AAH #662 - Electric Skeptics Predict EV Disaster

I'll online after hours. This brought to you by Bridge Dome Tires Solutions for

your Journey and by Borg Warner. Mister v John, how are you doing

well? You two? Yes? So, so last week you you were

joking about me having power since it had rained here, and so that night I lost power for two and a half days. I just want you to

know that. So, yeah, your your observations had an effect. So

so so when I was looking for something that happened today, I chanced upon something that claimed that in nineteen fifty two, on August thirty feet that the Henry Ford Trade School was closed. And I thought it was a little odd

that it would close at the end of August. So I searched a little

bit more and went to the Henry Ford, which is a compendium of all things automotive, and discovered that it had actually closed in July of nineteen fifty two. So, after thirty six years after training more than eight thousand young

people in automotive manufacturing had shut down because Henry Ford the second decided that he wanted to reduce Ford spending on anything that was not income producing. So I

say to you, don't you think that like right now? Would be a

time that the industry could really use something like that. Absolutely right, Gary,

Absolutely right, And especially with the transition to electric vehicles and software defined vehicles, there's a crying need for it. Right now. Every single automaker

is screen and supplier screaming they can't get the people that they need. So

yeah, I mean, you know, it's that's another example going back to nineteen fifty two of you know, the lack of discipline that American capital has, you know, American capital long term investments, that that's that long term is the end of the year, you know, and so to close down school saying while it's not producing revenue, but uh, it's so short sighted, it's just extraordinary to me. Yeah, I absolutely agree. I absolutely

agree. So we should bring into somebody who is actually training young people other

things, right, Eric Noble at carliab And we've got Larry Velliquitt from out of boute of News. Good afternoon, Hi guys. Yeah, and Eric,

you're coming to us from Art Center I think alas we are between terms.

Otherwise, Yes, on a Thursday, became into you from our campus in Pasadena overlooking the Rose Bowl. No, I'm coming to you from our

studio, the Carl Out Studio in Orange County, California, in a little town called Orange. Yeah. But Eric, let's hear what what do you

think closing down trade schools? You know, and I would extend that,

I would say shop class in high schools. Closing them I think was another

bad idea. I think we're really paying the price for not training people in

vocations as well as, you know, in trades. Agreed. I'm a

lass, right, maybe that's part of the problem. I'm a product of

high school auto shop. Right, That's what got me interested in studying this

stuff. We're lucky we still have a lot of applications for Art center.

A lot of those are international. That's fine too. We'd love to see

more of them come domestically. But as a country right now, we're not

investing enough in education generally. Agreed. It shows up a lack of tax

tax in short supply for sure. Critical shure. Yeah, what do you

think, Larry? It sounds to me like from your conversation that the deuce

was the original confession of a capital junk. You're right, that's right.

Those of us have been around long enough to remember Sergio's missive and the lessons that he you parted on that on that day to the great credulity of much of the industry. But he's been proven right. So so Eric, the

last time we had you on the show, it was a few years ago.

Now, you very I think controversially, controversially can't even say the word that, Yeah, you stirred things up by basically saying that evs were an economic non starter. How do you feel today, I've vindicated, like we're

we're at First of all, I want you to know the studio that I'm coming to you from right our Carlat Studio and our nearby at La seventy five percent of our work is still on evs or electrified vehicles. So it's not

us crying the blues because we're not we're not part of the rock band, but we're still only at about a seven percent US market. More importantly,

though, if you look at the states that have really leaned against this a long time, right, and I'm we're in one right in California. We

go back to you know, the EV one was released in ninety six as a ninety seven model. Here we're coming up on thirty years gang of the

second big push of evs in the North American market. And interestingly, here

our dealers recently had a really telling experience, which is sales got up to about one car and four was EV about twenty five percent. Right about that

same time, their inventories of evs grew to you know, somewhere between three months and half a year. In other words, peak EV in wealthy,

non reality southern California, Orange County. Peak EV here is twenty five percent.

And that's with massive incentives. Right, The average EV leaves with at

least ten thousand dollars of government incentives and on a secondary basis gets another ten twelve thousand dollars in incentives from EV credits that are then sold. So we

had in Orange County, right EV central Southern California, we reached twenty five percent, inventories became stratospheric, and we had an average of twenty thousand dollars subsidization on every one of those units. And so, yep, what we'd

say is what we've been saying all along, the natural market is somewhere between twenty and thirty percent. That's with the incentives. Southern California's proving that the

second incentives turned off with Ira sales fall into a crater. So yes,

vindicated. Yeah, but Eric, as you know, number one, Tesla's

out selling Toyota in California. I don't think anybody saw that common, especially

not Toyota. And it's pretty much just Tesla's in the ballgame, right,

I mean, Ford's barely gotten going, GM's barely gotten going. Han does

not even in the party. Nissan's got some you know, old product.

They they're trying to get this area going. Maybe the Germans are there a

little bit with Mercedes and BMW, but you know, we haven't even seen the whole rollout of car companies having these things available for people to buy.

John, You're right, and that's what's so scary because as all of those products come from all those manufacturers and all their brands, they're targeting basically the same small slice of the population, right, And this is why it's so much news for the other carmakers when anybody cuts their EV prices, right, so Tesla cuts prices, everybody has to follow suit. And look, Ford

sells a lot of evs, General Motor sells a lot of evs. I'd

a Kia sell a lot of evs, and any one of those four because they all live in the same Petrie dish feels it when anyone else's sales pick up. So that Petrie dish we could think of as that's the pie.

That pie is somewhere around twenty five percent of buyers. And we're going to

have more models to your point, John entering, but they're going to be competing for those same wealth eight suburban enclosed garage with two hundred and forty volt electric service households with at least one or two other cars that aren't evs and that total population. Oh and by the way, do we mention the transaction

price is going to be north fifty five thousand bucks. Right, So these

are wealthy, suburban multiple vehicles and enclosed garage in two hundred and forty volts somewhere with a nice climate. That just isn't a big slice of the American

market. So so, Larry, Larry, you cover Volkswagen very carefully,

and you know they're yeah, well Toyota is the other one, right, Yeah, Okay, So so VW is pushing really hard on evs, and you know, for the first half the ID four in terms of sales, you know, came in number four which is which is really good in terms of the EB sales. So so I mean, what do you hear when

you talk to the people at VW Uh, Well, there they executed this plan where they you know, they localized production before the IRA passed, so they were the only for nameplate to be able to qualify early on for the full seventy subsidy nationwide for purchasing for purchasing right and everybody qualifies with Lisa, Yeah to watch figured out how to bring back to seventy five. Yes,

yeah, that it got resurrected, didn't it. But I think what they

are, what Volkswagen Corporate is saying, is all as well, it's going according to plan. Right, you go out into the field and talk to

dealers that are outside of the coasts, the you know, the typical coast and remember Volkswagen dealers over night over ninety eight percent of them signed up to sell the Idea series right four and above. Uh. But you go out

into the into the field, and the dealers are sitting on them for months and they're not getting their their local markets are saturated already. And yeah,

but I would also point out ninety four and exactly the best EV on the market. John, Yeah, I mean, I'm sorry. You know,

if you if you want to bring people into the EVD segment, you better be there with a competitive product. And I'm saying, are you saying that

a car with four windows and only two windows switches is not competitive? Come

on, John, Larry. What you're pointing out is the unnatural acts that

car makers are having to go to to try to strip costs out of these things. Because, let's be frank, the the bill of materials is fifty

percent dominated by the batter right, So yep, we got vehicles that are missing all sorts of things. Tesla's are missing instrument clusters, volkswagons are missing

windows, switches, Right, Lots of these evs are missing metal roofs.

They're missing a lot of things. They're gonna be missing a lot more things

as people like Harley try to figure out how and Havn's name, they're going to pull the cost out when half of it is a battery, the cost of which is higher this year than it was last year. Yeah, bolt

bag, it can't be blamed. Yeah. Actually on the window switches.

The reason it only has two and set of four is because the four set wouldn't fit in the door. But that's enough. That's another story and they're

sticking to it. Yeah, you know there is You did mention something,

Eric that you and I have talked about before. That's interesting with this,

right, which is that unlike a traditional ice vehicle, because the majority of the car is actually the battery, and the majority of the battery is mind mind minerals that don't scale, right, they don't get they don't get less expensive the more you get, They get more expensive the more the more you get. Oh that's not true. Come on. Raw material prices have come

down dramatically in the last year, dramatically. Lithium, cobalt, manganese have

all dropped. And look, and it's not because there's more minding going on.

It's because the you know, supply chains choked up and everything. There

was a big demand. Prices went through the roof in twenty and twenty one.

They started to level off in twenty two, twenty twenty three. Boom

prices are coming down very quickly in terms of raw materials are alright, market all right, John, I've I've as always I have the data which will for why this little bit so SMP Global Mobility just came out with a study of minerals related to EVS and they said, and I quote for lithium, we forecast a sixfold increase in demand between twenty twenty two and twenty twenty three for like pastor applications. We also expect lithium markets is being deficit by twenty

twenty seven, creating a bottlebeck for automotive supply. Resolution will be slow as

lithium takes an average of fifteen point seven years to reach the market after initial discovery. Copper which is already under significant pressure and industry leaders are predicting a

shortage by the end of the decade, and then there are the rare earth metals germanium and gallium. By twenty twenty five, eighty percent of the e

axle based motors will need those materials, and as a result, we estimate that well over night, ninety percent of the world's production ready magnets will be mainland Chinese manufactured. So it ain't so smooth. Even if I'm not saying

that it's smooth, I'm just saying that raw material prices have come down in price. You know from their their sky high price levels of twenty twenty one,

twenty two. For now, I would yeah, I think it's a

temporary and look this is why yeah, and look, this is why Tesla has gone to aluminum wiring instead of copper. This is why so many automakers

are going with asynchronous motors that don't use magnets. I mean, this is

why they're going to LFP instead of M and NMC to get away. So

I'm not all I'm saying. I don't see the doom and gloom. I

see the industry quickly going to other alternatives. And while the batteries are still

expensive, it's it's the processing that's you're going to where you're going to see huge reductions in manufacturing costs. Whereas the the raw materials may not come down

much more than where they are right now, the processes needed to turn them into batteries or or things into electric motors, we're about to see huge improvements in that, John, I think it'd be instructive to think of this as as something that canto making steel, right, So you're right, they'll always make the process better because that's what humans do, and that's what free industry does. It innovates, right, and it creates efficiency The challenge that we

face with batteries, though, is the same challenge that we face with steel or other processed alloys, which is, we're at a point where now easily eighty percent of total cost. Right, so if you bought billet steel,

only twenty percent of the cost of that billet steel is the processing and running the business. That's only twenty percent. We're there on batteries, so yep,

we're going to get better at processing it. But realizing as we get

better at making batteries, the percentage of battery bill of materials costs that is just raw input the metals and the minerals will increase. So our ability to

scale these to Gary's earlier, earlier point into its hilarious too is is nil.

There's no scale to this. In fact, actually we've extracted just about

all efficiencies. I'm out to about the same point that we see in metal

alloys. So and John, what you're talking about is, okay, sure,

it's like steel market. So if steel gets really expensive, people can

switch, We'll switch to other metals, right, And there is some ability to shift, and we're going to see our industry try to other battery chemistries.

But in the end those are metal base two. Right. So,

and even if we look at at solid state, which is coming, the numbers aren't amazing on a per kilo. On our basis, solid state is

not really amazingly less expensive, it's not amazingly less heavy, it's not amazingly less volumetric. It is substantial gains in all those areas except really cost.

Right. So, I don't think there's an efficiency way out of this.

There's not a scale way out of this. The only way out of this

is for us as a global society to admit that we should use horses for courses and prescribing a single answer to solve our climate problems has been a disaster.

Yeah, no, hey, look I would agree. You know,

too much has been thrown on the back of the automotive industry, which in the United States accounts for, depending on the latest EPA study, thirteen fourteen percent of greenhouse gases. So you know, and I've been arguing this all

along, is you know what about the other eighty seven percent? And you

know most of that lies with public utilities generating plants, and they're only now starting to face regulations. But so I agree with you on that, but

I don't agree that we're not going to get scale that will drive down the cost of the batteries. There's no indication that that company. We just had,

you know, Mujiba jas from One on the show two weeks ago, and he's claiming he's going to be able to know. He's got a very

fascinating approach of using a battery as a range extender. Uh you know,

different slightly different chemistry battery. But he's claiming he can get that down to

fifty dollars per kilowatt hour. So I believe we are going to see a

crossover point late in this decade, twenty twenty seven, twenty twenty eight, crossover point where it becomes cheaper to manufacture electric cars. Thence ones, well,

Eric, we should have We should have probably done this earlier in the show. There are probably people who are watching who are looking at you and

saying, who the hell is this guy from the car lab? What is

the car lab? So tell us a little bit about that and why you

know what you know? Oh, all right? The car Lub helps car

makers and suppliers plan and design new vehicles. So we usually are working we

just strategic work that is five to ten years out on what should portfolios be, etc. But really on the brass tax level, everything we do is

from sixty months out to about twenty four months out from startup production for a new vehicle or a new vehicle platform. So we work with the J three,

the Big three, the K two, and some of the Europeans, and it's essentially platform planning or vehicle model line planning, a little bit of level planning. We also do that for some of the world's biggest suppliers.

It's not us, so when we talk about the future of the industry, we're not giving away anybody's secrets, right, That's what they're planning is none of anybody's business. And it's even a secret that we've worked on particular programs.

But what we know in general is all carmakers face the same existential dilemma.

Given one hundred percent mandates. By the way, it would even affect

Tesla because Tesla is getting three thousand dollars an EV credit for selling the credits of the evs they sell, and they only have a market for those because of the manufacturers that make ICs and need to buy the credits. Right,

So actually this is one hundred percent mandates are an existential crisis for the entire car industry. We won't get there, that's okay. The question is what

does it look like on the way right, you know. And then the

ACCD behind my name is Art Center College of Design, where I'm gas.

I think about to enter my twentieth year as a professor teaching vehicle technology to future car designers. Larry, you also look into Toyota tell us about what

Toyota sense is for electrification. Well, you know, it's evolving, which

to me is a little disappointing just on a personal level. But their sense

is that for now, with infrastructure where it is, that all there's there's no vehicle that shouldn't have at least a hybrid choice, that hybrids make the most sense for the most people. But that you they still need to offer

full lied vehicles. They need to have more hybrids, more plug in hybrids

in this transit transition to and that battery electrics also have a place in uh in the overall market. And I think that's hard to argue with, especially

for those of us in the middle of the country that don't that don't live in plug Inistan. So Larry you said it's evolving Toyota strategy and uh and

you're disappointed. So what is the evolution and what's your disappointment by uh,

Well, let me start with the evolution. The evolution is simply that with

the change in leadership, I think you're seeing uh oh no, here comes Toyota's bomber fleet. With the change in leadership, but with Akio moving up

to the chairman's role, with Santosan coming in as CEO, I think you've already seen some indications. And if you recall uh Akio's presentation in December of

twenty one where they rolled out sixteen evs that they said, we're on We're on the way, I think they are feeling market pressure and pressure from political pressure to move more quickly. Two evs, right. I think that's that's

undeniable. The disappointment to me is that I think that their strategy makes sense.

I think it's realistic that the transition has to be gradual, and I think the rest of the American public heart are kind of discovering that and that we we can't we can't have, as Eric says, one hundred percent band aid because it doesn't work. But I think their strategy right now, there

is the proper one I think they're going to. They may end up abandoning

it or trying to push up the because the market or political leaders say they have to before they're billing ready. I'll give you a slightly different point of

view, and this comes from an off the record, very background statement from a very senior level Toyota executive who said they underestimated how fast battery costs we're going to come down, and they underestimated the great run up that they're seeing globally of people going to evs, especially in China and Europe, but even in the US. And they knew they had to do something different, and

that's why Sato San as you call them, started this new business unit within Toyota called the BEV Factory, very similar to what Ford's doing with MODELI and what Renault's doing with Ampier, of deciding that, hey, we cannot rely on the old system run by ice people to figure out how to crack the code come out with the kind of EVS that the market really wants. And

so I think it's not just political pressure. I think it was market pressures

that forced Toyota's hand. Eric, what do you think about this portfolio approach

that Toyota has for now. Yeah, and Larry makes an very very interesting

point, which is Toyota has been on this for a long time and it is a portfolio approach and it's mixed power fads. He also identified very correctly

there was tremendous outside pressure that ultimately Toyota's board felt for them to look more ev forward. Right. We don't find any evidence in what we do here

that there was any market pressure. Right. Consumers already don't want the percentage

of evs that we're currently selling. That's why, as soon as we removed

the seventy incentive on the Hyundai Kia, sales of evs, which are great evs, fall off cliff Right. If the market wanted those, we wouldn't

be relying on ten thousand dollars incentives right to sell them right between state and government. So the market doesn't want evs at the level we're already selling them.

Let's be blunt. Any manufacturer that's doing research in North America knows this.

Everyone knows it. The question is how do we proceed forward as a

carmaker. We need to look like good students. The teacher up front.

The federal government and a lot of local governments have said thou shalt make evs.

So they need to look like they're behaving, but they need to pay for it. And John, you mentioned something really interesting, which is that

they're independent business units now at some of the carmakers. I don't know really

what caused those internally, but I think they're going to be because they're never going to be profit right and what that's going to prove. And I don't

think Ford the cynical when they did it, for instance, but Farlow's trying to run a division that can't be profited, particularly without Lincoln being a strong luxury manufacturer. We portion can sell Tykens profitably, right, So there's some

level which we can make profit on a DV, but it probably is at you know, at least seventy eighty thousand dollars products, and that's not where Ford is. So Fort's going to lose money every year on Model Y.

Anybody else that has an EV division is going to lose money on that every year. That may be helpful at such point that the carmakers need to go

back to governments and say, look, we get it on quote for I mean we believe we have kids too. We want to make a difference.

But continuing to lean against this problem with a single solution has gotten us to seven sent EV. And we've been trying this for almost thirty years. So

how much longer are we going to bullshit ourselves and say we're priming the pump.

We're not priming the pump. There's no pump. Yeah, but I

hear what you're saying. On thirty years, let's take it back over one

hundred and twenty. If let's go back to the Baker Electric, you know,

right, let's go back to the Detroit Electric. I think that's an

unfair comparison. I mean, the one, the EV one was a great

car, but it was nickel metal hydride. You know, it was not

even a competitive eed to today's standards. And John, I have nineteen o

seven books in our library behind me, and when they lay out a comparison between steam electric and gasoline vehicles, what those one hundred and ten year old books say about EV. Let's see see if this sounds familiar. Is they're

great for urban use, not far from electricity, short distances, right, because recharge times are long, the batteries are heavy, big and expensive.

Does that sound at all unfamiliar to what we face today. We just switched

from iron batteries to lead to nickel metal hydride to lithium. So we went

up the table of elements food chain. And what we did is we made

better and better batteries, but they're more and more expensive. And what we're

chasing is a buying public that for every vehicle ICE two once a four hundred mile range. This doesn't have anything to do with infrastructure. In fact,

that people love to charge at home. They don't want to charge in the

field, right, so we need four hundred mile ranges. That's going to

be really expensive. Those batteries are going to be big, large, mass

wise and expensive. Meanwhile, Toyota can't make enough preus prime jeep cells or

by ease all day long, you know, six days a week and twice on Sunday. So we have ample evidence. And right now we're in an

evaluation vehicle, a Honda CRV hybrid, which is amazing. Let's remember,

a gentleman, we only need to get back to nineteen ninety four levels of carbon output from our vehicle fleet. So what we've been doing, which is

a game of the Emperor has new clothes. Right, isn't working. Mary

Nichols is a climate criminal. She's no different than deniers like Donald Trump,

because the results are the same. We're nowhere, We're seven percent. If

we didn't admitted that we needed a blended solution years ago, my kids who are eighteen and twenty two now wouldn't be on the hottest planet we'd ever experienced.

You know, I go back, and I know we're gonna take a break here soon. I go back to something that that Sergio Marcioni said in

twenty thirteen, right when the when the EPA limits were up to fifty five.

And I'll never forget this. He came out. I think we were

in Las Vegas. He came out at a press conference and he said,

look, he said, I've got this was in thirteen. I think he

had to get to twenty twenty one. He says, I've got eight years.

Don't tell me, give me the target, don't tell me how to get there. And I thought, you know that that is stuck with me,

because that's really the goal, right. The goal is getting rid of

carpet. It's not to fill the streets with evs. And if if we

tell or if we take the limits off automaker and say, look, you just have to you just have to lower it. I don't care how you

do it, just lower it. That would have been the right strategy,

but we didn't. Marget Innovation would a handle it lay, Yeah, but

we didn't do that because the because the market only rewarded uh this only was looking for the second Tesla right to chase the returns. I agree with that.

Well, let's take a quick commercial break and come back to this.

I'm right, he said, how do to bridge stone tire stocks shorter?

On what roads? Is there hydrotrack technology? But you don't have to know

how the science works, just where the brain is. What really matters is

they're bridge stone. All right, we're back. So Eric, I'm going

to challenge you on a couple of things here. You know, you say

we're stuck at seven percent, but you know, look, none of the legacies have come out with a truly clean sheet EV. They're still on their

first generation. Let's pull stuff out of the part spin and do an EV.

That way, we're not going to see their best efforts until twenty twenty five, twenty twenty six. Same with batteries, We're going to see second

generation batteries around that time frame, and I've put to you that you're going to see you a whole lot better than seven percent at that point, and they will be able to make money on this because remember, Tesla lost money for a decade, It lost billions, and then it hit that magic inflection point where that production ramp goes up, that did the hockey stick thing, and now it's one of the most profitable car companies in the world. So

I don't buy your argument that Ford cannot make a profit with Model E or Renoul with Dampier or Toyota with the BEV factory. You raise good points some

but one of the things we have to remember is, look, every Tesla's soul in North America still has really at least twenty thousand dollars of subsidy on the hood right from taxpayers. Right. Look, I'm a Sierra Club member,

I'm not I'm not anti environment, but let's not kid ourselves and say this is working. Look, Muska is an interesting character for sure, right

because on one hand we have Tesla saying, hey, government, stay out of our hair, and on the other hand, we have Tesla very happily seeing government give its buyers ten thousand dollars and incentives, and other carmakers give Tesla another ten to twelve thousand dollars incentives if and that's what we don't include gas taxes, So I don't at all by an argument the test is profitable.

Take their volume and multiply it by twenty thousand dollars a unit at least in incentives, and let's see what the real math looks like. The other

carmakers actually have to make money, or at least until they go bankrupt, and the government's failed down right, and and it's yeah, that happens, that's never gonna happen again. There's my will never get bailed out again,

not in this country. So they'll go bankrupt. If they will get bailed

out, they will go bankrupt and goodbye. Yeah that's right. Look,

EV's work for a portion of the market, right. I mean, I'm

coming to from Orange County. So if you went to the average million dollar

home here with a two car garage, and then EV's a great fit household incomes a quarter million. There's another ice. They only charge home. They

don't have to worry about the infrastructure. But really for the rest of America

that this doesn't work. Right, and we have a lot of evidence that

says other forms of power train are very cheap if the battery is that is the eight hundred pound guerrilla here. What we need to think about is,

look, batteries are very helpful only because they feed electricity to an electric motor, and electric motors are not any seven percent efficient. They're amazing, right,

all right, good, We can't run an electric court every EV.

We need to have a battery because we want to use motors to power at cars. The game that we should be playing is sizing batteries appropriately based on

duty cycle and combining them with other forms for propulsion. Right, That's that's

what ranked before by ETAs, That's what prime does, That's what the Honda cr vtas. The emission signatures of those vehicles are incredible though. Facton,

there is a good argument that plug if hybrids will actually drive more miles all electric than fold the evs, because consumers aren't afraid to jump in, they're plug in and go on a road trip to Yellowstone. Yeah, but the

evidence suggests and this comes out of Europe, this comes out of the US.

They don't plug in their ps I mean they plug them in less than half the time. And in fact, both the Europeans on A regulatory agencies

and the EPA ORSA. And wait a minute, we're giving way too much

credit for pvs. They should not count as heavily as they do for CAFE

because they don't get plugged in. To raise a good point, and one

of the things Larry mentioned I think is important if we allow different solutions right, and we were using results right or evidence to set policy, one of the things we would do is say, look, we have telemetry now to every vehicle. Let's use telemetry, and let's start basing things rather than on

windows stickers printed on with ink on paper, let's start using electric vehicle miles travel. We can collect the actual data. I think to Larry's point,

carmakers allowed carmakers cut free to meet GHG targets anyway they can would very quickly on have vehicles with mixed power trains and telemetry, and even the California Air Resources Board would be satisfied that we knew exactly how many electric vehicle miles were traveled by every one of those units. So yep, we do need a

good system and we need to be able to police at John one hundred percent right, because cynical use and we saw this with going lay back to you to yellow bad popcorn field vehicles from the nineties. Right, We don't need

cynical solutions. We need to reduce our GHG. Eric Lembi ask you,

let me ask you two questions, one for each of your professional roles.

You said that you're working with major OEMs on programs that are in the future.

How many of them are looking at EV programs, how many of them are looking at hybrid programs? How many of them looking at straight ice programs?

And the other question is how many of your students are interested in designing things that are not elector? Are those are really good questions? Let's answer

the OE one. First. Oees have to operate based on the regulations that

are before them, right, and this is what Toyota is facing. The

regulations before them are called mandates. They vary by state, by federal jurisdiction,

and then globally by country. So the carmakers are in a situation where

they absolutely have to plan for those bandiates and all of them that we work for diligently are at the same time, what we see all of them doing is uncanceling ice programs that they had scheduled for cancelation and can unscheduling the shuttering of engine plants, unscheduling the changeover of whole production assembly plants, and can

tinuing ice platforms. So five years ago there were a bunch of projected removals

at carmakers of ices from the portfolio. Everyone was planning that. What we

see now is last minute saves of We can't cancel that that makes money.

We lose money on all these evs. So no, we're not canceling this

ic SUV. No we're not going to get rid of this luxury ice.

No we're not going to get rid of this full size pickup because this is what funds the EB side of the house. So are they still planning on

the mandates. They are, but they're they're having to run sort of a

rearguard action to protect their finances. And what I would say obliquely is most

of the carmakers at this point are doing what we call scenario planning, and scenario planning is running multiple potential futures. One of those potential futures is as

mandated the others are basically all different assumptions around what we call non attainment, and non attainment just says but California has set regulations before in the nineties that automakers didn't hit Californy regulators and EBA regulators figured out how to back pedal on that. Still have you know, legal vehicles sold. So I think all

the carmakers at this point, I can't speak for GM, and I don't speak for any but GM maintains differently publicly. Let's put it this way.

I think the rest of them, it would be safe to say, are all scenario planning. Only one of those scenarios includes full BEEV mandates. The

other scenarios are all less a lesser implementation, even though right now that's not on the books legally, because they all know they have to survive, if that makes any sense. And the question is to what are the students invested

in designing? Here's the good news. People go to, whether it's it's

Art Center College of Design or CCS in Detroit, or Fort Sign in Germany or roy Culture of Art in England. They go because they're passionate about transportation.

They're passionate about cars and trucks right, and we find them happily agnostic as to what powers them. We have some students that couldn't be more stoked

about a world that is beev only. We have some students that want to

do hyper military vehicles, and we have students that just want to put vates and things. And I think that sort of represents a cross section of enthusiastic

society. So are they all coming to design one type of car? No?

And what we teach them is, please be agnostic to power train.

For some buyer, the EV is the right answer. Please know how to

design for them. For some buyers, Diesel will remain the answer. Know

how to design for them. For some that gas, maybe for some ice,

maybe for some maybe AGV. So their task is designers isn't to choose

winners. Technologically, their task is to meet buyer needs. And the only

way we can do that is to know the buyers. And if we really

know the buyers, you've got to admit there's probably a different powered train solution for one buyer versus another versus another. It's the same way mankind gut where

the two hundred breeds of horses? Yeah, okay, Gary, come I'm

want to bring up a point in on what Eric talked about earlier, which is the part about the point about mandates. Right. I really think that

part of this part of this issue where we're at right now, this transition issue, is a marketing problem. We've told the automakers especially, have told

consumers that and sold consumers that evis are a direct substitution for ice vehicles, right, And I don't think they're they are yet, But I think that there's a larger portion of this is and this to me is how we get from seven percent to ten or twelve. I think there's a large proportion and

a growing proportion of especially in the US, people who are willing to contribute, who see the change of weather and say, Okay, I'm ready to contribute, but I'm not ready to go all in. And if we offered

them a way to say that, look, you don't have to give up your ice vehicle. Evis, and everybody on this call knows evis are fantastic

second vehicles and they ought to be the second vehicle in every garage in America, right, owning two ice vehicles unless you have special circumstances where you both drive a hell of a lot is kind of ridiculous. You can have one

EV and that's the message that needs to be delivered, and that's how you grow that market share. But telling people, look, you have to go

to this more expensive power train and this is the only way that you can contribute and help stop these you know, these horrible storms, or how what I ever argument you want to make. I think that's wrong, and I

think it's it's a it's really been a mistake. I'm the part of the

part of the automakers and driven again by the market that only rewards purity.

Right, So, Larry, Amen, the question I have is is that Eric is suggesting that it is impossible to make money off of evs that are not sixty seventy eight thousand bucks. And when you talk about people having a

second vehicle, I mean a lot of people have a tough time owning one vehicle. So how are we going to get to the second one, especially

if the second one is going to be so expensive, Because the second one doesn't need to have four hundred miles of range that's how you get there, or any hundred vole internal charging system, right, it only has to be you know, it has to be the golf cart to run around top, right, it has to be one hundred and fifty miles of range. It

has to be cheap. It can be that second, that second vehicle.

It's just the problem is we're designing for direct substitution. We're designing for that.

It has to be four hundred miles, which means it needs a giant battery, which means it needs a solid state battery. If not, you

know, or the magic battery, right, because that's the only way to get to four hundred. But you don't need that. You don't mean that

range if it's a second vehicle, or if you're in your first vehicle.

You know, your first vehicle ought to be a hybrid and your second vehicle ought to be an EV. And then you're done and you're content and gary

to your point, there are a lot of households that that can't afford a full, full be EV, even if it's a two hundred fifty mile range, right, even if that's an eighty kill a lot hour battery, they're still not going to be able to afford that. And I think what we're

missing is we need to provide solutions there too. Right. One of the

things that we often talk about internally with our carmaker clients is SFRS. It's

an acronym SFR, and it's single family residents. And you know, look

to be blunt right now. Nobody at an OE that knows what they're doing

plans an EV for any target buyer that doesn't live in an SFR. Nother

word's EVS our only plan for single family residences within closed garages. That is

the end of the discussion, because what we know is anybody makes them mistake of buying an EV and doesn't live like that has to really sacrifice practicality.

They're stopping them at a Walmart on the way home every other day and sitting in charge for a half an hour, or they're stopping at a charging network but they're ID four because they got free charging. But at their apartment complex

they don't. Right. Evs fold eevs don't work for people that don't live

in an SFR, And what we're not providing them is any alternative. A

hybrid is a great alternative for those people and will reduce GHD tremendously. But

the scheme that the California Resources Board has going forward, and that the following states New York, etc. Have also adopted leaves less and less place for

hybrid in future portfolios, and that is a dreadful mistake. The current policy

is actually going to cause global warmer because we're pursuing perfection, and perfection, as we teach Art Center students, is the enemy of good and what we want is good. Yeah. Look, I agree with all that, but

you guys are looking at this from a twenty twenty three snapshot in time.

By twenty twenty eight, so much of this is going to be resolved.

We're going to have much faster charging, We're going to have far more ubiquitous charging. There's going to be a reality setting in that we don't have to

fast charge everything level two in public places, even level one in certain public places like at the airport where you go away for a few days charging a one tenth fine, you're going to come back to a fully charged battery.

So what I'm getting at is, in about five years, in less than five years time, I keep saying this, twenty twenty twenty twenty six time, we're going to see second generation everything. That is going to be a

leap step ahead of where we're at right now. And Eric I believe by

the end of this year, we're going to be awfully close, if not at ten percent market share, not locked into the seven percent. So what

is the market share if we take Tesla out of that, well, a whole lot less. They're half the market. Yeah, they're half the market.

But you know, look at what gms bring into the market and the second half of this year, or look at Forward having just ramped up production of the Maki and the F one fifty, and it may be a problem selling those vehicles to your point, Eric, but a truism in the automotive industry is every car and truck that gets built gets sold. They do not

disassemble them at the end of the year and send the components back to the suppliers. They get sold. And so that's why I feel said will be

at ten percent by the end of this year. And my prediction, by

the way, even though I'm all in on this, I think by twenty thirty it's going to be one out of three, one out of three electric.

I think, you know, the administration's goal of fifty percent by twenty thirty, I'll call that a stretch goal. I'll call this the EPA's goal

of getting to what is it? It's something crazy. By twenty thirty two,

they want seventy five percent electric, I'll call that an impossibility. And

look, I'm all in on this. I want to see it happen.

But you know, to the points that you guys are raising, we got to be realists here. I just think I'm on the more optimistic side of

realism than you guys are. John, Can I ask you a question?

You may, That's why that's why we got this show. Different opinion.

Yeah, well, can I only ask you and you're you're far more of a of an optimistic futurist than I am. I just want to know where's

a flying car. They're working on it. They're working on it. Look

these vtalls, these vtalls keep making great strides all along, and in fact, I think the first really uh public awareness of vtalls are going to come next year at the Paris Olympics. I know the plan is to shuttle a

lot and then in in Eric's neck of the woods in twenty twenty eight in Los Angeles, the plans are to have v toalls. You know, because

the traffic in southern California is crazy, so is the traffic in Paris, and so it's common Larry, it's common, okay, but popularly kinnics said it would have been here what fifteen twenty years ago? Right, Well,

look, you know, for all, for all the other optimistic future of out there. You know, you know how technology goes. We all think

it's going to happen faster than it does, and then after it hits, we're just amazing at how fast it happened. Eric, let me let me

ask you, going back to Larry's observation about the second vehicle being something that is not a Swiss army knife of a vehicle, which generally vehicles tend to be. Do you see much of an appetite for cars that don't have full

blown capabilities alas, not so far. I agree with Larry. Right in

a household where we had probably a three vehicle choice, we could have a two hundred mile range commuter on which would make a great impact on carbon emissions and never leave that household stranded. Unfortunately, consumers, particularly in North America,

have been trained kind of like John to expect better and better and better.

And one of the things that we fight and we see it all the time when we're doing research with consumers. Look, range anxiety doesn't go away.

In fact, we shouldn't call it range anxiety because that belittles the people that's that suffer it. Right, we don't. We don't call people handicapped

anymore either, right, they're differently abled. This is not range anxiety.

That's an insult to buyers. It's range demand. And what they demand,

particularly people that own evs, is more range in their next TV because actually they like the experience of habit in ev It's like they can charge it at home. There aren't oil changes, breaks are changed less often. Right.

The manufacturers often loaded it with the latest technology, aid asset, et cetera.

Right, And if they charge at home, their cost per mild travel is actually pretty low because they're using residential electricity, often at night to put in the battery to store for you during the day. So these people are

incredibly happy with their evs except for one thing they want or range, and their rationalist a, I'm a consumer, so it's what I deserve. B

I have been trained, like John says, the technology continues of pace.

So yet my current EV gets me a tick over three hundred, But I'll never shop a future one that doesn't get four hundred, and intriguingly, range demand, not anxiety, does not go down with ownership. In fact,

we usually find if we research owners versus considerers, in other words, people who are experienced with evs versus people who've never owned one, the owners want more range than those who consider evs. So I last I don't think that

range demand will diminish. I think carmakers are doing all of this research.

They don't have to use us. There's lots of other ways they can.

They can find these same answers and they are So the carmakers know four hundred is the number because it's the number with ICE, and we got that through research too. I did a lot of research in the nineties. We had

to tell a lot of our carmakers what size gas tank to put in the car because we have done research. And everyone at that time called it range

demand. No one called it anxiety. That's a belittling term. We shouldn't

use, right, There aren't that evil anymore. There shouldn't be range anxiety.

It's range demand, gents or people anymore. Hey, Eric, do

do EV owners want more range than ICE owners do? No? They want

the same Okay, So, John, what you get and your question is great, is there are smaller passenger car segments or smaller utility vehicle segments where three fifty three seventy is enough and we find that an ICE as well.

Usually the sort of the line is about four hundred. And then like ICE,

there are segments where you like pick up at, large SUVs, etcetera, where you want to deliver four fifty, five hundred, five fifty or even six hundred. Right. Look, Ford isn't accidentally putting those huge fuel

tanks in their FT fifties. They're doing that because they did research and buy

buyers punt that range. So really, the easiest way to summarize this is

if I looked at the average range in a well developed ICE segment entry SUV, mid midsized car, mid sized SUV, large SUV, mid pickup, full sized pickup, et cetera. If I looked at the average range and

those segments for the ices, that's about arrange demand for the b EV and the same segment, because, by the way, the duty cycle is the same area. Let me ask you another a question. So we're seeing some

pushback on the regulation in the EU that some countries are saying, hey, you know, we've got to go more slowly. Here there's the possibility that

we have a different administration, which leads to different rules, different mandates in the United States. What happens to the discussion of evs, What happens to

the building of evs, What happens to the sales of evs? If these

things change, well, what regulation driveth lack of regulation will take it away.

Right, Look, we screwed, we screw We screwed up societally, we screwed up. And here's why we let GHG become a political issue.

It's not it's a human issue. We all face it. It doesn't matter

what side of the aisle we sit on. As soon as we politicized it,

we got to this problem and you're pointing it out, which is now we have the chance of radical swings with one administration versus another. We're gonna

have to solve this with compromise. It's lack of compromise that brought us to

this point. Right, So, democratic administrations want to drive regulations through the

roof and Republican administrations wanted to deny climate change. Both are bullshit positions,

and both of those positions are harming my kids. John, you've got kids

as well. We're not going to leave them a good planet. And it's

not because we didn't want to, it's because we weren't willing to compromise.

Yeah, amen, brother, I'm on board with that. Hey, look,

we're at the top of the hour here. Eric's pronunciation there is the

perfect note to end this show. It really is. But this has been

a great discussion. This has been fantastic. We're gonna have to come back

and do this again because things will will change. You know. We're going

to see new cars coming in, new batteries coming in, We're going to see new administrations coming in at some point, and we're gonna have to come back to this. Of course, as we established that things really didn't change

all that much because Eric still believes the same way he believed four years ago or when reverse the last time we hit him on the show, which is incompromise, let's be clear. Yeah, right, And I also believe Larry

has his finger on it. And literally that discussion you gave around Toyota was

spot on them, like you're paying attention, they're paying attention. And Gary

and John you guys too, and John, you know what, Thanks for being an optimist. We need them, please, we need it. Yeah.

Look, I can't help being an optimist. My blood type is a

positive. Gary, thanks for keeping him in line. Yeah, and I

now know where his boy Elroy, where the origin of that was. That's

great, Larry, great having you on the show. Eric brilliant is always

can't wait till we meet again. Likewise, thank you. Okay, okay,

thanks everybody, take care. Here's guys, bye bye, I'll do

online. After Hours is brought to you by bridge Stone Tires, Solutions for

Your Journey and by Borg Warner. If you liked this program, I would

like to learn more about the automotive industry. Check out our website at Autoline

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AAH #662 - Electric Skeptics Predict EV Disaster

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