Live with Bill Bishop and Tu Le on China EVs
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We're live, so I'll talk about that. Hey, everybody. Thank you for joining this great live discussion. Sorry, we're a little bit late. We're trying to work out some of the tech hijinks. But I'm really happy to have Tu Li, who runs, he's managing director and founder of Sino Auto Insights. And he is one of the West's leading experts on the China EV industry. And today, we're going to talk about...

Everything China EV, which is obviously in the news. We did a podcast to like May of 2023, I think. Way too long ago. You had just come back, I think, from the Shanghai Auto Show, sort of the COVID reopening when the world was awakening to what was coming. And I have to say, I went back and listened to that and you were incredibly prescient on what to expect from the sort of the just the massive dominance that was coming from these amazing cars that China is now producing.

Yeah. So I was just back in China about three weeks ago for 18, 19 days, almost three weeks. Got to see a mega charger, got to drive the new Han Al and Tan Al from DYD, got to try out their Godzai and then drove a Nio with battery swapping capabilities from Beijing to Shanghai. So lots to update you on, Bill.

Yeah. It's always good to see you, man. It is. It's good to see you. We were friends back in Beijing, and you're now in Michigan. I'm in D.C. Our kids went to the same school. And it was Phong Sao Di, which was great for them. I hope it was good for your kids. It was. They learned the value of homework in first grade. Now they're too American, I think. So we need to instill some of that Asian...

uh hard work back into them so anyways well so as people are joining thank you just a little bit housekeeping so this is a live conversation but when we're done it will um show up as a recording that we can both put out on um our respective sub stacks um obviously minus cynicism too has um sign of auto insights has this great weekly newsletter if you're interested in uh what's going on in the ev world in china but not only china you really should subscribe it's wonderful um

So why don't we go ahead and jump into it? I guess the big question right now is sort of what's in the news over the last couple of weeks. I mean, you were just there. And then since that auto show, right, BYD did this massive price cut again, two years, I think, after the regulators told them to stop cutting prices. So where is the industry inside China? Are we at the point where we're going to start seeing real consolidation or is this just going to sort of keep

Slugging it out with lots of companies that are going to sort of stay alive and only a handful are going to actually be successful and actually successful as a financial business. So first of all, Tesla started that price war a little over three years ago in January of 2022. And BYD has always...

kind of dictated the pace, either through price cuts or through new features, new products. They're relentless. And the difference between now and in the past is that we're in June and summertime's rolling around and BYD really, really cut prices. And I think it surprised everyone. So normally, you know, once we get past summer into September, October, November, that's when you see the jumps in sales, significant sales. So we should still be at

You know, almost as many units total as the United States in China for just NEV. So almost 13, 14 million units in China. The U.S. market total is around 15, 16 million. For the year, for the year, for the annual sales.

And so I think we're starting to see foundations crack. But the Chinese government, as you know, Bill, they always have centralized planning and then the provinces kind of take their interpretation of things. Because we know that state-owned enterprises, they're not really there to make money. They're there to keep people employed. And so gain tax revenues. And so there's this...

conflict between what the central government wants and what the provinces want, especially if the head of the province, the head of the city wants to get promoted out. And so, but

One of the crazy things, and this is where I think last year we weren't talking about tariffs or rare earths or supply restrictions. Now, because of the tariffs in the EU, because of the tariffs in the United States, it's just made it very, very difficult or more difficult to export, which...

We know that it's a huge pressure release valve for potentially a lot of Chinese EV makers. Yeah. And what I want to specify is that in the past, the number one export markets were Russia and Mexico, and they were exporting more petrol engine vehicles. But now in Europe, we're starting to see more and more vehicles.

So not only battery electric, but also plug-in hybrids. Right. And that's when the news a couple weeks ago that BYD had outsold Tesla in Europe. It wasn't, I think you pointed out in your newsletter, it wasn't like apples to apples, right? Because that included the plug-in hybrids as well for BYD, right? Sure. But so...

Tesla and BYD are going in opposite directions with regards to sales because I think in February, Tesla launched the Model Y Juniper in the China market first. And within two months, two and a half months, they're already giving free money to sell those to get rid of, to not get rid of, but to continue to try to have strong sales in China. So I think the latest trend

incentive is five years of no interest financing for the Model Ys. So that does not bode well for Tesla and its refreshed Model Y, which last year was the number one selling vehicle, not number one selling electric vehicle, number one selling vehicle in the world. So that's

Interesting. Yeah. I mean, I miss the days of 0% APR in the U.S. market. Yeah, that's not happening anymore in the U.S. 2015, I think, was like 1.3% APR. It was pretty good. Not happening anymore. So when we look at, though, like, I mean, how do you think just over the last couple weeks where you've had BYDs, price cuts, and then they seem like they have the financial wherewithal to handle it, whereas a lot of these smaller companies, I think it probably...

I'm guessing puts a lot of pressure on them. You know, the government sort of in various industry bodies like auto dealers association and auto manufacturers association come out and say they don't want to see this kind of involution. I mean, what can the government do though? They can't make BYD not cut prices, right? So part of the involution is that there's overcapacity.

And so I think the central government wants to limit investment in domestic capacity into China. It's interesting because I know overcapacity is a bad word now, although I think at least you're starting to hear some of the other auto executives talk about overcapacity in China because they know. The reality is there's overcapacity.

But to your point, Bill, it was never talked about by the private sector. It was always talked about by analysts and government officials and things like that. But we also have to remember that if we're looking at just the battery supply chain, so now there's battery overcapacity, there's rare earth refining overcapacity, there's mineral overcapacity. So on the raw material side, it's created a bit of a two-sided or a double-priced

priced market for some of these things. Now, with all the refining and recently it's all been about rare earths and magnets, right? We're talking magnets the size of a chiclet bill. So not these huge, huge magnets. We're talking about these small ones that can take heat because they use three particular rare earths. And it's crippling the European automakers for sure. And the U.S. automakers are starting to stress as well.

Um, yeah, we'll see. I mean, apparently that somehow the bureaucratic mess that was happening because of this new export control regime. So it was suddenly was unblocked hours after the Trump sea call. What a coincidence. So apparently there are shipments going into U.S. automakers at least, but we'll see. But so I guess the question really is, you know, when you look at sort of

you know, like, like the way, the way sort of BOD cuts prices that everyone else sort of has to follow. You know, one of the things we've also heard sort of bubbling up from, I think it was, was it the, was it the, the Dealey CEO or the Great Wall CEO? Great Wall. Great Wall. Talked about there being a quote unquote evergreen in the auto sector. Um,

What do you make of that? Is that like a legitimate concern? There certainly seems to have been a bit of a sort of a social media, I don't want to say campaign, but a lot of people were sort of talking about suddenly a couple weeks ago that there were some real hidden debt bombs in the auto sector. And then sort of no one would say who it was, but then people said, oh, maybe it's BYD. But then it's really interesting because it seems like they're really starting to get pretty nasty toward each other as the competition intensifies.

So, Grinning Wall, I think there's a little bit of envy, number one. Number two, he's probably right to a certain extent. But if we think about Evergrande, we think about the largest real estate development company in China, largest in the world, effectively. And so, if he's implying there's an Evergrande, there can only be one, right? And so, Wang Chuang-Fu came out and one of his lieutenants came out and said, you know, if you look at our debt ratios, the

The books that are available for us to see, they're much lower than a traditional legacy automaker. So he made comparisons to the automotive industry, non-Chinese, and so they're very healthy. But, you know, from a debt standpoint, they're still growing, right? They're growing.

Their base last year was 4.27 million units. They'll probably get close to five and a half this year. So to me, it makes a little bit of sense that they're not that profitable and that they're borrowing money to pay for the future. Now, there should be some other companies that are teetering a little bit. And we saw that Dongfeng and Chang'an had talked about or kicked around the idea of merging. Yeah.

And I'd never heard that before in the 20 years that I've been covering the China auto sector. But that's fallen through as well, because I think at the provincial level, the central government can say, you guys need to be dance partners. But if they can't cooperate, then there's no sense because...

Again, at the end of the day, Dongfeng is down south. They have factories. Chang'an is also in Chongqing, a big part of Sichuan province. So they don't want to close the factories in their regions. And so it's just going to make for a tough time to really, really consolidate, at least at the state-owned enterprise side. But there was a company called Hi-Fi that was...

that launched two vehicles a few years back. Now they're kind of a zombie company and we're seeing, I think, a Lebanese investor kind of buy. Were they the one in Shandong or where were they?

I want to say they're in Shanghai. I kind of forget, but it was an ex-GM executive and they had kind of, he was also an ex-Faraday Future executive. That's right. So, but what we'll likely see is foreign investors kick the tires on some of the IP and see if there's anything interesting. Now, there's likely not going to be for the most part, but

These companies, you know, Saturday Future is still in existence. I don't understand that. But they don't sell in China, right? They do not. Do they actually have a car after all these years or do they still have concept cars as they roll out every year? They've delivered a few hundred SS91s.

And so I went to the headquarters in LA, and they're always trying to raise capital. Of course. But six months ago or five months ago, Y.T. Jia is now, again, the co-CEO. So he's back in the driver's seat now. I think he's still persona non grata in China. I don't know if his wife and son are still there, but...

I don't think he's been back. He's got a lot of money he owes back to China. Right, right. And a lot of it in Beijing from Beijing investors. But it's just there should be consolidation. We're going into year four of this price war.

I don't know with everyone acutely aware of the increase in exports and the year-over-year growth and the number of boats and ships that BYD is buying and other companies are buying. There was a boat last week that went on fire. It's flooding off Alaska, I think. We don't know which car brands, do we? No, I don't. But what we're seeing is...

Especially with the United States now poking our allies in the face, one of the interesting things that I saw in Shanghai, Bill, was there were a couple Canadian dealership groups that were walking around seeing who they could represent in Canada.

Does that happen if we still have a good relationship with Canada and we still have the USMCA? Let's say that it might still happen, but not likely in the way that it is now. Well, like you look at Australia, right? I mean, Chinese EVs and plug-in hybrids are selling pretty well in Australia, right?

Generally, but with Australia, they don't have the types of incentives that Europe had put in place, the United States had put in place. So it's more of a slower roll there, number one. Number two, there's only probably four or five brands that are having any impact. Zeker is one of them, BYD obviously, and then Jayco, which is cherry. Yeah, I mean, you look at – it'll be interesting if Canada –

I mean, that raises those questions, right? Because the whole U.S. has the whole connected vehicles rule, right, where there's tariffs, but then there's also sort of the Biden era commerce put out there. The Biden administration commerce put out this connected vehicle rules effectively banning any sort of connected cars from China. So what happens if they're in Canada? Can they drive over the border or they're in Mexico? Can they go over the border or are they not allowed in the country? Yeah.

Well, we actually might get into a situation, Bill, where a lot of that connected software and hardware. So the software you're referring to is model year 27. So that's next year. Right.

Are there any significant Western players that develop the radar, the sonar, the cameras, the LIDAR? We might get into that same situation. And what I've noticed is that the Biden administration seemed very, very liberal with the use of national security as the way to restrict Chinese technology. Trump doesn't look like

He's that as concerned and maybe part of that grand deal is to allow some of that into the United States. I mean, I think it's possible. I think so too. For the cameras, right? Who makes Tesla's cameras? I'm not sure. I should find out. I'm not sure to be honest with you. That would be interesting if they're also Chinese made. I would bet they are, but let me get back to you on that. At least some of the components, right? Without question.

That's the thing is how, you know, two years ago, right, people were starting to wake up to this idea that Chinese could actually make really good cars, really good EVs, and that they were going to – they were leading the Western brands. Now, I think, especially with this rarest magnets mess over the last few weeks that sort of has come to a head, now –

Even folks in the Trump administration, I think, have to realize that the Chinese side has a ton more leverage than people thought when it comes to these key components and key materials in the supply chains for the future technologies. I mean, well played by the Chinese, I got to say.

And it looks like one of the new advantages that the United States has is still silicon design. Because we look at NVIDIA, we look at Qualcomm. Most of the Qualcomm Snapdragon chips are being used to run the infotainment systems in most Chinese EVs. And then NVIDIA orange chips are being used to run the intelligent driving. But...

You name it, you name the technology company build, it's probably a Chinese, almost every Chinese technology company is now designing their own silicon. And companies like NIO and Xpeng, they're already putting them into vehicles. So NIO has a Shenzhen chip that is five nanometers and is going in the ET9, which is their flagship SUV crossover chip.

So that's why Jensen Huang and that's why the CEO of SML are saying, hey, we need to back off on all these restrictions because it's taking money out of their pocket. Well, and look at Xiaomi, right? I mean, Xiaomi obviously is a big consumer, you know, big technology company and they have their new car division, right? But they're also, you know, they're now building, making chips too. Yeah. So, and...

So we have to move. I think North America, United States, we have to move, be very decisive what we want to reshore because we can't reshore everything. Reconciling the price of things because we got so addicted to Walmart, Sam's Club, and Costco. To say that we're going to reshore all these things, we're chasing the ghost because all of that capacity in China is going to be used up.

some way, somehow. And we're just going to see things that we can't build as well

have twice the price in the United States if we're not careful. Well, and also, I think when you look at what the Chinese are doing around the semiconductor supply chain, you know, and I think the U.S. government now launched, the USTR launched an investigation into those quote-unquote legacy chips. But, I mean, there should be no expectation that, at least when it comes to chips used in cars, that at some point it will be completely indigenized. They'll all be Chinese-made chips, Chinese-is-on-chips.

And that'll happen very quickly and there'll be massive overcapacity. And so the prices of those chips will also, or I think are already dropping, will drop a lot more. And here's the thing with the Chinese companies using our foreign IP, non-Chinese IP, they know how to get the most out of it. When I'd spoken to a couple Qualcomm guys recently,

I got the impression that the Chinese companies that were their clients or their customers were pushing them to make faster, more efficient tips with a faster and higher compute. Whereas I think the domestic players, the Volkswagens, and they didn't tell me the specific companies, but I think they're trying to figure out how to get the most out of it where the Chinese are trying to push for better and more.

Sounds familiar. So I actually want to talk about the U.S. market a little bit, because I know you're in Michigan and you do a lot of work in the U.S. too. But first, going back to the China market, where is Tesla and what are their prospects, given the state of the company, their sort of model lineup, and then the state of the competition in China? Yeah.

So let's treat California as a country. Okay. So if you look at the topic today, it may want to be a country, right? Yeah. So, well, I've seen a lot of that on social, but you know, California would be like a 10 top 10 country as they were, uh,

a country from a car sales standpoint. And so Tesla has really benefited from California, not only from a number of early adopters standpoint, but the number, the amount of subsidies that they've received, how much help they've gotten on charging infrastructure in California. And so they are,

Their brand image in California has taken a huge hit. It's taken a huge hit in Europe, the UK, France. And then so we're just seeing sales fall off a cliff. In China, there are 60,000 units last month, but we don't know what the breakout between export and domestic consumption is. Now, again...

I'm not super concerned until I start seeing September, October, November numbers. They have a million units of capacity at Shanghai Giga. It needs to go somewhere.

The likelihood of Tesla, their sales is likely going to shrink in 2025. And globally. Globally, okay. So they were at 1.8 million units last year, or 1.79. So they actually shrunk by 1%. So they're flat effectively in 2024. And with the...

cold reception or the lukewarm reception that the Juniper refresh of the Model Y has had in China. And then FSD still being... I think they're still charging over $8,000 for it for like an FSD Lite. It's not even the full version. They're still...

trying to figure out with the Chinese government what they can do with the data in order to train the algo for FSC in China. So there's still administrative issues on the intelligent driving side. Meanwhile, UID is giving it for free. Nios, Xpengs, Huaweis, they're all really, really good systems. Are they as good as Tesla's FSC Lite? Are they better or are they at least comparable? So...

If you ask folks that have tried out multiple systems, they'll likely tell you that Huawei is the best in China, including FSD. And then, you know, and you know this as a tech guy, depending on the software version, then that'll tell you who's better at that moment. Right.

As someone who drove an Xpeng using their X-NGP 1200 miles and then just took NEOs 700 miles,

I feel pretty good. I feel pretty comfortable saying that FSD is like an also-ran in China. It's a difference maker in the United States, but for the investors and for the analysts, I wonder if they're really taking into consideration the beating that Tesla is getting in the China market. And that beating's not about Elon Musk and his personal brand and people being upset with his politics. That beating's just about a product, sort of product fit in the market and actually being...

in many ways surpassed by the Chinese car companies, right? Yeah. And here's the thing about the Model 2, the rumored Model 2, is

That also wouldn't have been this tremendous hit because when you're talking 3 and Y, you're talking $40,000, $50,000, $55,000 cars. A Model 2 in China would have had to hit around $25,000 U.S. dollars, Chabu-Duo. And who plays in the $25,000 price point? B.

BYT. So there's no guarantee it would have been a hit at all. And so maybe he was saving face. Maybe he didn't want to make that investment because the most important market for mass market EV, it would have been crazy, crazy competition. Right. And as we're just seeing last couple of weeks, prices keep going. And Tesla, I think, is very efficient, right? But

Can they compete with BYD in terms of scale and production and cost of production in China? Well, part of their efficiency is that they only have two products. The X and S, they ship about a couple thousand of those a year. So those could be hand-built and they'd be fine, but...

If they get into a third or fourth and a fifth vehicle, then you get into really, really complex supply chains and you get into much more complex manufacturing. So there's probably going to be a manufacturing house of Tesla upcoming if they're able to...

launch multiple vehicles in the next 36 months, which doesn't seem like they're going to be doing. Interesting. The one thing I'll say, and this was a year ago, but I had breakfast with the co-founder of one of the, um, one of the big car brands. And, um, this person was just saying how we were talking about the market. And obviously it's very competitive a year ago too, that there was still a ton of respect for Tesla. So for example, um,

This person just said around battery management, Tesla was still more efficient at sort of squeezing out what they could out of the battery. Now that you have 1,000 kilometer range batteries, maybe that matters less. I don't know. That's one of the things that we should talk about, though, because—

It's not just the battery efficiency anymore. Now it's how fast things are getting charged. And now we get into, you know, BYD's slogan was faster than gas. So basically I can charge faster than I can fill up a tank, right? And I tell you, man, that mega charger. Is it really that fast? Is it really that fast?

So they showed us at a hotel like near Zhonghuan Cun and they had the double chargers. So they showed us the double chargers first and it was getting around, it was pulling around 800 kilowatts. And then they took us to a dealership because most of the mega chargers are at dealers. And the size of the charger was about the same as the Tesla supercharger, but there was a huge transformer and then there was a battery attached to that. Because what they do is they pull off the grid

and charge the battery, and then the battery charges the vehicle. It doesn't pull from the grid unless it has to, I think. And it got like 50% of the car was charged within like four minutes or something. I don't even have time to go to the bathroom at a gas station. I mean, it's like...

And so here's the China market in a nutshell. Within two weeks, Huawei launches something and then Zebra launches a 1.2 megawatt. Are they real products? Like, are they actually ready to be rolled out or they just have to make the announcement to catch up and they're still building them?

We know BYD to be one of those announce on Sunday, sell on Monday companies. So Apple used to be like that, where Steve would announce something at Macworld or WWDC, and then the next day you could order it. They've gone away from that. But BYD is still there. So BYD...

Now, they probably have to have some partners, but they're looking at launching or installing about 4,000 of those megacharges over the next couple of years. 4,000. And for people that are wondering, does it degrade the battery? My friend Steve Levine, he made a good point. He said the warranties haven't changed on the battery packs. So that implies that the cycles should be about the same.

Now, I don't know if BYD is assuming that you're not going to go to a megacharger every single time. But it's not just that BYD is commercializing this and it's available, and I've seen it from my own eyes. It's the fact that there will likely be two or three competitors that follow suit that really creates this mass commercialization effort for new technologies. Now, if we're looking at intelligent driving, though,

They're going to sell 5 million cars. Let's say 80% of those have the capability to go level two plus. Now people in the Philippines, people in Thailand are going to have this technology that might have taken 25 years if not.

I mean, one of the questions for this kind of charging, can most power grids support that in other countries? I mean, China obviously has done building out a pretty amazing power grid, right? But can places in the rest of the world actually support this? So that's where the best, the battery energy storage system. Effectively, moving forward, all the data centers...

you know, most new buildings are probably going to have a backup as a big battery because you don't need to be automotive grade on the cells or for those batteries. And I think that

And most cars in China, I won't say most, I'll say a good number of cars in China are bidirectional. So when it's not working, you can actually pull from the car as it's basically a big battery. So I think that trend is starting to happen where the battery energy store... Tesla has the Powerwall, right? It's the same concept. And so I think commercial-wise, we're going to start seeing these battery energy storage systems would sell that...

couldn't be used in a car, but still could be used because it's this huge battery that doesn't move and doesn't have the type of risk that having a battery in a car has. And that's an industry or product category that, again, will all be dominated by China, right? Because they just build them better and cheaper, right? Yeah. And own a lot of the IP now, probably. And most of those are going to be LFP chemistry products.

because the ncm and nmc that uses the nickel and cobalt is not going to be necessary for these battery packs that that uh um kind of back up the the power system for a building or the grid yeah but we're gonna we're gonna drill more right yeah yeah so i yeah i have thoughts on that but

Well, so one last question. I just want to know, when you were at the auto show, I have one question. Have you driven the latest Xiaomi, right? Have you driven like, you know, the one, what is it? Is it the U7? The one that just got announced is going to be in Gran Turismo, the video game? So the U7 launches in July. Yeah. So the Xiaomi folks sent me the press release for that. And I thought it was pretty funny. Right.

you know, up until two or three weeks ago, and I still think he is. You know, Xiaomi and Lei Jun were going through some stuff because of that tragedy. Yeah. Well, three people were killed, right? And like three college students or something died when they were like the self-driving malfunction theoretically? What happened there? Yeah, I'm still not clear, Bill. You know, so there's three women in Anhui province using the intelligent driving and

The driver, it wasn't even her car. I think it was her friend's car. And as far as I know, and I'm not paying attention to Chinese social as closely as I used to, but they don't know, or at that time, they didn't know if these women died because they got burned to death. It's tragic, so I don't want to get too detailed. Or whether they died because of the car crash. And so one of the things was...

They noticed that when it hit, I think it was going like 60 or 70 kilometers an hour, which implies that it didn't slow down. And so all of these questions and then social media, and this is where to your point about how

social media, Chinese social media kind of just don't and talks about who's the easy version of Evergrande, blah, blah, blah. Right. Like, we don't know if they're planting stuff because that's the competition right now. Right. And Huawei's cars, like that was the Aito, when they've had some access and they immediately get scrubbed from social media, it's all this is very...

It's quite the PR war. And that was interesting about Xiaomi because Xiaomi's been really good at PR and suddenly they sort of lost their mojo. And so they were getting pilliared online. And it's like, why is that? What's really happening? Is someone behind this? Because, you know, they've avoided a lot of, I mean, they've been sort of a darling for years.

Oh, it's funny, Bill, because now so many Americans know who Xiaomi is. You and I were in Beijing when they actually launched the company. Yeah, I was the first model of the phone. A friend of mine never gave it to me. So they're only 15 years old. The car division is only three years old. And they've sold over 200,000 of the Su7s, which is the Porsche Taycan imitation. And...

This was an opportunity for people to dump on Xiaomi and the Su7 because of this tragic accident. And break and hit break some of the momentum. And last year at the Beijing Auto Show, Lei Jun sucked the air out of the room because he launched the Su7 and everyone followed him from hall to hall to hall. He was peculiar, not peculiarly absent in Shanghai. I think that was the best thing for him to do.

And so the excitement, the electricity wasn't there as much as it was in Beijing. And so he laid low, but they announced the new seven just like two weeks ago. And it looks like a Ferrari Puro Sangue, which is their SUV, but it's

It should do really, really, really well. Yeah, I want one. I mean, it looks nice. I mean, it's a lot cheaper. I mean, I can't afford a Ferrari, but you might be able to afford one of these, right? Oh, it looks great. And so everyone in the past has had a version of a Tesla killer. This might be the...

closest thing to a Tesla Model Y killer that we've seen. And you've driven the Su7, right? I've driven the Su7. How is it? It's great. It's great. So, you know, I'm in a few WeChat groups with some old gearheads and randomly there's this video that one of the guys posted and it was a Porsche on a racetrack and you could hear the engine. And

I go, you guys are like silverbacks. If you guys like speed, you guys should like electric vehicles. They're like, no, no, no. And it's just like, so this is where there's not as many hangups in China as there are in Europe and the United States with regards to EV, not to EV. But if Tim Farley...

wants to drive it for six months. He doesn't want to give it back after driving it for six months. He's the CEO of Ford, Ford Motor. He came out and said he wants it. He's like, he said he saw it in China. He liked it. He wants one, right? Or he got one here, right? Yeah. So he had it in Chicago and he said he would drive me for six months and he didn't want to give it back.

Now, I think that was his backhanded way of trying to rally his own troops because Fort now has a skunkworks division in Southern California of about 40 to 60 people. And so this is where the legacies are, Bill. They are just…

kind of out of their depth with a lot of things. And unfortunately, in Michigan, me being in Michigan, I see it up close and personal, and it's kind of heartbreaking. Yeah, what... I mean, what do you... I mean, I know you recently... I saw you did some event with, like, some of the Michigan, like, state officials. I mean, what can Detroit do? Like, what are they doing? What should they be doing? Oh, so...

When I moved back almost three years ago, there was denial. And then there was kind of projecting blame. Oh, it's only the subsidies that's helping them. And I was like, no, no, no. I've been ringing the bell since, you know, 2018, 2017. And then, you know, a few of them saw these cars, a few, just a few. Now,

They're acknowledging that, yes, these cars are better than what we can produce currently. But, you know, I think with Michigan in particular, because Whitmer is looking or at least seems to be looking at making a run at president in three and a half years. You know, I don't know how any of the Democratic governors and I don't want to get into left right politics, but I don't think they want to push back on Trump.

And what's happening is the GMs and Fords, they're delaying product launches on the EV side. They're cutting capacity on battery factory investments. And in my opinion, that's just playing into the Chinese EV makers because unfortunately, and I think I probably said this a year ago, I do believe Trump would invite a Chinese EV maker to come

manufacturing in the United States within the next three and a half years. Well, there's an article in the Washington Journal today saying that the Automotive Energy Supply Corp, AESC, has just halted work on a battery plant in South Carolina. They were going to invest $1.6 billion, and now because of tariffs and questions about U.S. government support, they were going to do it for beat-up BMW, and now they're delaying the project.

Right. So, but also remember, so BMW is built in South Carolina, but Volvo too. So that could be, there could be many reasons that AESC is, but I mean, that's kind of symbolic. And there are two factories in Michigan that have been delayed. You know, Ford and GM both were looking at

utilizing CATL's IP to build cells. But now GM and Ford are looking and leaning into their Korean partners to really try to help them on the battery cell side. Now, one of the crazy things, Bill, is that GM makes more cells than any other automaker in the United States, more than Tesla. And those go into what cars? So...

Right now, every Cadillac has a version of a Chinese or a battery version. So they have a 9,000-pound Escalade IQ that gets about 400 miles of range. It's a huge, huge... Oh, they have a Hummer too, right? Isn't there the Hummer electric EV Hummer? Yeah, the Hummer is also 9,000 pounds. And so here's the crazy thing. A friend of mine has a Hummer and...

He couldn't get it serviced at the GMC dealer because none of the lifts

can take, can lift it. And you just go to like a truck maintenance center, right? Well, so again, they had to outsource it to like a commercial truck, but, uh, you know, that kind of tells you the strategy, how thorough they were thinking. They haven't really thought everything through. Oh, and, uh, you know, so, but, but the, the high runners for GM are the Inquinox, which starts at around $30,000.

And then the Chevy Blazer EV, which is about a $40,000, $45,000 with the $7,500 subsidy, it made it really affordable. And so they started seeing increased sales. But if we're going to get rid of that $7,500 subsidy at the end of this year, we're

I just don't know. You know, Hyundai is doing gangbusters in the United States. They're one of the companies that are taking a lot of share from Tesla in the U.S. or North America. And are their cars, like, are their EVs good? The copper or the Chinese ones, are they as good? Well, I actually... You're actually talking to a Hyundai Ioniq 5 owner. Those are very good-looking cars, I got to say. So I have the top-end limited version, and I just...

Charged it because I'm in East Lansing dropping my son off for Michigan State basketball camp. And so it's about a 90-mile drive from my house to East Lansing. And I had like 70 miles left and went to go find a charger. It took me a while to find the charger, number one. Number two, I'm charging around 90% bill, and it's showing I have 224 miles, unfortunately. And what's the range supposed to be?

It's supposed to be around 275, 280. But, you know, the estimates and the reality is probably still a 20% delta. You know, so... But...

Ride quality, fit and finish, terrific. Software's not great. Software's not great, right? The infotainment's not great. I don't get a lot of bugginess, but it's just not very user experience. Let's just not say it's not very intuitive from a design standpoint. I love the car. The range just kills me.

Yeah. Well, I know you got it right. I got just two questions that I don't see what I want to talk about. But first of all, a really easy question. What can the EU and U.S. car makers do? I mean, if the markets were actually opened, would the EU and U.S. big car makers, would they be able to survive and compete or would they just be blown away? They would get blown away. But...

So there's a big difference between the EU and U.S. I don't know if you could pull that broad of a brush out because the two biggest players in the EU are Volkswagen Group and Stellantis. They've already waved the white flag. Stellantis, 21% of Leap Motor is the owner of 21% of Leap Motor. And then Volkswagen Group is 5% owner of Xpom. And if you look at Volkswagen. Putting a lot more money into China, like in R&D and sort of joint development, right?

So this is where Volkswagen Group is really kind of in no man's land because Porsche and Audi were two of their big, big profit drivers. Yeah. And Porsche has literally fallen off a cliff in the China market. I think they just announced this yesterday or the other weekend, they're cutting prices in China. Yeah. So you can get a 3 Series BMW, you can get MacGyver for like $1,000.

almost half the price that you'd pay anywhere else in the world. Porsche is like existential crisis in China, for sure. Yeah, they used to be so expensive and they were a big status car. Now it's like...

Get the Xiaomi Taycan, right? Well, yeah. And then, so I don't know if you saw this, Bill, but Audi kind of rebranded and have an AUDI brand now instead of the four rings. And it's a joint venture with SAIC. So they're really, really trying to embrace and redefine themselves as

you know, in China for China kind of thing. They should have done that 10 years ago. Um, but Dave already waved the white flag and then Volkswagen group also, and this is the whole bifurcation thing. Volkswagen group also wrote, or is writing a $5 billion check to Rivian for North America. So, um,

If we're not careful, if they're not careful, they're going to gut themselves and effectively become a contract manufacturer. I guess, I mean, in some ways, maybe this is sort of the best of all the bad choices they have. I don't know. Which points me to...

U.S. automakers. OK, so GM and Ford right now, it's politically untenable to say I'm going to partner with this company. But if you look at GM in China, Bill, they're

Do you remember an autonomous vehicle startup called Momenta? I think Kai-Fu Lee was an early investor in that. GM also invested $400 million five or six years ago. So the Cadillac Vistac, which is just below the Escalade, so it's a pretty expensive EV in China, they're using Momenta intelligent driving system.

So they have Super Cruise in the United States, and then they're using the Chinese stack in China. So they're pretty partnering. They're just not partnering in the United States. Interesting. And Ford, they effectively don't sell that many vehicles in China. So do I think they want to go back and come back into the market? Yes. Okay.

If you listen to Jim Farley, they don't have anything competitive right now. And they don't have anything in the pipeline that's competitive, I would imagine. I mean, 30 or 50 guys in a skunkworks in LA are not going to come up with something that's going to out-compete some of these world-class Chinese EV companies, especially in China, are they? Well...

I believe they believe they do. But, you know, one of the misnomers that I always try to clear up is that the Chinese brands use China as an export hub. Every automaker uses China as an export hub. And I think that's kind of an important distinction that needs to be articulated because Ford...

maybe a couple hundred thousand cars in China last year. They made $900 million from the China market through exporting. So...

You know, it's still profitable for a lot of companies. And that's why the GMs and the Fords and the Volkswagens are fighting so hard as well to make sure or try to reduce or eliminate tariffs as needed or as possible. Yeah. And I guess also, I mean, and we haven't talked about Japanese carmakers, but I mean, aren't Japanese and Korean ones also going to be hit in Southeast Asia and other sort of global South markets where they've tended to do quite well and where the Chinese could just come in and undercut them?

That's what's going to happen. That's what's happening, right? Yeah, because the Chinese EV makers, there's not a ton of premium Chinese EV makers, but on the mass market, you're talking about Netta, you're talking about BYD, you're talking about Xpeng, you know, a bunch of other companies, and they'll enter Southeast Asia. You know, countries like Indonesia are trying to invite them because they want

manufacturing. They want to take manufacturing from Thailand to Indonesia because they have the nickel. But, uh,

The Japanese, they are, so Toyota is partnered with some of the Chinese companies for the China market. So they've also looked at it like, okay, we can't do it ourselves, so we're going to buy it. At the end of the day, a lot of decisions come down to make or buy. And the automakers, the legacy automakers, they don't have the expertise to

to really make in the timeframe that they need in order to be competitive. So how desperate does Ford and GM get? You know, could we see, and this is an antithema for somebody like me who lives in Metro Detroit, but could we see Ford and GM in five, seven years possibly merge because they've been weakened so much?

You know, that was off the table years ago. Yeah, no, that's... I also wonder, I mean, that would be pretty incredible. But also, as we see, you know, as the China market, you know, there's... There are not going to be that many companies that actually can survive other than if they continue to...

sort of have some sort of help from whatever provincial government or municipal government, you know, where their big factories are. But is there a chance we'll see actual M&A from some of the, you know, from the German car makers or from the U.S. car makers where they go in and buy one of these struggling Chinese brands?

Oh, I wouldn't. If it's allowed either on the U.S. side or the U.S. side or on the Chinese side, I mean, it seems like these, that the Chinese, plenty of these Chinese companies would be happy to have that kind of an exit, right? If you're fulfilling your, if you're a manager and you're fulfilling your fiduciary duty, you've got to be kicking the tires, right? Yeah. So, and then the, a couple of things that I'd also like to point out is that if you look at the Brazilian market, uh,

Their idea of clean energy is ethanol. But

If you look at the checks that have been written in Who Buy, Volkswagen Group has written a big multi-billion dollar check in Brazil. Great Wall, BYD, General Motors, Stellantis. I don't know if you know this, Bill. I didn't know it until, what, a year ago? SEAT is the number one brand in Brazil. Really? Yeah. So you're going to see...

new battle for Mexico, Central America, South America within the next few years. In Mexico, there's about 14, 15, 16 brands, Chinese brands that are shipping ICE vehicles. They're shipping EVs as well, but obviously Mexico needs to deal with the grid. They need to deal with charging infrastructure and charging in general. So they're trying to get this first mover advantage by, hey, 2%.

check out, you know, Cherry, check out BYD. So they have, so the Mexican consumer has that brand in their consciousness. And they have like a dealer network set up, right? They have the infrastructure to then push out other newer products, right? Yeah, you make a great point because BYD and Xpeng, they call for mulligans. They originally entered the European market and said, we can do this ourselves. And where Xpeng, as for about 18 months, they almost gutted the entire international team.

And now they're working with partners. And ExPon is likely going to be in about 50 markets this year. BYD also, there's a Reuters article that said, you know what, we can go with the loan. And they pressed reset and are looking at dealers and working with dealers because case in point,

At the press conferences, at these auto shows, I was hearing Spanish. I was hearing, you know, German. So, like, they are really, really leaning into building the brand outside of China. And the products kind of stand on their own. If BYD can continue to keep prices low in the emerging markets, I don't know who's going to stop them.

Now, it's pretty amazing. And as you said at the beginning, it's not just a tale of subsidies and theft. It's actually, you know, there were subsidies at the beginning, but these are amazing companies run by some of the best entrepreneurs in the world now. And you'd known this, Bill. It was a little bit slower when you were there. But, man, the speed, it's so...

A Toyota, I'll give you a quick for instance, Toyota clean sheet, meaning, you know, whiteboard to job one where the first car rolls off the line, I think it's three years. And there were the best in class. Now the Zekers and the BYDs, they can go from clean sheet to job one in like 16 months.

That's crazy. And then look at Xiaomi. Xiaomi, which started as a phone company, copying, basically trying to be like an Apple. You know, Lei Jun used to, you know, his nickname, I think, was like Lei Jiaobo, right? Because he would like go out and do all his presentations. He looked like Steve Jobs, right? And then, you know, Apple spent, what, $10 billion trying to build a car and then gave up. And Xiaomi started after Apple started. And then now they have like, they rolled out a car, what was it, like three years? Yeah.

So here's a company that should be on your radar, a U.S. company, if you haven't heard of them yet. There's a company called Slate Auto. They're based out of Troy, Michigan. Slate Auto, like slate the stone? Like the color, yeah. The color, okay. Because they have introduced a $25,000 car, but it has...

Frank Windows and has no infotainment center console. Oh, yeah. I saw the ad. They ran an ad campaign recently, I think, right? Huge ad campaign. Yeah. It's a Bezos-backed company. Yeah, yeah, yeah. Okay. So I had a discussion with a couple analysts, and I just don't think the U.S. consumer is willing to decontent.

you know, to, to, to buy an affordable car. Now there are kind of strategic choices that I think they've also have some challenges. Like it's a two door. So there's not many two doors in the United States market. Number one. And once you upgrade to an SUV or something that you want, it's more like a 40, $45,000 car.

and uh where i'm a little jaded though is because i know what i can buy in china for 45 so so does so one question on the slate does slate cars need rare earth magnets i mean if if they if they cut off the rare earth magnets again maybe we'll have to buy slates right well they do so so uh so if you if if you're looking at an electric motor um there's

Oh, these are electric. Okay. These are EVs. Okay. So let me clear this up. Rare earth magnets go into ICE vehicles and EVs. Yes. Yeah, yeah, yeah. And they go into washers and dryers. They go into MRI machines. They go into everything. Yeah. So it's not just an automotive thing. So last question. You were just at the auto show. Money, no objects.

which Chinese car would you buy? And if you money no object and you had a choice between like buying a Rolls Royce or a Ferrari or a Lamborghini or a top-end Chinese car, which would you pick? Oh, I'd still... So as a little kid, I'd get an M5 because I always loved that car. But I have to tell you a funny story, Bill. So I was in Shanghai, went to Beijing, saw some of our friends and Zeke was like, hey man,

tried these cars out and they delivered these cars. I was, uh, I was on Bonti. I was staying at the Hyatt on Bonti and third ring right there. The, the, the bow, I forget, you know, you know what hotel I was staying at. And so there's a parking garage. And so I'm like, I haven't driven these cars. I'm super, super excited. And I grabbed the keys from the front desk and I go out, take the car out. And I'm like, man,

man, I'm going to go out and visit a friend out near Xinyi, right? And so I was like, yeah, you know, I'll drive this car for a little bit. And so I get the gongti from the parking garage and I'm like, shit, now I remember why I don't like driving to Beijing because the traffic jam was like...

It took me 40 minutes to get from Gung Ti to Airport Express. That's not the car's fault. Yeah, and it was like, you know, that's like three kilometers, four kilometers. And then Airport Express, I was able to show it off. But don't sleep on Zeker. That was in a story about...

the traffic as much as it was about the weaker cars, the maturing. Because, you know, when you see them, you know, version one, they're still a little clunky design-wise. Fit and finish is pretty good, but not great. And, you know,

These cars are really, really nice. I think they're going to do pretty well depending on how aggressive they get on pricing. So Zeker, some of the Zeker cars I was really impressed with. Obviously, the Han and the Tang L were really nice cars as well. It's just amazing how quickly everything just got upended. Yeah, man. And...

The globe, the world is really, really starting to acknowledge it. Yeah. Except for us, except for the Americans, which is unfortunate. Yeah, no, I mean, the Europeans are struggling and, you know, they have those tariffs and maybe they'll negotiate some sort of, you know, lower rates. But even the tariff rates they put on aren't enough to actually, I think, stop the

these cars because the prices are so low, price-quality ratio is still so good that they can compete in Europe with the European companies. So no, it's amazing. And one of the big things, one of the last takeaways, maybe I'll plant a seed in your head on, is that there are 100, whatever, 90 brands in China. We're likely, rest of the world meaning, we're likely going to see 15.

Right. One five. Yeah. And there might be three to five that are successful in the EU, maybe some three to five successful in other parts of the world. But will a lot try to attempt to export? Yes. But they won't have the capital. They won't have the reach. They won't have, you know, but...

Three to five is still like... Think Toyota. Think Honda. Think Nissan, right? So there's three or four Japanese cars. In Korea, you got Hyundai. I mean, Korea has one. Yeah, kind of the same company. But, you know, so...

I'm scared, but be scared not because there's going to be 30 brands coming to Europe or 30 brands coming to the United States. It's because the three or four brands that enter the U.S. market have all kinds of experience dealing with an ultra-competitive market. Right, right. Arguably the most competitive market in the world. And this, I think, is why Musk and Tesla keep talking about robots.

Right. And and and robo taxis, because I think I think he must know very quickly that ultimately long term in most of the world, it's going to be really hard for them to compete with BYD and some of these top Chinese brands. This is again, this is where I don't understand where the analysts are with regards to the Tesla market.

share price and I'm not a financial analyst so I don't want to get too much into it but are they taking into consideration all the challenges for robo taxis because there's you know what five or six robo taxi companies in China number one so there's no clear cut robo taxi winner there and then obviously if you're selling EVs you need to be in the China market and they're struggling there so

I think anyways. Yeah. No, it's a real question. Well, Hey, thanks. Thanks for your time. It's always great to talk to you. We do this more than every two years. Let's do that, man. Let's do a little bit more than that. So, so, so two, he's got a great sub stack newsletter. I'll put it, you'll, you can see him if you click on his name in the video or I'll put it, you know, when we publish it as a podcast, I'll link to it. He's also, you have your own podcast. You do. What's your frequency with your partner?

So once a week, we do a live stream on YouTube X and YouTube

We should do it on Substack. You should try Substack too, right? I mean, you guys should, because ladies on Substack too, right? You guys should check it out and see if you see how it works for you to do. Yeah, I'll ask him. But, uh, and then, uh, I am trying to stand up another content platform called at the wheel with Joe White, who is a Pulitzer printing, uh, Pulitzer prize winning journalist. Who's semi retired from Reuters.

we're going to talk more about the North American market. We're going to pepper in some China stuff, but hopefully you'll see more of that in the next couple of weeks as well. Are you going to do that on Substack or another platform? Actually, we could because Joe's on Substack. He does the high-speed rodeo Substack that's really good. He's been writing some great stuff about rare earth magnets. Yes. He sent me one of his articles last week. He's like, smart guy. I didn't realize that. Okay, there you go. That's great.

Yeah, actually, I'm going to let him know that we should be doing it on subsect. Yeah. Anyway, that'll actually be great because I think there's, again, there's always room for good, smart work around the U.S. car market. Even if it looks like everything's...

uh, everyone's going to be struggling for a while. So, um, for a while, for a while. So, well, man, Hey, Bill, man, always good to catch up. Thank you. Thanks everybody. Yes. And, and, and this will come out as a podcast too, but I really appreciate everyone who joined. And, um, if you like it, let us know. We'll, we'll do it again. Thank you. Thanks too. Cheers. See you, Bill. See ya.