With Laurent's segle and from London and Gerard Reed from Berlin. This is redefining energy.
Today. On redefining energy, we're going to talk about the future of the global automobile industry. Who the winners, the losers, and I suppose the challengers are.
And the zombies because unfortunately we believe that some companies are not going to make it.
Yeah, we believe there's going to be some zombies out there.
And we don't even want to talk about the tariffs because it changes by the hour. We don't know who's going to tariff home and the spare parts and the batteries. So we really want to concentrate on the technology or technological edge of all those car manufacturers. Now, if we look at the IV market, and I'm quoting the excellent row Motion study for Q one twenty five, well four point five million evs was sold globally, which is a twenty nine percent increase compared to first quarter of two
twenty four. Of course, China is very strong plus thirty six percent, but even Europe is very good plus twenty two, and even North America plus sixteen. So we have a continuous growth of the EV market.
And by the way, a continuous decline of the internal combustion engine market. We've seen peak IC some years ago.
To make sense of all this and to assess one car manufacturer after another, because I think it's important to go, you know, inside the brands and not just blah blah about the global market. Web invited one of the leading experts, and that is.
Michael Dunn, and he's the CEO of San Diego based consultancy business called Don Insights. Yeah, listen, this guy has been around.
You know.
He was a president of General Motors Indonesia with a managing director of JD Power China, so he really does know what's going on in Asia, and we think age is particularly important because that's where a lot of the challenges are coming from exactly.
So let's bring Mike on the show. Mike Kiln, finally, welcome to the show.
Tremendous to be here with you. Been looking forward to this day.
Oh my god, you made my day. Like your first question, super simplen to watch twenty four seventy five million cars producing the world, twenty six million in China. What the hell's going on?
Welcome to the world in which China is the center of the global auto industry, the dominator, bigger than America, bigger than Europe, number one export in the world, number one DV maker, number one battery maker. You go down the list, there's China and then everyone else.
We have decided not to talk about the trade wars, the tariffs and song We've decided to concentrate on the tech to be rerustrative. We have decided to kind of screen the major OEMs in the world and you'll give us your opinion. Are they leaders, are they challengers or are they strugglers. So we're going to start by China. That's because that's probably easier. So Number one byd.
The single most exciting company, the fastest moving company in the world is byd IF. I had the opportunity to test drive their vehicles both here in the United States and Mexico recently. I can testify that in terms of quality and technology, fit and finish performance, they're right there with the Hyundais and Toyotas of the world. What's most astonishing about this is the speed with which they've risen
to the top ranks. They're now bigger than Ford. In Nissan, they were valued at you know, nothing, five years ago. Today the third most valuable company in the world after Tesla and Toyota, and by all measures is they're just getting started. That most of their sales ninety percent of their sales are in China, but going forward they expect to sell millions globally, so they have the vertical integration.
They make their own batteries, They're low cost, they're high quality, no wonder the executives from Toyota who recently visited there, went back to Japan and said, uh oh, we're in trouble. BYD, putting fear into the hearts of every auto executive world.
Why today, Mike, I'm so glad you started with BYD because actually I put my money where I'm out is and I'm invested in them, have been for a while because I take that view the same as yourself. I don't put it as poetically as you do, but I would like you to talk a little bit about what is it that makes BYD special? What are they doing different than everybody else.
We kind of have to go back to their origins as a company. What's their DNA nineteen ninety five, they start making batteries for sell phones. How did they beat out the Japanese and Korean battery makers at that time, cost down, low cost, and low cost. Again, this has been Wangchrang Fu's bible since day one, and that served the company well for the next twenty years as they got into evs. But really we didn't see this takeoff
until twenty twenty. What happened in twenty twenty two things One is they had hired a designers from Europe, Wolfgang Egger, to design, engineer, and develop much better looking vehicles than ever before. So if you were in China during the two thousand and twenty tens, bid was kind of an also rant, not that exciting. People didn't really desire to own one. But under Wolfgangger they've come up with really
good looking products for the first time. Second thing that happened the end of twenty twenty they came up with this battery called the Blade battery, which is arguably the most technologically advanced battery in the world today. There's some backstory there. They may have gotten some help from Apple on that, but who cares. BYD now has a formidable battery manufacturing capability, and then thirdly quietly BYD also has
this semiconductor subsidiary they're building their own chips. So not only are they good at batteries, good looking vehicles, but now those features inside the car you're on, navigation, your maps, your entertainment, they're engineering that in house too, so massive vertical integration, low cost, better designs, and more advanced technology
all happening at the same time. This is what explains their sales going up twelve x in five years, five hundred thousand to more than five million this year.
And it looks like it's just the beginning because I've been chicking on their overseas factory which are planned, or the construction Brazil two hundred thousand, Thailand thousand, Indonesia, Contism, Hungary two hundred thousand, Mexico, Turkey. They're literally all over the place.
All at once. In the old days, you'd say, well, let's venture out and build a plant in Brazil, for it's going to sell us one that's been idle. That's great, Let's go learn how to manufacture something overseas. No, they're going globally all at once, including too. This isn't manufacturing, but they're going into the Japanese market, which is almost heresy. No Chinese company would dare try to sell cars Japan until now bids there in forced trying to sell their
products and arguably the toughest market in the world. They're going global at pace, and the chairman has said most of our future growth will be outside of China, where we can make some profits. This of course leads us to the United States, where today they don't have access.
But the wildcoud out there is will President Trump three months from now wake up one day and say, hey, I've got a genius idea persuaded BYD to invest ten billion dollars here in the US the manufacturer cars and batteries, And we're often.
Running Michael on that point there. It's sort of already happening because my Tesla Model three is a BYD battery in it, right, So it's sort of showing you the way forward. Isn't it that you have to cooperate with the Chinese?
It really does. It looks like there's no workarounds. They own the battery manufacturing business, from a lot of mining to definitely processing to the cell manufacturing. It's hard to get a battery that doesn't have a Chinese aspect to it today.
If we took about other Chinese OEM because I listened to your excellent podcast and you said there were one hundred and forty different manufacturers in China, in more than four hundred factories. Let's focus on a few big names, and because I don't want to least them are So we have Shanghai Automotive, we have Gielee, we have Shong Gong Automobile, Soon Automobile. I mean every time, it's two mediums, great wolves, expand I mean, do you have anyone you like or you follow in particular?
Number one takeaways? There's BYD and everyone else BYD's in the class by itself. So then you go to the next level and you say, how do we think about these one hundred and forty We'll take the next ten. And if we look at the next ten nicely conveniently for us, there's five what I call OG companies old school, and there's five what I call techno gang companies. So those are newer companies that want to be the teslas
of China. Okay, so within those two groups, you've named them already, But within the OG group, I'd put g L number one. They own the Vobo brand, poll Star, Zeeker, Lotus. They have ownership and Mercedes they're the next one to watch, and the Ogs. And then in the techno gang of five, it's very interesting. You've got this new company called CILB, second largest smartphone maker in the world, delivering a beautiful new product called the SU seven set the track record
at nerveer Gring recently. They would be on the top of my list. Then you go to x Pun that heads that relationship with Volkswagen. They're also very impressive. So those are the three companies after BYD.
Can I specifically ask you about the shelmy car because obviously smashing the Nurmberg Ring, this is a shock to the Germans. And also it's a shock because the car is like a fraction of the price of say the Porsche that it looks like.
And I be interested to know just how the hell are they doing that?
And even to maybe start, we're looking at European guys, how does a Porsche compete with these guys?
Going forward? How do you compete with the Chinese? When the Chinese can manufacture at twenty five percent lower cost. That's the shock, that's the earthquake coming out of China. It isn't necessary that the Chinese are genius in terms of innovation, but they are genius in low cost and commercializing. So the backstory on Shelmi is so interesting. The founder Lei June met Lelon Musk ten years ago in China, took delivery of a models and said, one day, I
hope to duplicate what you've done. And here we are ten years later. He's come up with this beautiful new product, great design performances there, and it's built in arguably one of the most highly automated factories in the world. If I'm an automotive executive from the West, I'm not afraid of Chinese companies by themselves. What I'm afraid of is their ability to manufacture high technology and low cost inside
China in ways that no other nation can match. That's a problem for everybody that's not Chinese.
Before we leave China, any other names because Neo, but he's seen Neo is losing money out over fist.
Right, Neo, when your twenty second takeaway would be super ambitious, great visionary leader, spread too thick, doing everything all at once, and it's hard to make money that way.
Okay, let's leave China, even if we come back on a regular basis. So let's just cross the Sea of Japan or the Sea of China, because now you don't know how you name the piece of of of sea. They change name all the.
Time, Greater China.
Yeah, so let's go to Japan. And of course Toyota, which is the eight hundred pound gorilla, lost a lot of time on the hydrogen dreams, which of course would never materialize, but seems to be quite okay with hybrids. So how do you see Toyota and the rest of the Japanese crowd.
Just came back from a trip to Japan, met with several automakers there. My overwhelming takeaway was that there was there's Toyota, and then everyone else. Similar to BYD story, like Toyota's got its act together. It's not moving as quickly as we'd like them too, but they're highly profitable. They have a nice portfolio of products distributed across hybrids, plug in hybrids, and gasoline. They're making their way towards EVS.
And when I talk to Chinese automakers, I ask them who do you fear in the world, and they say they're two companies to re respect. One is Tesla and the other's Toyota. Everyone else is sort of up for grabs. I'm confident that Toyota will find a way forward. The question is what about everyone else in Japan?
Because Nissan is on his last leg and you still have Hondo. Yeah, maybe a merger, a merger will finish to up in in that chapter, or.
No Honda that whole Nissan Mitsubishi with Honda, My concern is their core DNA has forever been building great engines for their motorcycles and their cars. So I'm fluent in Portugueze for decades and then someone comes along and says, no, you have to actually learn how to speak Chinese. Now what Honda will have a hard time making that transition to electric We've already seen it. That's what concerns me.
Staying in the zone. Koreans, they seem to have adapted pretty well.
Doing nicely both with their conventional gasoline products and their evs and smart making investments globally. Here in the United States, they just announced a huge additional investment into Atlanta. What
separates the Koreans. I think they're just tenaciously competitive. They understand that they're a country the size of the state of Michigan, and there's no time for rest and they're just super zealous, work really hard and have a realistic appreciation for the competitive environment the world now enters, and they say, we have to move faster, work harder than everyone else. And they're doing a great job of that.
And it's probably the only competitors of China was an integrated supply chain. Is there a scay and you know some sums.
And some of the semiconductors, they're in good shape there. Now, I should hasten to add that no matter how good you are globally, global automakers, including Hyundai are really getting crushed in China today. Hyundai's numbers down about ninety percent from their peak in China. Can you believe that they're
barely hanging on there? They've done nothing wrong. Products are great, but the sentiment inside China for consumers today is I'm going electric and I'm going to a Chinese brand, and every single non Chinese automaker is taking it on the chin.
So, Michael, can we move a little bit towards the old world? And the old world for me is starts in Europe, and I would actually start in Germany with Volkswagen. If I look at Volkswagen For me, it's just inexcusable. They were the biggest manufacturer in China for the last decade, and they just seem so ill prepared for the future that you sort of have to wonder if it's going to be around. That's my assessment, but I'd love to hear yours.
In a way, this is the second major shock for Volkswagen in China. I was there in early two thousands. At that time, Volkswagen was enjoying fifty percent market share in China, selling through two joint ventures. They owned the market. They were the king of the hill. Wto happened and all other automakers flooded in and suddenly Volkswagen was really under enormous pressure, losing market share, sales and profits. Through the early two thousands, they recovered, they rallied somehow against
the odds. They found a way to update themselves for the China market, but that was building gasoline powered engines. This time around, they really look vulnerable. How do they come back at a time when the Chinese are getting stronger by the day. I don't know. They've lost over a million sales in the last five years in China. They've closing plants, there, it's going to be a lot harder to re cover. Their answer, we know, is to invest in x pump and try to sort of attach
themselves with an up and coming Chinese player. That seems to be their formula going forward. They probably should have done it years ago, but that's where they are right now.
Yeah, because look, they made a lot of bets, not of them winning. If you look at the went beg into Northwold, see the result. And also from a software perspective, I don't know how much billions they've burned into their software platform. It doesn't seem to work very well. Well at least they tried, but unfortunately they failed.
Yes, big picture, guys, I think we're talking technology here. The software defined vehicle is a great differentiator. Tesla's there, several Chinese are there. Volkswagen has really struggled, as you say, with Carryat and they're a hopeful X punk relationship. They're hopeful in their Rivian relationship to save them, the rescue them. But without an exquisite software defined architecture, they're just not going to be competitive. No one will be. And that's where we are with Volkswagen today.
The old Lady Mercy, it is uh huh, what's your take?
This is going to be heresy or highly controversial. My German friends will probably not be happy to hear this. But to some extent, when I think of Mercedes today, I think this might already be a Chinese company. Look at the ownership. Nineteen and a half percent share belongs to Chinese groups that gi Le and Baic Wow, single largest shareholder in Mercedes. When I listen to the CEO talk about, well, we don't need to have tariffsu on Chinese cars here in Europe, I do wonder what's inspiring
those words. And then unprecedented I saw he wrote an op ed that was published in the National People's Daily in China, which is a direct media organ of the Chinese Communist Party. I've never seen a Western CEO do that before, so to some extent I wondered, maybe maybe China already owns Europe's most iconic automotive.
Michael, I'll jump on that and say, yeah, they're also manufacturing there, because at the end of the day, the Smart is not even manufactured, it's it's a Chinese car.
Basically, right, you are right, the Smart, let's be honest, is Chinese now okay, BMW, BMW. I'm more optimistic. Why. I think that they retain their independence and they're still innovating and they'll find a way to survive. And this is where guys, I'm an American who lived in Asia for a long time, so I'm a little bit far from Europe the Old Continent. But as I look at things, I would say I bet on BMW finding a way to compete long term.
By the way, Michael, I wanted to talk about the French, but they're useless and they have no chance to survive, and so we could probably not that.
Interestingly, there is this group which is half European, half American and that kinda allows us to cross the Atlantic. It's stell Antis, which is really a pile of weak brands of being coupled up together. And they're now changing their CEO. So stell Anti's.
Which is like what they have a new one yet.
As we speak, I don't know. It must be very tough to manage all those dispread brands from Chiat to Open to Purge You to Chrysler to Wow. So stell Antis first, does it exist as a group or it's still different strategy The way you see it between the European side and the American side.
Feels like Stellantis on the side of the ocean is jeep, yeah, and then on the other side of the ocean is the European brands. Here again, they wouldn't be surprised to see a Chinese automaker make a bid for one or more of those brands in the near future.
Wow. Interesting?
Why because they've done so well when they acquired the MG brand, they acquired the Volvo brand, it's been a winner so far, so why not pick off one of those brands from the Stilantis group.
Okay? In the US, Ford GM, How do you see them from a technology point of view? Because Ford was quite ahead, but now it's seeing GM's coming back. Was it just pr or is there a bit of substance behind.
Ford's rush into evs? I do feel as though, in retrospect was premature and mostly driven by a desire to make an impression on Wall Street. So they ran both the F one fifty Lightning not a good idea. You knew that their range wouldn't be there on the battery powered full size electric pickup truck. You know you've got long distances, high speeds, Hills cold weather towing and that's
been a disappointment. Secondly, they really fitted battery arc texture onto cars that were designed for guests, so they sort of rush to markets Fords behind. In my mind, GM has done the right things in investing in crews and try and develop its own battery manufacturing capabilities with LGCM, but they have not executed well. So I feel as
though as a detroiter I can feel their pain. They are companies one hundred years of manufacturing and suddenly the game has changed to things called chemicals that batteries and then again software defined vehicles, and it's so unfamiliar to them. How do they make that transformation? I'm very concerned about the future of those two companies. They'll be able to carry on in North America buildings, large trucks and SUVs
for probably a couple more decades. But if you look outside the United States, where are Ford or GM competitive? Europe niche player right, yeah? Asia?
No, they used to wreck billions every year in China last decade. Then now it's gone.
Gone, swung from huge profits to losing losing Boku money. That's not good. The trend is not their front. GM. You know, took a five billion dollar charge last year. They used to take home two billion dollars a year in dividends for years, and now they're underwater, so it's forth okay.
So that's the shrinkflation before we go to the last one world on Rivian? Are they going to survive as a stand alone company?
In your opinion, the terriffs might buy them some time. They're all American, and who knows. If our ja get's on the good side of Donald Trump, he might put a Rivian on the lawn too and say this is a good American car. We should buy more of these. Take away on Rivian impressive leadership, quality car, quality company. But you know, let's remind ourselves how many new automakers outside of Tesla have been born in the last generation and survived. It's so glad to do. I used to
have money and Rivian about two years ago. No, I don't have an appetite for that risk anymore, so I wouldn't you know. Our test right is always do we take the cash from our pocket and put it on that company. I'm not there.
Yet, Michael. Let's finish our around the world trip with the most innovative and now the most controversial brand, the one who made it happen and now might be past to speak. Last year I did an episode and we ask ourselves as Teslamojo and everybody recognized five years ago they were like on the top of the world, and maybe they'll see you what has dropped the ball? How'd you see them the next five years?
Several years ago I had the opportunity to sit down with Michael Mortz, who's one of the founding partners. That's a quare capital, highly regarded worldwide, and at the time I was asking him about the Apple project. I said, I'd like to get involved. I know you know Tim Cook, I know you know Elon Musk. How could I contribute? And he said, why would you want to go to Apple when the answer is right there with Elon WHOA that got my attention. This is already this is like
twenty seventeen, twenty eighteen. He for one saw Elon as someone extraordinary, exceptional, and he's it's been proven out. So I know today there's a lot of controversy around Elon Musk, but the bottom line is I don't want to bet against him. I just don't want to. I think he will return to Tesla, and he's already called it an AI and robotics company. He's making a big bet on robo taxis. They're rolling them out in Texas soon, they've
applied for permits here in California. I think we've were going to see great things out of Tesla in the coming years. I'm optimistic.
So, Michael, maybe we can just zoom back up to big picture. I'd love to hear your views on how fast we electrify automobiles across the world.
What do they say about the future is unevenly distributed? Here we go again, futures here unevenly distributed. We're going to see continued rapid development of evs in China last year was fifty percent of total sales. That's the China playbook. In the United States much different picture. I think that five years from now we'll see evs accounting for just ten percent of the market, maybe fifteen, and in Europe probably likely to land somewhere in between. So say by
twenty thirty, let's put some numbers to it. China could be easily could be seventy five percent, US fifteen, Europe maybe thirty. So much depends on policy of course, but I see the rush to electrics being a national imperative in China and for the rest of the world, it's like, yeah, okay, it's an option, but it's just not mandatory in the short term.
My John, I'm so pleased to have you finally on the show and a great conversation. I would have you for hours, but just an opportunity to extend a reinvitation next year to see how things have panned out. We kind of agree generally that it's an absolute party for China. In Europe still because we need to import a lot of oil, we'll be wobbling on the high side and the US. I share your skepticism, but very interestingly in the rest of the world, took in India, Southeast Asia,
Brazil and so on. The qualification is going to go pretty fast as well.
So overall, the thing we're watching is PHTV versus EVS. So I was in Mexico last week, just across the border here from San Diego BYDS store there and I asked them what's selling and they said EVS no, PHVs yes.
Interesting.
So that would fit in a lot of developing markets. You don't have to worry as much about the charging.
Thank you very much, Michael, brilliant, happy.
Thank you, great to join you guys.
Thank you for the It was a lot of fun. Laurent. I'm going to use the word mind blowing. And the reason I say mind blowing is because I talk a lot from theory, from what I read, and this guy's coming up from practice, and he was just so forth right and open in his opinions in and around the different manufacturers, where they stand, where they don't stand, who's gonna win, who's gonna lose?
A super Oh, it was great, such a pleasure, such a pleasure to do this podcast. So we have the opportunity to have great conversation with guests like Michael. Now, I did not realize a certain number of things. I did not realize that behind BYD there's going to be a lot of pain with the one hundred ish Chinese brand. If you look at Japan, Toyota is in a better shape than I thought. Of course now they've given up
on hydrogen, but they look like they're resilient. But if you look at Nissan, oh my god, I was surprised by the fact that you thought that Korea was under threat. Yeah, so I really learned a lot.
Yeah, and listening confirmed a few things that I was taught, which is that obviously Volkswagen is stuck in reverse gear. I'd also look at the manufacturers and actually think the German wants to say that BMW is the best position. He was sort of confirming this. I did find it interesting the point he made about Mercedes, which is it increasingly feels like a Chinese business. You know, Yeah, very interesting.
And look, there is the wild card Tesla, and I know a lot of people have a lot of opinion about Ilon Musk, opinion which might have changed a lot in recent years. Look for me, rather than say something, I just want to pass the song.
That's a good way to finish this podcast, right, That's a good way.
I don't know what they're going to do with the robots or to the mus and everything, but what is clear is that there was so much ahead five years ago, and now while there's a there's a lot of competition. So yeah, it's going to be more challenging going forward.
I think the one thing I would just say is this, it's been a huge damage onto the brand over the last six months anymore now mm hmm.
Well, well, well we wish the best to everybody. But it's very clear that the k industry, which those big brands, are pretty stable from one decade to the other. At the end of this decade, there'll be a lot of guys left behind, which is sad, but that's capitalism.
That's capitalism.
Yeah, okay, Jad, great talking to you and I talk to you next week.
The to us, Yeah, thank you for.
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