of silence, but I've got a really great episode for you today. And we've actually recorded a couple more. The next few weeks are only some really great episodes. I'm really excited for those.

[00:00:24] Our guest today is two Lee with Sino Auto Insights. I originally came across to on John McAroy, who was on an earlier episode of the podcast on his program, which is auto line after hours.

[00:00:38] And two really brings a really fascinating and deep knowledge base of how the Chinese Auto Market is impacting autos globally, along with not just the electrification of the space, but especially around autonomy. His background is really fascinating because he actually was born into Troy, grew up in America.

[00:00:56] And then went to Silicon Valley and worked for Apple and some startups. So he can I got the foundational background of the kind of big three Detroit automotive background.

[00:01:06] And then was exposed to everything kind of going and Silicon Valley and the really disruption that that's led to, I think a lot of industries, but especially that was kind of led by Tesla and a lot of the other startups in automotive.

[00:01:18] And this is really accelerated under what's happening with a lot of these Chinese automotive companies and he actually ended up living in China for quite a few years and was exposed to it directly and saw just how quickly these Chinese companies were looking to make the change and then become leaders in the space. And now they're going into European markets and looking to even start coming to North America.

[00:01:39] Our kind of conversation goes all over these topics and it's a really fascinating when I want to have really excited to have with him for quite a while so we talk about really the current state of the industry, the impact of China.

[00:01:53] And then how this is going into electrification as well as into the autonomous driving space.

[00:01:59] If you're not already subscribed, I highly recommend following his news. I believe it's weekly newsletter and it's always a really detailed breakdown of what's happening in the industry and kind of taking a lot of these events that you might hear about, especially when it comes to autonomy or the general automotive markets and what that has with these kinds of impacts tied to electrification tied to the greater market around autonomy and especially the Chinese kind of component versus what we're seeing here maybe.

[00:02:28] And here maybe in more media in the US about how automotive makers are approaching here is you get kind of a full spectrum approach. I also recommend checking out his live podcasts, which is every Friday at 9 a.m. Eastern on actually Twitter. I guess now ex spaces that he hosts. But is then recorded and it is the China and more EVs podcast. You can also check him out there but I'm really excited for this episode to be sharing with you today. So enjoy.

[00:02:57] Chase, thanks for having me on. So my name is Tuley as you'd mentioned. Group in Detroit or just outside of Detroit for NFL fans I grew up about a mile away from the Pontiac Silver Don.

[00:03:11] Which no longer exists. My first job out of undergrad was that general motors ironically at the factory that it's now building the Chevy Bolt and did the automotive sector for a few years and when I was 18 years old.

[00:03:26] When I was 18 years old, 19 years old at Michigan State. I thought the end all be all was being a manager at GM or four and so little did I know there's a lot more out in the world.

[00:03:38] And so after about three years, to Pittsburgh, to go to grad school and then graduated from business school and moved up to Silicon Valley where I worked about six and a half seven years.

[00:03:51] And met a girl in San Francisco and she had transferred over to Beijing. And so I pursued her and chased her over to Beijing.

[00:04:02] And so in around in around 2008, 2009. And so this was when the economy wasn't well GM Chrysler, Diomol Chrysler at that time or FCA was going bankrupt and my entire family was still in Michigan wondering why I would quit a high pain job and so can family and move to a country where I didn't speak the language and didn't have a job.

[00:04:30] And fast forward 13 years later, I moved back about a year ago and in between that time in China I worked at Ford and worked with a couple Chinese e-commerce startups and started a consultancy signawata when sites about seven years ago in Beijing.

[00:04:53] I, my background is because or the reason that I started it is because I saw this disconnect between traditional automotive guys and tech guys. They were speaking completely different languages and I kind of anticipated what we're seeing today six or seven years ago.

[00:05:13] And so yeah and in San Juan, a win-size we help governmental agencies, we help small mobility companies, we help EV companies. We've done all kinds of projects for the market research, traditional market research, we've helped raise capital for some smaller companies.

[00:05:34] And we've done some marketing and strategic communications projects. And I moved back a year ago to open an office and Detroit because I wanted to be a part of kind of the evolution and adoption of EVs here.

[00:05:51] And as we're seeing right now, Chase as you know it's getting a bit lumpy but that creates opportunities for smaller companies as the larger companies are really trying to still define who they are in the EV world. So.

[00:06:09] And I think that's what's so fascinating about your perspective on this because it is kind of the nexus of disruption right now in the automotive space you have a lot of the Chinese autom manufacturers, I think had been disregard and there were quite a few that came up and obviously like anything a lot kind of fell by the way.

[00:06:28] But now there's still a large number that are being successful and I think it is this kind of completely different approach that is really a big struggle for the traditional auto OEMs between not just kind of the mindset of what the consumer and what a vehicle should be, but then you also have the challenges around.

[00:06:53] Essentially, think out how to make these electric vehicles they've always made cars so this should be easy and I think a lot of like the Tesla's of the world and the startups in China we're kind of being laughed at like oh yeah.

[00:07:05] We're the big auto OEMs we know how to do this when we actually have to start making EVs will have no problem and I think we're starting to really have any doubt removed that just isn't the case and I would kind of like you to kind of.

[00:07:19] Maybe flesh that a little bit more and give in your experience I love to hear your take and I this way I think I find you so interesting here or listen to is just how.

[00:07:29] And so, wrong the mindset isn't what this gap is that the domestic auto OEMs have in this new revolution. So a lot of impact there but let me start by saying that. Having manufacturing excellence or manufacturing deep manufacturing experience for ICEs doesn't for doesn't.

[00:07:54] And check into being an expert in building electric vehicles. Case in point GM is hand-building battery cells for their old team platform and lucid they've been what 567 year old company now and they can barely build 9000 cars a year.

[00:08:15] And so, I had the fortune or misfortune however you want to say it of being in China during COVID and so real quick story it was December January of 2020 and we had come back to the United States of visit family and Michigan.

[00:08:42] And what I thought was going to be a three week trip with my entire family ended up being 3 and a half months. And the consultancy was doing great.

[00:08:53] And then it went to zero and my wife and I because home was Beijing so my wife and I thought okay we're safe in the United States well enrolled kids in school and then when it's safe to come back we'll do that.

[00:09:06] Well, next thing you know the US starts getting pretty bad in February March and so we try to get back to China and luckily we were able to get a one-way ticket.

[00:09:20] And the day we got back to Beijing they closed the border on the day after so March 2627. So we're there for on two and a half years without leaving but during that time you saw this massive move by the Chinese consumers into electric vehicles.

[00:09:43] So but that was a long time coming because Neo was established in 2014, expand the auto. Those three companies are US publicly traded companies and I live right next door to the in Beijing where Tesla opened its first retail store.

[00:10:02] I literally lived about 100 yards from heart view green and so the first day it opened of course me being the the card nerd that I am had to go down and check it out.

[00:10:13] And it was really cool only a model last was in the show room and again this is 2014 so early adopters you started seeing you know model lessons but no no huge numbers but during COVID that's when.

[00:10:31] That's when critical mass hit and coincidentally in December of 2019 it also is when the first locally made has the model three rolls off the line in Shanghai.

[00:10:47] And so even though there had been significant focus on and long term focus it's starting in 2009 from the Chinese government to build out EVs build out the battery sector in China.

[00:11:03] It still took Tesla building locally to really be a catalyst to get that EV adoption up and what we saw was a million and a half units in 2019.

[00:11:15] Three and a half million units in 2020 no a million half in 2020 three and a half in 2021 and six and a half last year this year in China will get to probably around eight nine million units with a bunch of them in export it so last year just so you you probably know this but last year the United States sold 800,000.

[00:11:39] EVs with I want to say 60% of those being Tesla so we are far far far we're farther behind the new Europe is on EV adoption which is a shame.

[00:11:54] So for sure and I'm kind of curious I'd love to hear your perspective you're talking about how it was during COVID that the Chinese consumer really started by more EVs and why do you think that is because I know.

[00:12:07] Traditionally China was doing a lot as a government to incentivize between the special license plates and the.

[00:12:15] I believe financial incentives to really get people into EVs and we're starting to see obviously that's kind of with the IRA and a couple things that started to happen here in the US within incentives I still don't think to the same level I don't know if you could do it to the same level politically for sure especially with kind of a license plate side of stuff but.

[00:12:36] Yeah I would love to kind of hear more as to what.

[00:12:39] We've seen a lot of pretty consistent growth in Europe what do you think it was about the lockdowns and kind of that COVID time in China that really caused it to ramp up and what do you is there anything that the US market can learn from that to maybe help the adoption here.

[00:12:57] The biggest or one of the biggest misconceptions that I still think Western people have about China is that it's a copycat.

[00:13:06] Society or copycat world from business standpoint and that couldn't be further from the true we have three core beliefs at sign water insights and whenever I do an introduction to the management consultancy.

[00:13:18] I talk about these three core beliefs all companies are becoming software companies innovation is now moving east to west. You can look at tick talk you can look at DJI is too easy examples of that okay and then the third is you're not moving fast enough.

[00:13:35] And that's more or less tongue and cheek but if you think about it even traditional manufacturing companies bricks and mortar companies they all have an online presence they're all selling online so that's what I mean by all companies are becoming software companies.

[00:13:50] So if you don't have a competency and software development you're going to be at a disadvantage and in China the economy has effectively. been only growing for about 40 years but that means that the.

[00:14:06] The early a rivers the GM's and the Volkswagen who arrived in the late 90s for Volkswagen arrived in the 80s. They feasted off the China market you know we hear these things about how they were forced to do JV's with the Chinese state owned enterprises

[00:14:28] They weren't forced to do anything. They entered willfully. And if you think about the number of vehicles they sold in China, Volkswagen wouldn't be who they are today. GM wouldn't be who they are today. Toyota wouldn't be who they are today without the China market.

[00:14:48] And so I wouldn't feel too bad for the foreign legacies when it comes to the hardships they had to deal with with their dominance in the China market for the last 35 years. Now, with regards to the economy, only really being developed over the last 40 years,

[00:15:08] that means that most people didn't have phone analog phones in their house. Most people didn't have those things. And then there's a generational divide where as people born after 1990 are considered digital natives. And so they had mobile phone in their hand. They had internet on their mobile phone

[00:15:34] and everything, they had e-commerce. And so a lot of those services were brought to them by Chinese brands. So the trust factor on the domestic brands was high. Whereas their parents, they would always want to buy a Volkswagen and they would never buy a BYD.

[00:15:51] They would never buy, if they could afford a foreign brand, they would likely buy it. And so one of the reasons that I look back at besides Tesla being that catalyst is also the level of competition. It goes back to what I said earlier about how

[00:16:10] I think the Western audience is still thinking, some of them still think China's a big copycat. The level of competition, there are hundreds of EV brands that sprouted up over at 18, 24, 36 month period. And where these Chinese brands live is in the mass market.

[00:16:29] So below 300,000 RMB or about 45,000 US dollars. And so what Chinese consumers demand is a safe vehicle and a connected vehicle. Now the legacies, again, they're not very good at software development. But guess what? The main consumer that's buying those EVs

[00:16:55] is those digital natives that are used to having digital features on their phone in every aspect of their life, connected home, smart home. And so if you're not able to provide that in your vehicle, you're not gonna sell that EV or that.

[00:17:14] I see, and that's what we're seeing happening. There was, let's just say that the foreign legacies in China were very surprised that how quickly EV adoption ramped and they were caught flatfooted. And then as they tried to pull products in, they weren't able to do the software right.

[00:17:39] So it does sound like in your, because I think one of the things, especially here in the US right now, and so well, EVs are starting to slow down, no one really wants them. It's because of government incentive. And there might be some like truth to that.

[00:17:55] I think more it just interest rates and slowing economy and all that. But from what I'm hearing, it sounds more like for all this stuff the Chinese government was doing. And there was a lot that they did as far as like, the manufacturing infrastructure to make EVs

[00:18:12] an easy thing to live with in their country. It sounds like to me what you're saying is, it wasn't so much the incentives to the consumer that the government was pushing that made EVs popular. It was the fact that there were now products

[00:18:26] that the consumer wanted to buy. That kind of may have been catalysed as you said by the Tesla factory there in Shanghai, but really it's more, now that there's products that the digital first buyers kind of resonate with and can afford, that's really what's causing this large catalyst

[00:18:45] versus kind of government incentives or any government mandates pushing it. What is that fair take? Or do you think it is a more of a mixture of both that's led to the growth? It's definitely a mixture of both because what we're seeing is

[00:19:03] successful adoption of electric vehicles starts with subsidizing the purchase and the buildout of charging infrastructure and to create that awareness. It will never happen in any other country but the level of competition in such a short period of time is what really drove prices down

[00:19:26] and made them affordable on par, or in parity with a Volkswagen jetter or Volkswagen Passat or a Buick that would used to be popular five years ago in China. And so, again, this should be unsettling for Western automakers. BYD will be the number one brand in China,

[00:19:58] D-throating Volkswagen, BYD only sells hybrids and battery electric vehicles. Okay, and collectively, this will be the first year in 35, 40 years that the Chinese brands will outsell the foreign brands in China. So there's a lot to kind of analyze if you're Europe or the United States

[00:20:29] but the unfortunate thing that's happening to the United States is that we can't build affordable EVs, number one, number two, there's only a handful of notable EV startups. Who basically loosened in revient because I can't think of too many others that actually were a vinfast

[00:20:51] but they're a Vietnamese company, not American company. And so that level of competition is not there either to drive down those prices and what we're seeing is, I think it's a lack of product, high interest rates in an economy that's trying to figure its way out.

[00:21:11] But I do believe the inflation reduction act was the right thing to do in Stellantis for GM. They announced $35, $40,50 billion worth of investment to convert and move over their products to electric or clean energy. So it's not an if, it's a win

[00:21:35] and it'll be lumpy up until there are more products because we're dealing with the lack of charging infrastructure that you had mentioned earlier but again, the lack of products and if Tesla continues to reduce price on their products it could be lights out for a few brands

[00:21:55] that you and I have grown up with historically in the United States for sure. Yeah, it's kind of funny you say that because there is, I'm kind of indifferent but I do know there's a lot of people especially if you go on Twitter

[00:22:09] or any social media that love to kind of hate on Tesla or Elon Musk. And now I'm seeing them even say like, you know what? I don't like Elon, I don't like Tesla. But that model three model why are priced at such a price point?

[00:22:21] I don't know why you wouldn't get it. Which is kind of the first time I've seen that as far as I can remember and really only within the last couple months. And do you think that that is,

[00:22:33] I guess a question for you would then be with what you just said I think those will be kind of the last thing about like looking back but with where the Chinese market is and how quickly the competition is driven down their price

[00:22:46] do you think that it will be the, I guess it's more forward looking actually? Do you think it will be the Chinese come into the US market at the low end like the Honda's, the Japanese makers and kind of like the Hyundai's and Kia's are had?

[00:23:04] Or do you think it will be the domestic autoeums are able to make these products at that low point or get the price down? Which one do you think will happen first? The Chinese come in with the low priced vehicles or do you think the domestic autoeums

[00:23:18] will be able to get their products and pricing together to really start serving the sub 45,000 market? I think we need to really peel a few layers of the onion back because the GMs in Ford can build lesser expensive vehicles. They just won't be profitable, right?

[00:23:39] And part of that reason is because they need to continue to build petrolinge vehicles to fund their AV future and a Tesla and these Chinese EV startups, they don't need to do that. Okay? And then on top of that because specifically Tesla,

[00:23:56] they can build a 25 or 28,000 dollar car profitably. Okay? And that's not gonna be the case for Ford GM for quite some time because Jim Farley famously said earlier this year, he was quoted in a financial times article that it takes about 30% less labor to building electric vehicle.

[00:24:20] And so if they start building, if the majority of their vehicles that they produce are electric, but the number of employees that are still building them is about the same, that is a lot of overhead and fixed costs that is attached to every single US made vehicle

[00:24:39] or USW made vehicle. And it creates a huge, huge disadvantage. And the thing that should be one of the scariest things for a Mary Bar or Jim Farley or Carlos DeVaris for the US market specifically should be Tesla comes out with a $25,000 model too

[00:25:04] because we can hate personalities, we cannot like brands, but ultimately price is gonna decide most consumers or let's just say that price is going to dictate consumers decisions on what to buy for the most part. Okay? Because first of all, Tesla superchargers

[00:25:29] are ubiquitous for the most part in the United States whereas electric via America, charge point, EVGo, they're not. And the NACS plug being now the De facto Universal plug for the United States really makes it, so that should help EV adopt overall.

[00:25:51] But it creates an even bigger advantage for Tesla because now they get licensing revenue from that and they get incremental revenue for non-Testalovic goals charging at Tesla, supercharging stations. And the third thing is that they get government money to build more superchargers

[00:26:12] whereas if they wouldn't have opened it up to non-Testalovic goals, they wouldn't have got that from the inflation reduction. So yeah, that's a good point. And I think there's actually two points that especially around superchers on an earlier episode this season

[00:26:27] we had Lauren McDonald come on from EV adoption. And he talks about how Tesla will take government money where they get it, but their default is move fast. And if government money either has too many strings or takes too long, they'll just drop it all together

[00:26:47] and just build the supercharging and be done with and go on the next one whereas the EA's and a lot of these other public charging infrastructure just can't do that. Or they kind of purposely slow down to try and get more government money

[00:27:00] through the Navi and these other programs so that their installations are have a, it just makes the margins and the profitability better for them but it's still not as strong. And this I think goes back to one of those kind of three principles you've done about moving fast.

[00:27:15] And I was always a fan of the North American charging standard charger. I just never thought it was ever gonna happen. I was like, yeah, that'd be the ideal but I doubt it. And to see all of the domestic auto-eems pretty much flip around and give that up

[00:27:31] only gives more ability for Tesla to have more money to move faster. And I think that that is, sometimes still kind of surprise that they gave up. It doesn't surprise me from like the consumer experience and what needs to do if you actually want to sell EVs

[00:27:47] and that's the main concern but being able to focus on getting more supercharters in the ground and just getting more revenue from that in general. Once again, it to me is just kind of a flywheel thing where it only makes other stuff then move faster.

[00:28:04] They can take that revenue and put it other places and it is just really interesting to me but with where that investment has been in public charging and with how Tesla's approaching it that I think it's really putting the auto-e...

[00:28:20] Not that I ever thought that they would do their own standard or do anything like that. But it to me just puts them almost further behind where Tesla's and it just gives like you're saying, this other revenue to them to accelerate and continue to move faster.

[00:28:35] Because I think I look at Tesla in some of the ways like, oh, they used to move really fast and it was just because they were a small company and they had no products. So when they came out with an update to a product

[00:28:45] or more products, it was like, wow, they are moving quickly. But now it just seems to be there's Tesla and then there's the Chinese market. And then you have the domestic auto-eums who, as you're saying, they're really, their focus, understandably,

[00:29:03] good or bad has been kind of short term focus around and Wall Street's really demanded of them is to focus on the profitable high-end trucks and SUVs. And that is an area where I think they'll probably continue to be successful and help them.

[00:29:17] But I just don't know, I'm still... And I guess this kind of goes back to the other question, like, I don't know which one can do it faster. Can they take the revenue and being a very SUV truck-focused market that the US is make electric trucks popular

[00:29:35] faster than the Chinese market can come in and flood the market with cheap Chinese EVs and then maybe even start making EV trucks by these Chinese companies. So I believe, here's kind of my theory. The legacy automakers are some of the best marketing companies

[00:30:01] in the world because for the last 100 or so years they convinced us to spend 50, 60, 70, 80, 90,000 US dollars on their product that we use 5% of the time. Right? And so they need to flip the script because they've created this notion of big large trucks and SUVs equals freedom, right?

[00:30:31] Freedom to explore, if you don't drive anywhere you want. Now they have this conundrum because a $90,000 US dollar F-150 lightning or a $60,000 F-150 lightning. I think they started at 57 and change now. So let's say 60 grand. That thing probably gets about 250 miles of range. Okay?

[00:30:57] And then cold weather probably less. And so they're gonna need to sell a lot of smaller SUVs and crossover in order to be competitive at all because let's not forget their manufacturing footprints, right? They have millions of units of capacity that need products.

[00:31:23] And if they can only build you $80,000 F-150 lightning, there's a lot of those factors that are gonna end up being idle. And this is where, and I don't, unless you wanna talk about it, but this is where for the foreseeable future, through 2030, the US legacies

[00:31:44] and the foreign legacies that build in the US will need Chinese batteries to get anywhere close to the $48,000 US dollars. That's currently the average price of the US car that was sold last year. And remember, $48,000 on interest rates that were next to nothing in 2022. $48,000 dollars a $50,000 loan

[00:32:13] with six or seven percent interest rate is much, much higher on a monthly payment. This time of year that it was last year. And so these are the types of challenges that the US legacies have and they need to be careful because if,

[00:32:31] so the inflation reduction act really allowed, I believe the US legacies to kick the can down the road by a few years. China EV Inc is entering full stock. And let me just really quickly say this chase as someone who worked in a couple different factories

[00:32:54] for an extended period of time in US factories. Visited hundreds and grew up here, so in Detroit. So I know what an automotive engineer is thinking when they get into a vehicle, fit-farmant function, panel gaps, little squeaks and rattles and I've driven enough of these Chinese cars now

[00:33:19] that they should be really, really, really worrying. The US automakers anyways. Right and it's funny you say that because that's a pretty consistent thing my favorite over the past year to, I unfortunately haven't had a chance to drive a lot of these but everyone I've talked to

[00:33:37] that's kind of gone behind when they've been pretty impressed with just if they've driven them before or maybe a couple years ago how quickly the quality and the interiors have removed any sorts of, I guess you could call it quality control issues

[00:33:52] but those kinds of squeaks and rattles and where they are now today. Yeah, it just is no longer the domestic auto EM advantage that I think a lot of people think it was. So one of the things I'll go for. The other thing to chase is that

[00:34:10] the definition of premium and luxury is changing too. For sure, for sure. Where the Western consumer and this is the Chinese consumer in particular but I think it'll evolve in the West too. The Chinese consumer used to think Mercedes and Audi with the premium leather

[00:34:34] and the nice knobs and buttons to shiny stainless, knobs and buttons was luxury and premium but that's gonna change. And so the advantages of the legacy auto maker are also really getting pulled away so that it's a new game that they don't have a ton of experience

[00:35:01] and competing in. Yeah, that's actually a great point that it kind of reminds me of something and it totally about people who has asked me because I have a model why and they say, why do you like it so much?

[00:35:11] Like what is it about it that you're like, yeah if you're gonna buy a car, why would you get that again? And it goes back exactly to in my opinion, the changing of what definition of premium electric is. For example, we have two dogs.

[00:35:26] We can have the dogs in the car. If it's hot, we can turn on dog mode and it seems like a simple thing that really any car companies should be able to do but that's a feature that if the next car I buy

[00:35:37] doesn't have it, probably takes it off the list. Having the test load and the app just works and I've used other car apps where they don't work but what else are you gonna add to that? No, this is a digital experience.

[00:35:50] Yeah, because it's a flash of a software that creates a new feature. That's exactly. Lettuces cannot do. And all right. So for your listeners who are trying to understand what we're talking about, do a Google search on Cariad and Volkswagen and the struggles that they've had on software.

[00:36:15] And then this week alone there's an article about Toyota and their software division, Wolven Planet and the struggles that they've had. Now remember the Googles of the world, the Amazon's of the world are trying to enter the mobility space, Uber's ready there. Okay.

[00:36:36] And so Chase, you've only built things with your hands. Now you have to build an interface, right? And not only that but you need to be able to do that, well enough to compete against an appular Google or an Amazon

[00:36:58] and you need to do that in the next five years. That's the thing that they're looking at. I think that's pretty spot on because you look at, I'm speaking of what's been in the news, at least on the on-motive side.

[00:37:12] The new Volvo EX30, which is a small little Volvo obviously being the Swedish brand but isn't out Chinese owned. And what are they doing? There's a lot of people that are liking the interior and the sportness of it, but they essentially teamed up with Google

[00:37:26] to do the Google Auto pretty much cranked to 11 all through at that car. And so it gives you a really strong, I think that's a really good example of kind of partnership of the traditional Swedish Volvo brand known for safety known for their interiors

[00:37:43] and kind of their take on it meets the big tech, pushing into mobility and having the advantages of that digital first experience. And I think, and how much interest that car is getting even Volvo surprised how much interest a small electric car is getting in the US.

[00:38:02] I think that is also a great sign of that should again, we'll wake up call for a lot of these kind of traditional auto-oems that yeah, there is a market for small cars actually. And so a big part of it is the price point.

[00:38:16] You've sorry, sorry, didn't mean to rub. No, no, go for it. So the backstory on the EX30 is that it's gonna be built in China and in the quarter to ten of that is states. There's currently a 25 plus a two and a half percent terror

[00:38:30] on Chinese imported vehicles into the United States. Currently, Polestar and GM eat that because GM imports the Buick Invision from China. And currently the Polestar 2 is imported from China. Now if you do anyone listening is unfamiliar that is a division of Volvo more or less.

[00:38:56] Right, it used to be their performance division like BMW's M, M, M, G. And so in order for them to be cost competitive or price competitive, they'll likely need to eat most of that terror. But long term, they'll look to build the EX30 locally.

[00:39:20] And if you look at the China market, the European market and US market, the three largest markets in the world, last year, China sold about 22 million EU, about 11. And the United States, about 14. We've gotten as high as around 18 million units

[00:39:38] but we haven't been there in quite some time. But so long term success in these three markets, one region into two country markets means that you build locally. And because of the NAFTA or whatever it's called now it's not called NAFTA anymore. You can actually build in Mexico

[00:39:58] and still have a free trade agreement with the United States and Canada. And so at the state level, there's this conundrum and schizophrenia because they want jobs but they're not sure whether they want jobs from Chinese companies. And so let me assure you Chase

[00:40:23] that if the governor of Alabama was to meet with Wang Chuan Fu who is the CEO founder of BYD who is the largest EV maker in the world. Now, not Tesla, BYD is the largest EV maker in the world. If Wang Chuan Fu came up to the governor

[00:40:43] of Alabama or Mississippi and said, I'm gonna write you a $3 billion check. We're gonna build the largest factory you've ever seen in the United States. You don't think you would, and we're gonna employ about 5,000 people. You don't think he'd be like, yeah, let's do that.

[00:41:02] So, what do you say that? So, totally, totally. What was, you might remember this, what was the battery manufacturer recently that tried to do something kind of like that? I wanna say Kentucky and then the governor essentially had kind of a backlash

[00:41:18] and pushed back because it was a Chinese company. And then I think Michigan ended up getting the factory or, I don't think they broke him around yet, but this was, I thought a few months ago, I'm trying to remember the name of the battery factory.

[00:41:32] So, CATL which is the largest battery manufacturer in the world, it's a Chinese company. They negotiated, or they were negotiating with Virginia, the governor of Virginia. I didn't think it was CATL, I thought it was a different company. Yeah, that is a huge company

[00:41:53] and a huge amount of jobs potential there. Right. And so actually you're right, you're right. It was Go-Shin, Go-Shin. It was Virginia, Go-Shin, and Michigan. Go-Shin ended up going to Michigan. There's a backstory about that too, but that's probably for another, I guess. But these are jobs, right?

[00:42:16] For sure. If you think about the Midwest specifically, you know, not so much west coast, but in the Midwest, governors hang their hats on manufacturing jobs. And so there's also a backstory of Governor Yunkin and Virginia too. I think he thought he had leverage.

[00:42:37] This is what I heard. Go and go. And so they were committing three billion. He wanted five billion. And so he tried to play hardball and they pulled the offer and went to Michigan instead, and are writing a three billion dollar check to Michigan.

[00:42:56] But so I think so on opportunity to kill two birds with one stone, right? He bash China and you know, played to his base, but he wanted that factory in Virginia and he would have been, and if he would have not been so greedy,

[00:43:16] he probably would have gotten. So you know, I think the other important thing that is interesting to note is that Westerners know about Tesla, but they don't know a ton about BYD and your point about earlier iterations of products like retrash and for Chinese companies,

[00:43:43] I'll give you a case in point. The first taxi that I got in when I landed in Beijing from my first day there was a BYD. And it was like those old-day woo cars where the doors were paper thin and the wheels were super small, noise,

[00:44:08] thin finish, the fabric was terrible. And I was lucky enough to be back in China in April for the auto show. And did some sight visits with one of them being Shen Zhen and Beijing and they let me try out about six cars, six or seven cars.

[00:44:30] And software is good, but design is a little bit not my style, but it's for Chinese consumer, obviously. But man, the acceleration these vehicles, the finish, the pricing, the BYD is who Tesla wants to be because number one, they're gonna get to probably close to four million cars

[00:44:59] this year sold, which is gonna make them extremely formidable about 6040 split. So 60 babes and 40% PHVs, they stopped building ICE vehicles early last year. So, which I don't know if a lot of people fully realize that, but yeah, and I think BYD is like,

[00:45:20] well, they're not as big as they do PMs, but that's just not true. And so I think it is wild to see, and I always had a feeling they would be Tesla. I'm curious to see this upcoming quarter to see if BYD is still in the lead.

[00:45:36] They probably will be, but I know last quarter, Tesla had two of their factories down for all the changes they're making. So I think if Tesla takes it away from them next quarter, too, I do think you're right within a year or so,

[00:45:54] then BYD will probably be fully in the lead, which is a huge accomplishment. And I think something that doesn't get enough awareness outside of people in the automotive space that are in the know. I do want to switch topics a little bit,

[00:46:11] just because I know you are kind of tight on time here, and we're kind of getting near the end, but one of the other areas I'm kind of curious about hearing when we're time by digital first in the exposure to the Chinese auto-oingams is around autonomy.

[00:46:27] I know the Chinese automakers have been really focused on that, and it's been really interesting here. In really the last year in a special, I feel like the last few months in the US, the big autonomy bubble that there was and the promises of it,

[00:46:41] and really have kind of gone away completely. And those who were leaders are just facing so many issues in this space, I'm the kind of like cruise and waymo, especially that have either to pull back or even stop altogether.

[00:46:56] But there's been a lot of push for autonomy and success and some of the companies I buy do are already running autonomous vehicles in China would love to get your take on that. So during my trip in April, I rode in four Robotex, Level 4.

[00:47:15] Two of them had safety drivers and two of them did it. And so that's moving full steam ahead, the importance, or what's important for, well let me do this. Let me take a step back. When you say autonomous, I think it takes, and we'll regards to passenger vehicles.

[00:47:40] I think there's two forks. There's the RobotexC, and then there's ADAS or advanced driving assist systems. And you probably know about the five levels of autonomy and RobotexC is Level 4, Level 5, we're cruising waymo or at. And unfortunately, specifically for cruise, they've had a lot of challenges.

[00:48:00] They've taken most of their vehicles off the road in San Francisco because of a huge accident that one of their vehicles ran over a pedestrian and dragged them about 20 feet. And then a waymo is dialed down a little bit

[00:48:15] and they're not as chest thumping as cruise has been. And so we have to really look at Robotex as the final frontier, which is still 15 years out because the data machine needs to be fed. And where we don't look,

[00:48:41] how we should look at it from a Robotex standpoint, there's millions of use cases in situations that need data in order to make informed decisions for the machine learning algorithm, to make an informed decision. And so when it's sunny all the time in California

[00:48:59] that creating a lot of data for certain use cases or certain situations but if we're to get from where we are now to chase, you have an app, it's raining, it's snowing, it's dark, you can still call a Robotex and it can take you anywhere

[00:49:18] you wanna go, that's still probably 12, 15 years out. But that doesn't mean that a cruise in a waymo, what they're doing with having their Robotex is out in San Francisco is creating awareness, building awareness, educating consumer. And so that's really important.

[00:49:38] And when they can, we'll try to commercialize it to show Wall Street that, hey, you know what? There is a business case for this, right? In China as with everything else, mobility related, it is just hyper competitive. And there are strongholds, like by do's very strong in Beijing,

[00:49:59] we ride is very strong in Guangzhou, we ride is a company that you should learn more about because they're likely going to be IPOing in the US early next year. And so there's another company called Pony and Deep Rout is another company.

[00:50:17] They all have offices in Silicon Valley. So those are the four companies and Robotex is that I got to try out. By do, not safety driver, amazing experience. If you've never ridden a Robotex seat, you should do that, it's kind of surreal at the very beginning.

[00:50:34] And then you just kinda forget because it just kinda works. But I do wanna highlight that there are other use cases in situations. So we'll start seeing autonomous lawnmowers on the sides of highways, probably in the next two or three years where starting to already see autonomous robots

[00:50:55] and hotels that are replacing the concierge if you go ask for a toothbrush, right? They might bring up a robot that says, go to room number 217. And you'll start seeing an airport's autonomous cleaning cleaning vehicles and an agrotech. You'll start seeing a lot of autonomous agrotech vehicles

[00:51:20] that are picking up the things that have our most autonomy that I don't think people fully realize and what's coming down the pipeline is pretty impressive. Yeah, so I don't want, I mean, there's a lot of progress. And so I wanted to highlight that because yes,

[00:51:41] you see the headlines, cruise and stuff like that. But in the next five years, there's gonna be a lot of other situations use cases, business cases that will use autonomous vehicles, whether they're four wheeled to wheeled, delivery vehicles, harvesting hypertech vehicles, drones,

[00:52:04] are gonna be, so I'm very hopeful for that sector, for the autonomous vehicle stuff. And we kind of known for electric vehicles and batteries and stuff like that, but the consultancy, we help mobility companies. And so it's our job and our business sit

[00:52:24] to know what's going on and all these different sectors. The one thing that I'd also like to highlight is that GM and Ford, they all talk about selling services in the coming years and transforming their five-cell business to a services-based business. So the main difference is that,

[00:52:49] instead of every five years, I sell you a car every month. You get a recurring $20 fee or some sort of recurring expense that because you're providing you with services, right? I think Apple TV, think of the apps that you're watching TV and things like that.

[00:53:09] And so, but you need data and where Tesla is also at a huge advantage is that they sell their aid-ass service or their taxier autonomous vehicle service with a one-time fee, $14,000 for FSD. I think, and this is kind of the crazy part. I think Tesla would be,

[00:53:35] and I said this five years ago, I could see Tesla selling their cars that close to costs in order to get more vehicles on the road. Yeah. And because their long-term strategy for profitability is not through by-sell cars, it's through providing services, specifically autonomous services.

[00:53:57] And in order to do that, you need more data. In order to get more data, you need more product or vehicles that are vacuum cleaners that are who's ring up more data. Right. A typical connected vehicle takes about a generator,

[00:54:12] or generates about a terabyte of data every day. So, which is wild. Yeah. Well, I think that was one of the things that I was skeptical and with everything going with the careers that I'd be kind of curious to know how they approach it,

[00:54:26] what's in these Chinese companies as I'm not as familiar. For Waymo, I know with a lot, the decisions are made on car or in car. And with Tesla, is it probably perfect now? But the decisions are made in car. And with crews, it's essentially they're very well,

[00:54:47] they're RC cars with a lot of different sensors on them that have to be the information then sent off site. The decisions are made by a computer and sent back to the actual car. And that's part of the reason some of the issues

[00:55:00] crews was ringing into is they had loose connection and then the cars would just stop driving. And that is one of the things that I think, especially going back to the data talk about it is like, the value to me,

[00:55:13] I think there is value in getting a software that can drive a car but being able to build a software that can be on the car and then that data can be understood and processed on in the car. Versus having to be sent out every time

[00:55:26] is also a huge opportunity for being able to make these cars fully autonomous like we're talking about. Like when there's bad weather and there isn't a self connection, like that is a big step up that I don't think a lot of people fully realize

[00:55:40] that there's value in is making sure that the car can make these decisions by itself versus having to always peat back and forth to kind of get approval and verification that it's doing the right thing. And I think talking about services

[00:55:53] especially if you're able to kind of have the state and stay in car, then you can start making a lot more decisions of what is actually relevant to that user and then good or bad. Advertise and target that user went to upsell

[00:56:09] and kind of sell to them directly versus kind of the more broader approach. And I think that is one of the kind of conendrums that we've been talking about. Like you have these large domestic auto-encs and they're talking about the value

[00:56:21] of their Tommy programs and they're pitching it to Wall Street and all these other to kind of raise the stock price. But then you look at their actual products and cars and none of them are actually software-defined, software-first. And it just isn't kind of a truly cohesive execution

[00:56:39] versus what the messaging is. And I think that to me is what makes listening to your podcast so interesting because clearly the Chinese manufacturers are doing that, Tesla's doing that. But a lot of these other domestic auto-encs are really struggling with the full package

[00:56:56] that is a software for software to find vehicle. I realize we're kind of coming up on end of your time. I don't know if you can go for a few more minutes. Oh, okay. The other side of the list.

[00:57:10] Yeah, if there's anything else you want to add to that. So you brought up a good point, right? The process, right? Because it's not just software. I think an electric smart connected vehicle is the toughest hardware software integration product any engineer has ever gone through.

[00:57:31] And I'm going to try to convince you to stop using software-defined vehicle as a useful term. I think it's a terrible term because I believe it's user-defined. Software enables the technology, but it doesn't define it. I have had the pleasure of working at, I would argue.

[00:57:57] Two companies that are the best at hardware software integration. And so the command I worked at Apple and I worked at Logitech. They make the keyboards and mice. And so I'm very, very cognizant of user experience design and understanding hardware and software integration.

[00:58:19] So it's not just software, okay? That's going to really, really create a compelling experience in an electric vehicle. It's how that software plays with the screen, with the Infotainment Center. Because if there's a latency that's either caused by a slow processor

[00:58:40] or the screen, then that's a poor experience. And it takes both of them working in concert to really, because we've been trained by our iPhones and our Android phones that touching something should have an instantaneous response, okay? And so this is where it's an increasingly difficult challenge

[00:59:06] for the OEMs because again, they're terrible, it's software. And they need to get really good at it. And a very, very short period of time. You brought up a great point. Volvo is using Google for the back end, okay? Android Auto.

[00:59:26] That's inviting the Fox into the handouts, right? And so what are the matters, the Amazon's, the Google's to apples really good at? Creating a sticky environment that doesn't allow you to leave very easily. Okay, and so there was a big stink about GM getting rid of CarPlay, okay?

[00:59:54] That was a shrewd decision by Mary Barra. I would argue, and that's a serious decision because she saw that there was gonna be heartburn from them kicking CarPlay out, but if they let CarPlay stay in the GM vehicle for another five years, it would probably be impossible.

[01:00:15] You had said the dog, what was it called? The dog feature on your Tesla? Oh, the dog mode feature. Yeah, dog mode, dog mode, right? I mean, you said that potentially do break. Right? Take of that. No, and I think that's a great one to bring out

[01:00:36] is kind of the CarPlay functionality because I think your right it is shrewd and it is the smart decision to get rid of it. However, I personally am still not convinced they are, I would love to be proven wrong that their software is just as good

[01:00:57] or better as the CarPlay. And it won't be sometime. Right, and I think that's why so many people were annoyed with that CarPlay, which I get, but I also get from a business standpoint, you're completely right.

[01:01:11] You do have kind of a fox in the head house or situation and you wanna get that out of there and you wanna true value that you're providing. And I also love the fact that you just said earlier about the user to find vehicle versus software, that's perfect.

[01:01:25] And that is exactly true that it is about the special things to be user and the software could matter less. We shouldn't know that you're all here. I feel like we're in a hardware way too much. I think that's a spot on insight though.

[01:01:39] It should be used for that. It's a consultant term that they don't even know what it means, right? It's just trying to sort of, to kind of wrap this up what I appreciate you listening and following me. I think I bring it completely different perspective

[01:01:58] because just like media, there are analysts that were great at kind of researching and understanding traditional auto sector. Yep. They're trying to hold on to relevance right now because they don't understand it either. They've never worked or lived in Silicon Valley.

[01:02:19] They a lot of these guys have never driven electric vehicle. Right, right? Like, there's supposed to talk about Tesla and if you think about it, some of the these famous analysts that cover Tesla, if they don't know what Tesla is doing in China,

[01:02:38] they don't know what Tesla's doing. 40% of their production comes from China. And so, so this is my case for listening to the guys like me who you can check the receipts, right? I think that's really, really important because to me, I look at

[01:03:03] there's gonna be four phases of mobility. The electrification, the smartification and I'm taking the smartification from Brian Gu who is the chairman of the, the sherification and the autonomousification. And if we look at regions and countries, US and Europe are still in the electrification phase.

[01:03:28] China's in the smartification phase. And when I mean sherification phase, think of Google, think of lift and China think of DD. Their, these legacy automakers are gonna create mobility platforms like an Uber. And they're two signature services in this mobility app because if you look at Uber,

[01:03:52] they have Uber Eats, they have Uber Grocery, they have micro mobility Uber. And so we're talking about stickiness, right? We're talking about staying on the same platform. And so the final frontier is gonna be the two services, EV tall and Robotaxies on this mobility platform. Okay?

[01:04:14] And let's take this a step further. They're gonna partner with airlines so that Chase, you're supposed to be going to San Francisco in three days. The mobility app will plan out your entire itinerary by looking at your calendar, looking at the meetings that you have, looking to flight,

[01:04:36] looking to Uber, looking to micro mobility or the public transportation that gets you to your final destination once you arrive. And then knowing that you have a meeting at ADM the next morning, setting your alarm, calling that Uber based on the traffic patterns

[01:04:53] at 730 in the morning, making sure you get there. And so that's the final frontier for mobility, okay? And it's gonna be an exciting time as I'm hoping that there are enough companies that can kind of disrupt even in Uber, right? Cause Uber and all, and all player now.

[01:05:11] Yeah, exactly. Just look at it. Yeah, if you look at the top 10 companies, maybe it's UPS for delivery, maybe it's Uber for, for, right, hailing. But 10 years now, will we see different brands? I sure do think so. And that's kind of the most exciting thing

[01:05:32] for me as a consultant and just a nerd that loves what's going on in the space. Yeah, I just want to thank you so much to for being on here and discussing all these topics cause I think I could, we can have a few different podcasts

[01:05:49] but I'll be just giving your insights and how passionate you're about these topics and the fact that you kind of, I think what you said earlier is so spot on about so many people in the space right now talking or covering from an industry,

[01:06:05] they really don't know anymore or have that kind of perspective to no better about versus kind of like oh, we've always covered out a motto so that's how we are going to approach all these insights. And it really, I think I, through my own personal career

[01:06:19] experience have been fortunate to be in both automotive and in kind of the startup Silicon Valley side to stuff to see that exposure that that really is the way moving forward and how you can have to bridge both of those mindset.

[01:06:32] So I just want to say thank you for today, thank you for being on and can't wait to talk to you again soon. Thanks for having me Chase and the last thing I will leave with your audience is make sure to keep an eye on how fast

[01:06:47] these companies are moving and how good they get at software development because without either of them they're not going to be very successful in the future. Just think of how fast Tesla moves and then think about Tesla being playing defense in China.

[01:07:06] So the Chinese companies are bullying Tesla in China. So if you don't see forward, yeah, I move much, much faster and it really, really good in a very short period of time at software development and hardware software integration and they're going to look a lot differently,

[01:07:26] unfortunately, than in the next 10 years. So anyways, hey, Chase, great chatting with you and again, man, I thought I had this time but I just talked man so I apologize for both guarding the conversation. No, that's what we wanted.

[01:07:45] And that's why I went to you on here was when you do talk, it's just incredibly fascinating and I think a perspective that more people need to hear. So thank you so much too and we'll talk soon. Have a good afternoon, Chase. I see you, man.