231. Car Wars: China vs. the West - Jun26

With Laurent's Segal end from London and Gerard read from Berlin. This is redefining energy today. On redefining energy, you were going to talk about cowors, not Star Wars. Cowores during that title.

Yeah, it's really about what's happening in the car industry with electrification, autonomy, who's winning, who's losing. But first of all, from my partner, A. B Loco Energy is Europe's premier leaser of ten foot container mobile batteries built in Europe with COTL best LFP cells. A Bloco Energy serves fourteen European countries, including France, Germany and the UK.

A Bloco's batteries can be leased for any duration between six weeks and six years, and they are monitored by the Dutch award winning platform school a Blocko Energy. Make your life easier, make your business more flexible. Back to the show. So we received a year ago Michael Dunn, and the portrait we did was pretty spooky, but now it's the apocalyptic because there are so many things that have happened the past twelve months.

I'm not even talking about Trump Iron crisis. This is accelerating trends that we've seen for quite some time, but we need someone to put clarite in what's going on. For me, when I look at the industry, it's the speed of change, which is the thing that's hard to grasp. First, you've got to move towards autonomous cars.

As I say, I drove away More before Christmas and I played with the way more. Just mind boggling. That's number one and number two for me. It's just a leap forward from a technological point of view that we're seeing with these Chinese cars, particularly EVS.

That does a two standout point for me over the last twelve months. Yeah, let's bring Michael on the show. Michael, welcome back to the show. Great to be with you guys again.

Great to have you in. Michael. Maybe just kick off. I mean, we had a conversation a year ago in and around the state of the odd more industry globally.

Let me tell us a little bit what's changed. I'm not excited, you know, As you know, twenty twenty. Six depends so much on geographies. Here in the United States, we've had a complete reversal on evs.

They were creeping up into double digits, now they're back into single digits. They're out of favor. The incentives to build and sell EV's have gone away. So if you're living in Kansas, the United States rights just in Michigan, EV's are an afterthought that whatever didn't want them, government wanted us to buy them.

We don't like EV's, forget evs. That seems to be the sentiment on the ground in the United States here in May twenty twenty six. Then you go to China, and it's a completely different story. If we pull the lens back, evs as a share of total global production, sales have just exploded in the last five years, going from about three million in twenty twenty to more than twenty million last year.

So whatever people's opinions might be about the future direction of evs, the numbers don't lie, going from three to twenty million, so now now accounting for more than one in four new car sales globally. China is a leader, Europe coming out strong, But then we see also big penetration levels in unlikely places like Thailand, Indonesia. I was recently in Mexico where the infrastructure isn't great for EV's, but you're seeing EV's poor in their phv's poor in there. So one big trend evs are happening.

The other big trend is the explosive number of Chinese cars being exported globally and put a number to it. Twenty twenty it was one million cars a year. This year will be ten. We've never seen such a transformation in such a short period of time as we've seen with EV's and with Chinese going global.

Those are the two big shocks. Two analyze a bit in numbers. There are two numbers who really shocked me. The first one was at the end of two twenty five is the amount of write offs that the main USUEM passed on EV's and probably fifty billion dollars.

So that's one. And the second thing to counterbalance is the recent Beijing Auto Show with like, I don't know, fifty football fields full of okay, so the bad and the good please. Here in the United States again four GM. Stilantis went quote unquote all in on EV's right around twenty twenty one.

If you remember, Joe Biden had an EV summit there We're gonna be the world. Later in EV's Mary Barra promising EV's or our future, Jim Farley the lightning taking their crown jewel, the F one fifty pickup truck, making an electric co the lightning super optimism around EV's here in the United States. Bam, that's gone, poof, gone vanished. So the automakers look around and go, oh, no more ev incentives.

The American customer never really wanted evs. We're just going to write these down. And so how to think about that? I see Detroit increasingly as an industry that serves North America full stop with large SUVs and pickup trucks powered by castleine engines full stop.

That's their business. They're not competitive in markets outside of the United States, and so they'll take this right down and say, guess what, Our profits are even higher this year because we're building highly profitable vehicles for our consumers here in the United States. Okay, that's happening in this isolated world called America. In a way, the America is becoming the new Cuba.

They're nicer than the cars you get in Cuba. But the idea is that there's still there. It's like we're living in the past. Ignorance is bliss.

Yeah, this is great. We still have our big trucks in SUVs. Life is good. Why change?

Meanwhile, the rest of the world is changing and we're completely oblivious to it here. We just don't know about it, don't care what no isn't that? No, so's That's the sentiment in the United States. Now.

California, where I live is different teslas all over the place here in San Diego, but Michigan, Kansas, North Carolina, it's all gastling. So yes, Cuba. Hopefully it's not our future, but that's the status right now. And then we go across the ocean.

As you said, Beijing Auto Show wild. When I walk through there is exhausting. There's people everywhere, noise, cars, brands, most of which, as my friend said, I can't even pronounce the brand, let alone recognize, like how do you pronounce Saomi, X Punk and these other ones. And they're going wild with electrification.

It's just wild, always innovating and improving on their range of the evs, the capabilities, the efficiency of the batteries, the number of products, the price points, everything from fifty five hundred dollars to you wanted two hundred and twenty one thousand dollars supercar. We have that too. Sadly, as an American, I think, well, God, China's looking like America in the nineteen fifties, where it was all about innovation and creativity and the locus of action. The center of the auto industry today is China full stop.

Can I ask a little bit about let's talk about Japan and Europe. Give me your view on the manufacturers there and how you see them in the future. When I ask Chinese automakers who they respect and admire in fear, they say, oh, that's easy. There's just two companies left that we worry about.

Who are they? Is it Tesla Toyota. Everyone else they see as like marsupials as the word is, I know, open savannah, like where it's is gonna roll over those guys, eat them up and spin them out. And so if we look at Japan, let's take Japan.

Toyota continues to hold its own because they deliver quality and great service and reliability, and they have the nice hybrids. But it's just solid for customers globally. So Toyotas are. But Honda, guys, Honda I grew up in the where the Civic and the Accord phenomenal, the engine Honda's under enormous pressure they'll record their first loss since World War Two this year.

Then Honda's the next strongest after Toyota. After that it gets very shaky. Nissan's and Mitsubishis and Mastas are barely hanging on. I think that market cap of Moss is like three billion dollars.

It's hardly hanging around. So Japan, outside of Toyota is under enormous pressure and they don't have answers. Europe, you guys are there so forever it's been like, yeah, the Italians and the French, you know, there could be pressure in the future with Pougeot and Citroen and Fiat and Maserati. They're vulnerable.

But there was an understanding that the Germans would always be strong, invincible, and they were having a hell of a great time in China making records, sales and profits. That's all vanishing and suddenly the German shares in China are collapsing and the profits are going away, while at the same time the Chinese are coming in double barreled into Europe with exports, with plans to build plants there. I see Europe as in a super crisis right now. I could see the European industry just becoming Chinese.

Michael, just on that point there my view, looking at it, I think the one that's in the most jeopardy is Volkswagen, and they have to probably go to radical and I suppose that would be the kickoff of it, because we haven't really seen serious restructuring in the industry. Yet, No, we haven't. We've heard talks about it. Remember Volkswagen said at one point about a year and a half ago, they said, we're looking at potentially laying off tens of thousands of employees by twenty thirty.

And then there was discussions with the unions and they said, oh, we'll delay that. We'll only close a couple of plants, but will minimize the layoffs. Volkswagen, just as you say, had tremendous growth in profits coming out of China for so many years, for decades, and that's evaporated, so their sales are down by more than thirty percent of their profits there going to nothing. Volkswagen would be the bell weather.

If Volkswagen goes, what's holding the fort in Europe. In the meantime, you have, of course two Chinese automakers, Beijing Auto and Jili being the largest shareholders in Mercedes. You have Vovol already, of course owned by Jili. What's next?

Yeah, you talk about Gili, And it's interesting because the view and a few months ago was that BYD in China was the king of the game, but now it seemed that Jili has kind of outsmarted them or is it a good perception Gili? We can never underestimate this guy, Li Shufu who founded Gili. He's the entrepreneur's entrepreneur. A couple of years ago, when BYD started to have explosive growth, Wang trump Fu called an all hands reading.

He's the chairman of BYD, and he said, guys, we have about a two year window. After that, Sai C, Gili and Chang'an are going to come after us hard. And that's exactly what we've seen play out. Chile's the best selling car last year in China is called the Senior and from Gil is priced at ninety nine hundred dollars.

So they went right at BYD in terms of we'll go at your pricing and we'll match it or better it. And then Gile also offers you want gasoline, you want hybrid, you want plug in hybrid, you want evs. We have the whole gamut, whereas BID is only PHGV and EV in a way, they're limiting themselves at home. And they've been the target for Sai, C, Changa and gi L for the last year and a half.

And it's amazing to see how strong BID was and then as you say, eight months in a row down sales in China now and if it weren't for exports, they'd be in a lot of trouble actually. And of course we have the crisis in the Middle East or at one hundreds rar Baril, so I guess this especially in Europe where we are is accelerating the push for evs. And there was a very interesting statistics which was noways interesting in the sense that it's the most sectry fund market. So for the first time the EV charging network made money in Norway, which is not really the case elsewhere.

You see the fact that Cassoline has become very and save an accideration of evs. No question that's happening globally in Europe and elsewhere. One of the interesting things historically if we look back at how EV's took off take to date twenty twenty, and we look at what Europe was thinking. If you remember there's a Green Deal where climate Europe said climate is number one, Europe is number two, and national interests are number three.

Our goal is to reach these really super ambitious climate targets to save the world. Quote unquote. China is looking at the same reality and saying, oh, wealthy Europe wants to save the world, how can we benefit? And they may have talked about we want to help with climate, but what they're really thinking is we want to enhance our own power and wealth by providing the solutions to Europe's goals.

And here we are Europe saying climate targets evs and then the Chinese ready to supply those, and then layer on top of that the oil price going up in look and say, well, boils now through the roof, so let's go EV's in the Chinese. Towl Mike, could I just turn a little bit to innovation? And I just want to say that I had a very interesting experience a few weeks ago, which was to drive a Chinese Neo and go to the battery swapping experience. And it wasn't just a battery, it was just a whole car.

I just thought this thing is just unbelievable. It is it is, It's arguably neo and tell me, both build phenomenal products and it's stunning. So tell me more about what you did. Which neo was it and where did you drive it?

And I was on the road. It was in the Netherlands on the way for Germany. And what you've got is battery swapping stations along the way. What was interesting you pull in to do the battery swapping and it parks for you and it does everything for you within like a minute and a half.

But it was also for me it was just the experience of driving the car. Sorry, I was a passenge in the car. What was interesting for me though, was the car is basically autonomous as well. That's the other thing that was interesting for me.

Everything about the car in terms of the comfort the field. I was really like, wow, this is. Did you feel like it was equivalent to a Mercedes or BMW and or Audi and ride quality? And I did.

I actually have a BMW electric car and I felt it was really it was the closest thing I've got on BMW. That's what I would say. Yeah, the executives I know who work at Mercedes and BMW. They say Neo is very good car, very impressive both in driving and the electronics.

So when you went to this swapping station, was that integrated into your center stack screen? Like how do we find where it's ye or all of us? So you're saying, and my batteries, low bang, I hit the button here on the navigation battery swap. How did you pay for the swap?

Do you have to pay you or is that also integrated into that. It's also integrated everything is, so you have different choices. You can buy the car with the battery in other words, it's your battery and you don't change it. Or you can have the battery where you can swampush by the way and you can charge it normally as you would as well, or either.

Way, either way, just like wow, okay, well. Michael, you introduce autonomous I can pronounce that. Sorry, not a native autonomous autonomous autonomous car. So a lot of podcasts also has been done in autonomous.

So it seems that Tesla now finally good, is up together. There's way more a lot of things in China as well, So how do you see that old autonomous landscape? Seems like a two country race United States and China. And on the US side you have way Motor, so you said Zooks is a smaller player interesting to watch, and then you have some specialists in trucking like Wabi, but it's Tesla Way More really the two leaders in the US, and then on the Chinese side there's Baidu, We Ride, Pony, Momenta are the big players.

The way to think about it is that the Americans are still more advanced in terms of innovation and overall sophistication of the technology when it comes to autonomy. The Chinese, as is their strength is they'll copy paste and iterate. So in the past they copy pasted and people go, well, they're always going to copy paste, but they're copy pasting, making a little bit better and then going to market very quickly, and so who is going to win out. Part of that we're seeing in places like London and the Middle East now where both Baidu and Way More are getting in there and working with partners, and we may see how it's going to be decided in Europe and the Middle East and other places in the world.

Whereas the US and China block each other, No Baidu in the US, no Way MOO and the two governments just don't want the other players in their respective markets. So as a result of this, we may see the competition play out more aggressively in places like Europe between the two systems. What about all the technologies out there that you're looking at there, I mean, if you look the last twelve months, what's the big sort of technology forward you've seeing? It seems like autonomy is first, second and third These days.

There are iterations around software updates and over there updates and batteries and being more efficient and different chemistries. But the most exciting thing, the ultimate goal is who can crack autonomy? And so you see Elon saying redefining his company as an AI robotics company. He's discontinued production of the S and the X, leaving just the three and the Y and the cyber truck, and he's all like, our company is all about the cyber caps.

So globally and within the industry, I think the most exciting innovations right now are all around autonomy and their applications. Another exciting development for me is going to be trucks especial as usually as in China. But I think the truck industry who doesn't have an emotional connection with the car, and that was designed. It's really what's the cost poculometer or mile period and the advancements in batteries and make it that.

Now the economics looks pretty good and we start to see somebody else. My personal opinion is that in the next eighteen months, each trucking is really going to explode. Do you see the. Same Definitely, We've seen it happen in China already, where electric share of new truck sales, even the big heavy trucks is above twenty five percent.

Now maybe thirty percent. Let's come out of nowhere. And for the longest time the debate was well with heavy trucks, batteries don't make sense because long distance and heavy. But the Chinese have found a way to make it work.

As an American, what's I'm coming to terms with is that the trends are being set by China. China is the new California, where if it's happening in China and it's happening at scale, it's likely that it's going to happen elsewhere in the world. Eventually. That's like a one in one hundred years change.

That the world has to get accustomed to. And so if the Chinese are using electrics for trucks with success NX scale and at low cost, then we have to wonder why wouldn't it happen everywhere else in the world now? And Europe would be a great candidate for it because of the cost of the drivers and you have autonomous trucks powered by electric vehicles. Oil diesel is through the roof.

Wow, it looks like a solution just looking for a place to apply itself. You guys are in Europe, so I'm always a little bit from the outside looking in. It looks like China's number one prior globally right now is Europe? How do we concrete?

Europe looks so delicious. It's such a big market, there's so much money to be made, and the industry itself is not at its peak of power. Let's go capitalize on it. There's only one thing about here's me coming out from European side.

At least you've got Tesla and Weimo. What do we have. Why haven't we seen a Tesla or a Weymo materialized in Europe? It isn't for lack of smart people, resources, money, it's all there, but somehow we haven't seen it.

I think we're stuck in the old world of the combustion engine, and it's just the culture of these businesses have they've been so dominant for so long and they've lost the ability to innovation. That's it. They're maintaining rather than innovating. Innovation has come from very aggressive and hungry entrepreneurs, come from FALL or from GM or you know the type of guys.

So when you are sitting on a mud ad which has proven lucretive for decades and white. Change, let me follow it because it's very interesting to me. So you guys are in Europe. Where would something like that come from?

Now, let's be optimistic, like there's young people, smart people who look at Tesla and go, damn, I want to build one of those. What country do you think that's going to come out? Well, listen, the only sort of new brand ev company that we have, as Rymack, it can come out of Croatia. So if you ask me where does it come from?

The innovation, the entrepreneurship, et cetera comes out of Eastern Europe. But there's an issue. Probably the capital is not there for that that's the issue. But we definitely see massive innovation across the Eastern Europe, and not just in this and in lots of different sectors.

We see that, but they need capital. They need capital, and Europe has a lot of capital, but it doesn't go into businesses. It goes in a property and it goes into government bonds. And say we have no California.

That's what I would just say, No Silicon Valley, No Silicon Valley some days. Coming from the Midwestern United States, it wasn't until later when I went to California I saw Silicon Valley up front. If I'm being honest with myself, it wouldn't occur to me that you could have such a culture that welcomes risk and willing to take risks and is entrepreneurial and the chances of failure are pretty high. That wasn't the education I got in the Midwest America.

So it is unusual and maybe hard to duplicate, but that's what seems to be necessary for Europe to have a renaissance, is just go back to that model of risk. Yeah, that's that's how it happens. Let's take some risks. Miket I like to go into the kind of conclusion.

It's about the book that you're gonna release next year. Next year. I don't know why it takes so much time. Do you have a title yet?

Have a title? It is called car Wars mm hm. How China sees the auto industry and how the West wins it back. Ah.

So there's an element of. Hope, there is, there is, And that was the hardest part of writing the book. The easy part was telling the story of how China convinced the world to bring all the capital and know how to the Middle Kingdom or for decades and say bring all of your capabilities to us, Thank you very much, really appreciate it. The first half of the book is looking at how that happened mm hm.

Things along the way, like China convinced the world that to have access to the China market, you must join venture and you must give half of the business to a Chinese partner. Now, no other country at Russia, India, Brazil, no one else was able to get away with that, but China was. And then not only the joint venture, but by the way, if you're going to be here, you better invest in R and D, you better transfer know how and during those years there were manufacturing joint venture products that buicks and the toyotas and the hats.

They're making a lot of money. Western automakers making a lot of money. So they're like, well, eventually we're gonna win out here and it'll just be us and the Chinese will give up. But they underestimated the Chinese, and the Chinese has played a long game getting all of that capital and knowhow into their country.

Hundreds of billions of dollars poured in and then now we look, China has the capacity to build half the world's vehicles. Now, okay, we're kind of familiar with that story. Then you start to think, like, how do we possibly come back, And to put it in geographic terms, think Detroit was yesterday, West Coast Texas is tomorrow. Our only hope in Europe in the United States is to invest heavily in companies like Tesla, Weimo, Rivian, potentially Zooks and these others, because the future is autonomous and electric.

And as much as I as a Detroiter, I'd love for the Detroit to rally, or for Stuttgart to rally, or Paris or Milan, I'm not sure that it's going to be able to happen. It's all about autonomy and electrification. I was having breakfast with an investor from Sequoia Capital, one of the early founders, Michael Moritz. Sir Michael is very accomplished, very smart guy.

And I was having brekfasted with him a couple months ago, and I asked him, what's the future of America. So he said, flipping burgers in healthcare. Of course he is joking, and he said, no, we cannot hope for a comprehensive comeback of Detroit industry. He said, look for points of light, individual points of light, and those can be strong enough.

When you think about the capabilities of Waimo backed by Google or Tesla with its robotics. Yes, that is the way forward, and we're still leaders in that. The Chinese are right there with us. But if there's a way forward, it is it's got to be that.

It's got to be West Coast. Well, Michael, as usual, it was really a pleasure. So next time we speak, if you agreed to come back, it was after your book goes out, but in the case we'll make sure to advertise it. Michael, Thank you so much.

Thank you gentlemen. Always a pleasure having a conversation with you guys. Next time we meet in where we'll it be in Dublin or Berlin or Paris. Dublin, Berlin, Paris, London.

We don't mind. Just let us know, Okay, all right, don't it so job? Any comment? He's spot on in terms of where he's at.

I see the US. Yeah, that's just kind of remain with our gas guddlers. It's a cultural thing. What you've got is China without a doubt, and I think Asia will follow it as well, just electrifying everything.

And then you've got Europe moving towards electrification as well. But the issue courses, they've got the legacy automobile industry that is what outed out and a goat from massive restructure. There was so much thing to say. We didn't have time to talk about one or two things, which I'm gonna address now.

So the first one is we didn't talk enough about batteries advancement. Before the Beijing Auto Show COTL it was called their Super Technology Day and they unveiled oh my god, this is in Chinese, so sorry, the changing Gen three and the killing contents battery, which means you can charge certain batteries one thousand favor kilometers. Others you can charge them in five minutes. And of course they unveil what they call the next RA, which is the sodium iron battery.

So what's happening in the battery area is insane. Yeah, I think i'd add to that as well. Ron I call it the balance of systems in an around the battery in the car. This is the power electronics, this is heat pumps.

This is also showing incredible avent answers as well. And you're right, we've never seen this speed of change in the off obil industry. That's the bright side. Now if I look at the darker side, and just looking back at the statistic of the Beijing Auto Show, thirty eight tech dours one five hundred vehicles exhibited, including two hundred new ones.

And listen to this, one point three million visitors but only sixty five thousand from overseas. That tell you the size of the Chinese auto industry. Now, they went over their skis. They have a capacity to produce fifty five million vehicles a year, so it means their plans are running at fifty percent capacity.

In Europe also plans are going at fifty percent CAPAESTE in the US it's seventy percent. And what we saw over the past months is that the cast sails in China were down twenty percent, down twenty percent, but the export search eighty percent. So in fact, the domestic demand in China is sluggish. And if you look at the number of common eufactor are there, I can see a big consolidation happening.

So let me just add to that point here. You're right, the car sales are down, but what's interesting is market share of electric vehicles is going on. So to be clear, I think anyone across the world of what's going on in the Parisian Goals, we'll our second thoughts about buying an internal combustion aged and that's what we're also see. But at the same time, if you look at the excitement of the stock market for the two industry, it's pretty lame.

If I look here today, the smps are almost ten percent, but byd GM, Rono, Volkswegen, even Tesla they are flat this year for minus seven Shanghai Auto Modif minus ten, Toyota minus fifteen percent, BMW minus fifteen percent, and then it get worse and worse on the minus twenty, Mercedes minus twenty, Ciaomi minus twenty, Xpangs minus twenty five, still on Tis minus thirty two. The stock market is very very sho em. Well, when you've just said why there's over capacity across the whole industry, that means margin.

Pressure, rice pressure. There's only one that's up. It's Gillie because they've got such a great diversification. Again, exciting times in the automobile industry.

But the one who are killing it are the battery manufacturer because CTL is up twenty five percent this year. The battery manufacturer are capturing the value of the EV sector, which is fascinating. Well, don't forget CTL is not just a battle. The CTL as stationary storage as well, and that market is booming as well.

The growth actually is in stationary storage, it's not on the automobile. Well job. It was a fascinating conversation as usual with Michael. So we thank you for coming on the show.

Thanks Michael, and I'll look to you next week looking forward. Thank you for listening to Redefining Energy. Don't forget to rate the show and subscribe on Apple Podcast, Spotify, or the platform of your choice.