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