AAH #676 - Tesla's Cybertruck A Cringeworthy Masterpiece

I'll online. After Hours is brought to you by bridge Stone Tires Solutions for

your journey. Hey, everybody, welcome to Toddle Line After Hours. Last

show of twenty twenty three. But boy, it's going to be a great

one. Why because of the guests that we have on here. Gary's not

here with us today, but Sandy Bnroe is in the house. He's back

good. And we got Joe White from Reuters and to Lee from Sino Waudo

Insights, and guys, I know this is going to be a good conversation.

Who knows where we're going to go with this, But Cleandy, I want to ask you about the cyber truck because you were down in Austin.

You got to talk to elon demand himself. But the one that I really

watched, In fact, I took notes on your video when you had what it was like six or seven of the top execs there five Okay, yeah, I'm trying to embellish see all of them all. This means we can

all lie. Okay, that's good. So that was pretty damn good.

But here's my question to kick off the conversation. How many of these things

once they get up the line speed it's gonna I mean, Elon has said what it's going to be a year, year and a half before things are really humming. What do you think their sales rate's going to be at that

point. I know what they've got in sales. It's published all over the

place that they've got a million pre orders. That's a big chunk, all

none refundable. Right, So when the time comes and they just changed it,

you want to you want to spec one out, you want to configure it thousand bucks. That's going to get rid of a lot of riff raff,

right, and a lot of the riff raff is they're getting rid of them right now because you know, okay, some of these guys, they they put in their money for their their their their new product, and it's it's it's not forty seven thousand dollars anymore now, it's one hundred thousand plus.

So that depends on the right. Sixty thousand, I think is what

they're launching with. Isn't it a little over sixty grand? Yeah? I

know, but they're not me. You know it's right now. So if

you if you have the mid range, I think yeah, But the one that they're building is the Founder's Edition or something like that, and that's coming in at over one hundred grand, So that's gonna that's gonna weed people out in a hurry. And right now we've had quite a number of people saying

you're can buy my truck. They want extra money and things like that.

And I'm not really interested in scabbing because I want to keep my I don't have them as a customer. Tesla's not a customer of ours. But I

don't want to have any any any issues with with the folks at Tesla, So I'm holding back. I have I used to have a lot. Now

I don't have so many because little things that happened in my company. But

at the end of the day, I got one for sure, and I'm keeping my fingers crossed. I told you when you get us fyber truck,

you got to invite me over to drive this thing. Yeah. Well it

tears it apart. Yeah, that's right, it's the shreds. Wait a

minute, what do you think, Well, what do you think they're going to sell cyber truck? Well, I have no idea. And this is

Sandy. This is what I want to ask you about, because you did

a couple of videos and one of the john you referenced with the engineers, but others as well. And I think there's a couple of things I want

to ask you about this thing. I mean, what's your take on on

on the buildability of the physical of the truck itself, because it's challenging, right, it's a novel novel throughout it's novel, but it's not that big a challenge. They've solved most of the stuff that I I couldn't figure out

how they were going to how they how they were going to do what they wanted to do. They have a six thousand pound press and a nine thousand

pound press basically, well, that's the that's for the casting, right.

Well, yeah, so let me let me there's more that that's relative.

Once you tune those in, they'll square it parts out all day long and there's very very little that they have to do. They're they're taking the rough

shape and putting in inserts and it does that's faster than I can drill and tap and whatnot. It's a little thing you're talking about the body, right,

although there was that, But I'll also asked this and my colleagues at at Reuters Paul Hundert Norri Schoz, who had a story today about troubles with batteries. I think some other outlets are having the same are coming up with

similar stories. So what, what, if anything, did you see on

the on the forty six eighty batteries, and what can you say about, you know, how that process seems to be going well. I saw the

forty six eighty battery line lines and the dry the dry cell batteries. I

was right there. I was watching them coiling up the the anodes and the

cathos. They were right in front of me, and and quite frankly,

I looked for powder, and I looked for all the things that I should see if there's any kind of an issue, and I saw nothing. So

they were cranking them out on the short lines, the ones that don't have salt than in it. You don't have to acclaim that solvent. So instead

of lying that long, I got one this one this long. So I

watched all these things. I didn't see huge boxes of scrap parts. So

from what I saw, this thing looks like it's a go. However,

shit happens, and when somebody comes along and gives you see some new grade of lithium or some new copper that's a little bit different. Then the shit

can hit the fan. It's like anything else. If a purchasing agent comes

in and says, ho, look this, I can say, you know, ten dollars on a reel of steel, and I bring it in and I'm uncoiling it and whatnot. I'm looking, Wow, where did this come

from home? That looks like a flaw on? Yikes, But it's too

late. It's already in the presses now. Crunch, crunch, crunch,

everything's sprung all over the place. Purchasing agents have a lot more influence over

over the quality of the product than almost anybody. If they if they save

money, which is their job, and you can't stamp it, you're screwed.

And that's kind of like what could be going on with the because I did hear about the batteries, but what I saw I didn't. I didn't

see. The issue is this is going to create next level of challenges,

right, because if the Model two comes out by twenty twenty five, we're talking much more than two hundred three thousand units, which the cyber truck is supposed to have an annual capacity for it I think the model too will have anything that'll come out with LFPs. I mean, there's no reason for rocket

ship want I want distance and I want cheap. I'm not gonna I'm not

going to suggest for a minute that that that that'll be lithium own batteries.

I just I just don't think that'll think they go with LFP. Yeah.

So another question, it's kind of a very end of the earlier one.

So if you're looking at the cyber truck and it seemed like they use this as a technology, kind of future technology test that. I mean, it's

pretty big test bed. That is a test bet. But as you look

at the technology that you saw, I mean the way the body is constructed, or the electrical architecture of the forty eight electrical architecture, what of that do you think is significant in that it's going to be scalable and deployable across TESLA as opposed to not just for the cyber truck, but something that you think they can scale, I mean that that electrical system, or do you think there's some other aspects of it. I think number one on the hit

rade it's forty eight bolts, But more importantly is the Ethernet ring that they've got for communication. That got rid of seventy one percent of the weight and

probably the cost associated with all those wires. People were asking me about it,

you know, and whatnot. So I was going to bring like,

okay, this is what you'd see for twelve bolt years, which you see, but it's too small. So I took a big cables and it's just

basically, give me that big cable over there, you know, big in diameter, and give me one it's a quarter of the size, because that's what it is. It's four to one. Twelve. Thing isn't anything like

my forty eight volt. So it's just all you do is multiplying amps and

volts. And that's what I get in the way of power. Well,

if I've got forty eight volts, I only need two amps. But if

I got twelve, it's just a math problem and people don't quite get it.

That is revolutionary. That is going to give you some real good bottom

line results. And then so that would be and then I mean we I

looked at all of the stuff that they can do with the Ethernet communication system.

This blows everything away. Now I got my Ethernet connection Okay, one

connection and I got a power line to anything? I don't care. What

is it A speaker? I don't care? Is it a is a window

regulator? I don't care. Is it the door latches? I don't care.

Everything now and it communicates fast? So what are you talking about?

Is that that sounds? What is that? In a per car? Like

hundreds of dollars of car, thousands of dollars per car? What's which?

You guess? Could be a well, it depends on how much you've got

driving and whatnot, but I would I would guess somewhere around a thousand bucks in labor and material, everything all rolled up. Okay, it's not small,

no, Joe, I equate these hard knocks. That manufacturing hell that

they're going through is kind of similar to what Apple does with their enclosures, because everything that they do is a one off when it starts, so the suppliers that they use get a lot stronger, get a lot smarter, and you know, in Tesla's case, much larger case scenarios. But they're designing

Apples, designing their own enclosures and fixtures and tooling, and this is similar to Tesla. So I think this is I think it says much about how

much of a disadvantage the legacies are versus how much more advanced. I was

thinking, I was thinking about this today, which tells you something about me that I would think about, you know, product cycles. Was I'm walking

to the grocery store. But but again it was when I was watching the

videos of the cyber truck and the point you made, I was wondering, Okay, so how far behind are the legacy automakers. Are they two generation?

Two cycles behind three one? I can't. I can't tell you,

but I know one thing for sure. Taking forty eight volts and retroating it

into something else that would not happen at a legacy auto manufacturer, and I don't think it's going to happen at Tesla either. They if they if they're

going to do something on the three and what had to be a new three.

Yeah, there's so many different things exchange, right, all the electrical compretty much everything, everything goes to forty eight bolts. Now you can put

you know, you can put a little transformers and whatever. But but at

the end of the day, you'd really want to do it right the first time, and you wouldn't want to have anything that well, it's a twelve bolt camera. So we're just gonna, you know, we'll put a little

box in between that and the forty eight bolts and we'll downcommement it. No

that that just isn't that ain't that's not that adding boxes seems to now.

Adding boxes is what Tesla doesn't do. They get rid of boxes. And

the other part we haven't even spoke about is new components. Not even talking

about software yet, right, So Tesla is way ahead of everybody, with the exception of China. Ev ink. So you'd say on hardware and software,

China, we'll come to China, right, Yeah, Well I'm talking we can jump into it anytime. Yeah, I've been telling you right now

that Tesla is at least eight years ahead of everybody else on forty eight bolts.

And the reason for that is because nobody's looked at it. It's always

been the same thing. Why I was at Ford thirty five years ago.

We were trying to get people to go to forty forty two then, but forty eight bolts and guess what, Ah, that will never work. There

are no suppliers. Well, there are suppliers, but they didn't want to

use them because we got a long term contract with Fred here and he gives us a good price. And so that's what was the killer there. Nobody

wanted to look at weight reduction. What do you need? We're putting big

V eights in these things, don't So at the end of the day, you're looking at a really huge mindset differential. And by the way, that

forty eight also helps something else. Oh yeah, steer by wire. Well

that's right, I'm telling you what. Forty eight volts the Ethernet steer by

wire and rears steer. Okay, so I brought the Lightning with me and

I was I drove the I drove the cyber truck for about two and a half hours. You can get it doesn't take long to get happy about a

car that usually takes like the same radius as the Queen Mary to turn and all of a sudden, now, well, well, I'm it wakes you up because it cuts in so quickly. And I noticed that, and I

today I drove, like I said, I drove the Lightning down and uh and the turning radius is dramatic when you're when you're in the isn't about the same lengths as it is one of the flesh. So the rear was.

But it's only like Robber EV's got that too. Hummer EV's got that to

a lot of cars have got real steering, some more aggressive than others.

It's great for super high speed stuff, but it's especially good in parking lots when they marget. I'm telling you that's where that's where it really that's where

it really sings. And the steer by wire. I know others have tried

it and whatever, but uh, but to have this the the cyber truck to me, and I realized that this is going to sound goofy, but the cyber truck to me is the BMW I three of our time. The

BMW I three I was totally blown away with new materials, carbon fiber, new welding techniques, new casting uh materials so that you can actually weld a casting to to to an extrusion. I mean, holy shit, on sets,

all these wonderful new man just a hideous carb Actually that's funny because I went to you know, some might say the same thing about the cyber truck I went. I went to the I three factor. I had exactly a

much less sort of informed level. I had exactly the same reaction that you

did, and then the thing didn't sell. I was like, oh,

well, I guess that's that's that's that's it for that. It didn't look

like a BMW, didn't It didn't look like a BMW. You know,

they had the fake grill and they had the bad But that was the end of it. In terms of looking like a BMW. Nothing in the world

looks as as terrible as that. Well, the current BMWs don't look like

you're talking about the front grill. We're talking about the front grill, right,

So this forty eight fold thing. And I listened to the video you

did with the engineer. Even the Tesla engineers are like, this is hard

because you got to change your entire supply base for almost anything that's in the vehicle that has got it has got to make that shift and retool and recalibrate and new software. So I'm wondered, this is the cyber truck enough.

Do you think it's enough to push the rest of the industry, because the I mean, if you're saving a thousand dollars a car, you'd think everyone else in the industry would look at that and say, okay, fine, if that's the benchmark, that's what we ought to be doing. Well,

here's the thing, as you probably know, the guys at Tesla send out here's how to design for forty eight volts, and we copied down everything.

We have the manual and then we have every one of the different supplemental thingies, all the addendums and whatnot. We've got it and it's a fairly thick

package if you print it, and it's got everything you need to know.

When I said I thought they're about eight years behind, it should be ten years because it would take two years to marke that book just to read it.

And Joe, you have to remember that most of the rank and file management engineers at these legacies, they don't have the capability to move over to forty eight fold, right, So it would literally having to be hiring entire engineering departments at these companies to really reinvent that kind of stuff. I know,

we've got to have leadership, let's face it, And you're not going to get that out of GM. Volkswagen is just hoping to make it till

next week. You're not gonna you're not going to get Toyota thinks about stuff

for a long long time. Farley, first guy with a truck that was

electric. Farley, first guy to say, I am going I don't give

a shit about that SA thing. I'm going with the the national standard yet.

So he's the one who probably won't. He'll go in and say,

hey on me, fold guys that work in for me. I got this

manual clunk. Yeah, I want you guys working on as as fast as

possible. The force challenge is building designing a profitable car that's not called F

one fifty. Well, here's the here's the thing I don't I don't know

enough about everything, but I do know one thing. The profitability. We

look at when we do a teardown and analyze a car. We we don't

look at, you know, what was the investment, you know, what are the negotiations and stuff like that. We just tear the car apart and

we look at it and we come back with numbers, and those numbers tell us whether or not, you know, their gross profit is good enough to stay in you know, alive. And quite frankly, our numbers say that

the F one fifty the lightning. They've got money that they can take out

of it, no question about it. However, they're not that bad,

they're not that off track. So why is it that everybody says this,

Well, because you know, what is it? If it reads it,

if it bleeds, it reads, or something like that bleeds, it leads, it leads. Oh sorry, that's the lead story if there's blood all

over them. Okay, good. So at the end of the day,

I believe what they're doing is they're taking the investment costs and they're rolling it in. So I made a huge mistake one time, and I don't remember

which group that I was with. They said, is the how Sorry,

when the Chevy Bolt first came out, they said, is this a profitable vehicle? And I said, I don't know. We'd have to, you

know, we'd have there's a lot of calculations here. We've torn it apart.

We looked at this, this and this. You know, most of

the stuff is already optimized for a for a gasoline vehicle, and they're adding this, this and this, and really the only thing that'd be more expensive would be the battery itself. Well, then then they came back and they

said, well, what about the investment. How do you roll that in?

I said, well, investment's different. You don't. I don't usually

include that. Well what happens if you did? I did to get back

here. This will take me a while. I came back and he said,

well, how much what would the what would the car have to cost in order to get payback in a year. Okay, so that would be

instead of whatever the price of the car was, you'd have to add sixty five thousand dollars more to it. Well, that's what everybody is doing,

and it's not. We don't do that. We never do that. Never.

The car is what it is. Here's all the bits and pieces,

here's the labor, here's what we're looking at for war, any sales, all that other chef gets rolled in and then you say, boom, here's the price. What about the investment? The investment is the investment. Here's

what the prices are. And when we hit this many vehicles then we'll be

making profit. But you know, we had to pay it off. But

right now that's what we can sell it for. This is but they're not

doing that. So they're saying, you know, things like each each each

Ford product is losing fifty thousand dollars. Well, you know what I look

at now that the bolt is like paid off everything. Now they can sell

it for what is it, thirty six grand or something like that, way less twenty eight grand base price, but they don't want to, I don't know, not on the ultimum. And yeah, well here's the thing.

They're going to try and get their money back fast on some of the Cadillac products. And that's the way you do it. Yes, charge them for

the investment right up front, and then people just run away from it because that's going to be well, that seems like that's going to be a tough game to play when you've got what I mean, I've lost track of how many EV models are going to be in the marketplace in twenty twenty four in the United States. Forget about China. China's double whatever number that would be

in the United States. I was reading this year, there's ninety in the

US. Ninety. Yeah. But just this idea of like, well,

we can charge your premium because it's electric, I think that's pretty much out the window. I think that it depends on who is charging. I think

that actually charge depends on who's buying and who's buying because you know, look, the earlier attenders, they all jumped in right, and they'd buy anything, anything, just to have an electric vehicle, especially a Testla. And

it looks like the market has pretty much sucked them in, at least in the US. And now there's another contingent out there that's interested in electrics,

but they're not quite ready to pull the trigger. Well, here's the deal.

The thing that the thing that's going to make it happen is if you know, you guys start pressing or story of putting across the benefit of having electric. When I had my Rubicon, I was paying two hundred and fifty

bucks a month for gas. Now I have a Rivian how much for electricity?

Eleven dollars. I had to have oil changes, and I had to

have air filter changes, and everyone in your tires, my tires a go forever. It's unbelievable the tires and people saying ten twelve thousand miles they're replacing

tires so heavy. I don't know if it's just that. I think it's

people mashing the pedal and that's what I But it's not just mashing. It's

a choice. That's a consum used to a truck going zero to sixty and

three and a half forthside I'll try it. That's free at the end of

the day. If you if you, if you're driving like a normal human

being. The tires, the brakes you never use. They don't they breaks

don't use. Right there's a lot of fake news out there with tires and

different types of pollution. But but the tires thing on electric cars, I

can tell you from listening to the tire companies it's an issue. Well,

I don't know. I can only tell you what what's your experience, my

man, My experience is the tirewear is like I can't believe it. There's

no tirewear. The brakes look like brand spanking new. Because I drive with

one pedal. I never I never hit the brakes. Never. If you

hit the brakes and you grabbed the wheel, you're going to get You're going to get two problems with electrics right now, insurance and residuals. Yeah,

because the residuals. I don't know about Tesla's what their residual value is.

If you go online and look at the US prices, I don't I don't believe them because in many cases they're higher than new and it's like, who's going to buy a new or a used teslat for more money than a new one. So I don't buy. I don't buy, so get it.

But I can tell you especially all the compliance cars, oh my god, there's sales proof. They're nailed to the showroom floor. You can't get rid

of them. And insurance costs it looks right now. I'm not going to

say it's for every single one. It costs more to repair an electric vehicle

for a whole a bunch of reasons, right, there's not that many parts out there, not that many people to work on them, blah blah blah blah blah. But those are the two problems that I see right now for

electrics in the market. Insurance and residuals. Well, most of most of

the company like okay, so if you buy a Ribbean, they provide an insurance company to work with, and it was no more expensive than when I had the Rubicon. If you get into an accident, I just did,

the biggest problem is waiting for the parts. That is killer and that pisses

that that that kind of like okay, you well, as long as you mentioned accidents, we had a viewer right into me, Roger taketto hope I didn't butcher your name there. How hard is the cyber truck going to be

to repair? In fender benders? Their fenders don't bend everything. The other

guy the problem. I watched the I watched the videos that they had the

IHS all all the stuff they broke, the sword machine. I mean at

the end of the day. Uh, it's going to take quite a bit.

Even a machine gun has a hard time with it with a cyber truck.

I watched the one where they t bone came in. It went bang,

hit the door. The door went like that for a second and it

went pop. It's Martin's side. Martin's side is playing that what the hell

is Martin? Okay? So all stainless steels start off usually is austinitic,

which means what, which means that it's non magnetic and and it's body centered cubic, so body center. I wudn't even ask, okay, it's that's

an allotropy. So the allotropy okay is different, and it basically it's it's

it's firm, it's it's really tight because there's there's things inside, main ingredients being nickel and chromium. So Martin side means really really hard Martin's site,

I didn't even know. I took four years at at tech, the school

and high school. I went to of of Metallurgy metallurgy and two more years

when I went to college. I thought I'd be a metallurgist. I like

the idea of all this, but it stinks and I give me a headache.

So that was the end of that. But I know a fair amount.

Okay, I'm not the expert anymore, but I know a fair amount.

And when I was a kid, you couldn't take an austenitic material and turn it into Martin's site unless you worked hard, work hardened it. And

they didn't tell us that that this thing was was was martin cidic until I went on a tour and then he said, I said, what does that thing do over there? And he said, oh, well, that's cold

forming that we we use cold forming for what. Well, it changes the

allotropy a little. Can you make Martin's out of this? You know,

I'm not sure I want to answer that question. And that's and now when

you look at when you look at normal stainless steel, it looks like blobs, But when you look at Martin's site, it looks like like like the microscoe under the microscope. Yeah, uh, it looks totally different. It

looks like like giant things that have come together somehow. They look they look

like like the chemical reaction when the when the skin reaction. The chemical reaction

is when you heat it up and then and you and you're run it through and quench it at whatever temperature it needs to quench. In order to make

austenitic materials, you you have to quench it fast enough so that the the the metals that are you know, you want to bond into. You have

to make it fast enough so that the the the outside cubic holds that that whatever the chemical is, that orever the the additive or agent that you want to keep and it it has to close up on it fast enough. And

and that's that's when you have stainless steel. And the things you add are

like I say, there's a whole bunch of things, but in essence, the ones that really make things happen are nickel and chromium. So that's that's

kind of like normal stainless steel. Now when you want to have austenitic stainless

steel, things change quite a bit and it's not my first choice. But

if you work harden it, if you can work harden it, and and on the on the on the on the line. I mean they're uncoiling it

over here and it comes out and I see it dip down and it comes back up and it goes into this What are you doing there? Because I

don't recognize that machine? And I know most of the machines that you use

in a stamping line that when I don't know what it is. And so

what they're doing is they're work hardening the steel and it comes together and it's Martin City. It seems like an awful lot of work to do for a

niche product. They want to have machine gun bullets bounce off Martin site,

you want to have it go through like a butter stay with Austinite. I

mean it's they've invested a lot to do this. Well, it all boils

down to Elon's son, right, He said, how if if this is a future vehicle, how comes it doesn't look like the future? And then

they showed these all a pickups one after another. They all look identically.

I also think that they're seven hundred million dollar company right now. Yeah,

so the decisions that they make are a different undred billion. Sorry sorry,

Yeah, and John, who'd have thought we'd have had a chemistry lesson?

Yeah yeah yeah, over line after right right in here? Now, well

you know, and we're going to talk about space allotrophy. You should really

have an expert, right yeah, oh god, but anyway, you're education over again anyway. No, I just think that those types of decisions and

if he's still thinking about that twenty million by twenty thirty or getting close to it, then he's got to make these types of decisions because again he's also thinking more like a technology company, software engineering company than a traditional car company.

Right. So, but to me it doesn't seem that complicated. I

mean, if you're unrolling the coil right and you're doing the processing right there, and they laser cut the blanks or what do they do? Yeah,

they laser cut up and then they form them. Done and quite frankly,

no performing, no paint, and that's they do have paint in other areas.

But the big thing for me was deforming. How do I bend that

stuff without bruising it? And they've got a machine that Trump built and they

call it air bending. It looks like a normal brake, but they've got

something that's uh, that's helping it out so that you don't get a bruise.

So when you say bruise, I mean you're saying you want to clean bend without any ripples and stuff. If you if you bend normal material in

a break, it goes down and you you have a line. Okay,

it's a it's a If you put your fingers on it and rub it, you can feel that it's like a crease. It's well, it's a crease,

but you can feel that there's little broken parts of got it, got it, parts of steel there with this stuff, there's nothing. So I'm

I put my hands all over this stuff and how they do that, and they showed me the machine. So it comes rolling out, it gets uh,

it goes through at that process and then to make it into work hard in d austinite and or sorry martinsite, and then it goes into machine and go and it's done and it's fast and it's easy and it's all robotic about this. Let's just say, I mean, you know, five years ago,

six years ago or whatever, I would not have said Tesla is going to be a leader in manufacturing process in like the people we talk about the Tesla production system. The stuff you're talking about says that they are becoming that

that they're they're they're ahead, and a lot of manufacturing process stuff. They

spend an awful lot of money, a tremendous amount of money on R and D for manufacturing and material science. And if you don't if you don't invest

in material science and uh, and you don't invest in manufacturing and you don't invest in software, you are screwed. You're not gonna win. You can't

win. I don't care about the look at that dazzling paint. Well,

let's put little LEDs that change color all the time. That to me is

just bull And then they just waste the time. And this is what I

was talking about with Apple, right, because in the front end, they spend a ton of money in R and D, and they don't trust their suppliers to build a spec on the capitol equipment, right, and so they teach them how to do it. They they have employees there that are at

the facilities. When the capitol equipment gets delivered, they'll sit there, they'll

sleep there until they can get to you know, production mass quantity units.

And then they'll go. So, yeah, it's just different relative to the

automotive traditional legacy stuff. So okay, hold on one tech. We got

to take a quick break. We got to give a shout out to our

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don't tire stop shorter on what roads? Is their hydro track technology that you

don't have to know how the science works, just where the break is.

What really matters is they're breached out. All right, we're back. We're

talking about I don't know, we're talking about everything here. Chemistry, Yeah,

like stainless steel. You wanted to get into China? Yeah, I

do, I do, and I guess direct to sit in both to and Sandy. So we talked when we spent the first half hour talking about Tesla.

My question is, so, meanwhile, in China, there's this whole gaggle of companies that are that are pretty innovative, one or two of which are making money. I mean, I'm just serve of curious. So you

know what's happening in China relative to what we see? You know, I

mean, are the are Chinese electric vehicle companies in the same ballgame as Tesla or in a different ballgame, and what's going on with that. So I

would say it's by D Tesla and then everybody else really not. You wouldn't

put le Auto or Neo closer. I would This month, Li Auto should

get to about fifteen thousand units for December sale, so everyone else is around ten twenty. And I was mentioning before the show that Volkswagen Group sent out

a tweet saying they were at like twenty three thousand units in November. That's

over six or seven or eight models. So even the legacies are struggling mightily

because we're talking about a base of between eight and nine million vehicles for ny v's this year. By D probably won't outsell Tesla on the BEV side,

but they're going to be the number one brand in China. But they all

out sell Tesla in China with BEVs. Yes, now you're talking globally,

they will not out sell Tesla, but in China they will, right, so it already are Yeah, so BYD globally with PHVs and Bev's probably around three three two million. I think tests is probably going to hit around one

eight with you know, forty five fifty percent of the production coming out of Shanghai Giga one hundred hundred and fifty thousand units being exported and then the rest domestic consumption. So, but that being said, they are just a gaggle

of of Chinese EV brands that are fighting each other because of the price war, and that's why we're seeing this huge increase in exports. Now. The

Lion's share is still ice vehicles, you know, from SAIC within sixty sixty seventy seventy percent, right, Icy ice and thirty percent. But that but

that that those numbers are changing rapidly, right, the government's got its foot on the well and within the next three years is going to be foreign brands that are shipping Chinese made evs with their logos on them to Europe. So

I think we should note the two notable companies are going to be Volkswagen as Atlantis, right, because they had major deals with Chinese EV companies. And

you make a great point li Auto, because there's three publicly traded US traded Chinese EV companies, Neo, Liato and x Pong, x Pong. Their

valuation got reduced substantially because Ali Baba sold a bunch of their shares Neo is the premium brand that has made swapping a thing in China, and then li Ato is domestic only with e revs. They have three products. They all

kind of look alike if you squint, but their family SUV crossovers. And

again, as x Pong and Neo struggled to get to twenty thousand units a month, December will be probably around fifty to fifty five thousand unit for li Ato and market cap wise, they're double Neo and x Punk right now.

So yeah, so my question would be by DS SEMs like a monster.

I've said, if they keep this rate of growth going, sometime in the next decade, they'll be the biggest car company in the world. That's that's

my prediction as well. And when I talked to excuse me, when I

talked to Elon Musk, I said, I think that you know, Tesla's going to be a rock solid second, but I think by D is going to be in first. And he said, you're probably right, and and

he doesn't he doesn't mince words. He but here's my question is BYD technically

where Tesla is is it? You know, software defined, is it centralized,

zonal computing? Is it ethernet, is it gigacastings, is it all

that kind of stuff? It is not, but they have invested in expansion.

So over the last two years they're entered like sixty markets, right, and they have the Seal, they have the un plus the Health Dolphin and then the Eagle, all under thirty thousand dollars. So where exporting to Europe

or the United States eventually or North America for those products, It'll take some time because the BYD brand creating awareness, education and trust. You know.

The reason it makes so much sense for these Chinese brands to enter Mexico either, you know, to produce is not just because entry into North America.

It's also because they can sell domestically into Latin America and South America at that twenty thousand dollars price point. So well, I think this is in a

moment, I'll bring up the word tariffs because I mean, it was just a story this morning that Biden administration. I can't remember who wrote it,

but somebody who had started the Bid administration is looking at raising the tariffs on Chinese vehicles like cameber. What is it now, like twenty percent and a

half. So that's apparently, and then twenty five for Chinese and the European

Union is you know, is growling about dumping and whatnot and unfair trade.

I mean, I mean, what is a company like byd I mean it's kind of like back to the future, right, this is what the Japanese were in the nineteen eighties exactly. So what happens next, Well, what

happened with the Japanese We rolled over and let them in. And why was

that? Because nobody in North America could give the consumer what they wanted.

They wanted a small car, it had to be fuel efficient, and wanted high quality. Well by a X y Z car. It's made in America.

Wave the flag. It's made in America. Wave the flag. It's

me. And it didn't work out. So we put tariffs on it.

We did this, We did that. Eventually, somebody said, well,

because people they still bottom and quite frankly, if they're coming in from China, liberates in China are a whole lot lower than they are anywhere. And

the cars are really good, I mean I spent from really good right now.

So I think, sorry to interrupt, but just really quickly, the Japanese Koreans took years to get the Koreans did, but the Japanese it didn't take them long to catch on, and they had the right market. They

end the California market, sure, and that was it. They everything else

got crushed after they started coming out. I was thinking about this too,

that the idea that whatever whatever is the Chinese companies do to make electric vehicles affordable at a BYD makes money. I don't know about the rest of them,

but b YD makes money. They make money, so they know how

to do a profitable electric vehicle at that sort of people's price point of you know, twenty five thirty thousand. I guess the idea that they won't be

able to transfer that to other markets, that seems like a fallacy because the Japanese did it exactly right. This is okay. By D is already building

buses right here in the US, not in the In the not too distant future, they're going to be building and selling a Class eight kind of tractors here in the United States. They have battery factories right here in the United

States. They didn't deal with problem. They don't know because why, well,

let's see, oh yeah, they make chips, Oh yeah, they make batteries. Oh yeah, they make their own circuit boards. Yeah,

on and on and on. Everybody from Harvard you know, wow, yeah,

no outsource, they didn't needed in Tesla. Who's going to win?

I mean, this is so so elemental, and it's it's so obvious to anybody, but those people who say, well, we could save a penny if that that that that isn't what's going to make you wealthy. It's not

gonna it's not going to get you to a prestige kind of product. I

think what d YD will probably end up doing, especially if the tariffs go up, build a c KD plant in the United States, not down.

You bring in the parts from China, use American labor, you call it America. That India right now, and there's there's and I might do it

through Mexico too, And they're also doing it through Canada. So they may

not get the seventy five hundred dollars ev rebate. Who knows how long that's

going to last anyway, but I think that they all be able to subvert the terroriff by building in America. And remember that's what the Japanese did.

Remember Reagan came out question voluntary restraint agreement and they said, okay, baby, we'll build there. I started covering the auto industry when the voluntary restraint

agreements were still in force, and that's why I asked these questions because it seems to me like history is going to repeat itself. Absolutely, this is

so obvious it isn't even funny. And yet I see all these characters pounding

on tables, getting all red in the face. Come off it. It

ain't gonna it's not gonna work. You can't do it. All the Chinese

have to do is say, oh, you need some lithium. I don't

think they kind of did. They're doing that as we speak. But I

think the I think it goes beyond that because it's not about EV's anymore.

It's about software. Yeah. So even if the manufacturers here us three Volkswagen

Stlantis can build an affordable EV, who wants it if the entertainment system is super buggy and latency is not great because we're so used to the iPhone and they're right now, the decision is make by and guess what Volkswagen's buying, Silantis is buying. You know, GM kicked CarPlay out, but now we're

seeing a bunch of problems with the lyrics. So so I mean there's challenges

ahead and they just don't have the horses in house to really create that competency long term. And that's where tess and it's not just it's not just sim

entertainment. That's what the customer sees. Each one of those little black boxes

that are stuck inside of a North American car, each one of them has their own software. The software is owned by somebody else. Uh, They'll

they'll give you communication from that little black box to whatever you want to communicate with you. They'll allow you a handshake, but you don't know what's in

that box. You don't know whether that little box is going to do what

you wanted to do. And you're you can't chang chuck. And there's one

hundred and forty of those little boxes and each one of them has a different software, and each one of them that they need to talk to each other.

So we'll see what happens at Ford. Because Doug for Doug Field has

talked about yes that you know the Capitol Market stadium right dumped all the parts on the floor and said, you know, suppliers write the software for all those components not going forward. They don't. But can Ford pull it off?

Can any of the legacies, because you're saying too, they just don't have the software horsepower, folks like it depends on where you get the software done as well, because you had a guy in Germany that hired twenty thousand software engineers, and that's not a place where you hire twenty thousand software engineers.

You go to Silicon Valley and who does that or who did that?

Well? The Chinese did. They came in, they sent their people to

Stanford because I used to teach there, and I'm telling you what, there was lots of Chinese people in there. I didn't teach software, but they

were the class that were either in before me or after me. And so

I'm gathering my shit up and these other guys are coming in. Everybody's Chinese.

Everybody. I couldn't believe it's a master's course. I couldn't believe how

many Chinese people were there when I went to China, when I went to teach them how to design using our packages and whatnot. And as in essence,

all we did, all we did was talk about electric vehicles and how do you make it lighter, and how do you get better coefficient to dragon?

How do I get rid of friction? And all these different things.

They were soaking it up like sponges and everybody bag. Well, you know

what, we needed a big V eight and okay, so we spent from twenty fourteen to twenty nineteen. Actually it was twenty twenty when Trump said,

uh, nobody, how many nobody could do any business what China? And

if you're doing something like that, well, we're just going to come in throw you in jail or something. I don't remember the exact amount was,

but I do know that I low four million bucks four million dot in purchase orders because you were not because there was not it couldn't work. And then

and then there was a conference a few months ago, Fortune conference where they had a couple of head of designs for jac and uh Gua, which is the Bidu Jelly joint venture. Who happens to be Frank Wu who studied at

CCS, worked at General Motors for about eight years before moving to China.

So it's not just Chinese, but it's it's a culture. It's a kind

of a mindset. And they said their teams are looking at every six months

refreshing software to update features. So that's unheard of because, as we all

know, a product life cycle for traditional automotives five years, right, half millions whatever to so all those policies and procedures need to be thrown out.

You can't evolve. Even if they were to create efficiencies, it might be

seven, ten, twelve percent, but we're talking six months. They're coming

out with brand new features. And so I mean, this is a culture

thing. I mean, it's up and down. It's not just a component

here or a component there. And in the United States, Tesla is by

far ahead, right because China's and China it's not as clear. I mean,

I think I agree with the way you ranked it, the way to eat Tesla. That makes sense in this hierarchy. But it does seem like,

yeah, it does seem like we you know, I guess it does seem like both of you are saying, is we're at a technology We're at a technology kind of turning point. That's that seems like maybe you could compare

it to the seventies and eighties when you had toyleta production system meets highly efficient you know, highly efficient vehicle engineering. Maybe it's even before that. But

but it seems like that's what we're dealing with. It's just it's not just

like a evolutionary stuff. No, this has to be revelutionary. And quite

frankly, the biggest changes that have to happen are corporate changes. They the

corporate procedures, the all all the corporate culture, all that stuff has to change. You can't have it anymore. It's it changed. You change corporate

culture. It's the toughest thing on the planet to do. And why I'm

asking. I mean, you're almost better just blowing up a company and starting

a new one. Maybe, But remember remember we used to have all the

corporate All the corporations used to build their own stuff. They made their own

seats, they made their own instrument panels, they did all this stuff.

Slowly, the consultants came in and, oh, that should be offshore, you should give that away. Oh look at how much we saved here.

Oh look at how much the UAW played a big role in that. And

all of a sudden way cheaper to buy from suppliers. And that's something that

Sean Fayin at the UAW is never fessed up to. They're part of the

problem. Hey, you know what, and I'm not against these people getting

money, but it goes beyond on the money is you know, it's work rules, its lines of demarcation, it's battles in the factory and all that kind of stuff telling the company what they're going to do from you know, why did they agree to that? I haven't any idea, but I do

remember that I for two years. So I came from the machine tool industry.

Initially I was a tool maker. Then later on I worked my way

into engineering and went to school and stuff like that. At twenty seven,

I was a chief engineer Valiant machine Tool and it was a big place, biggest, the biggest machine tool company in privately held machine tool company in North America. And I'm telling you what. When the union made the rule that

they didn't want any robots, we were in the tank. I mean it's

the only time that we were. So what do we do? We automated,

I think was a typewriter thing we did. We were working. We

got a great, big, giant contract for the Karma River project in Russia.

I mean, we were doing anything to just keep the doors open.

And why well, the Union says we don't want to have any robots.

We want a union strong. A million and a half people used to be

in Actually I think it was like it was quite a bit. I think

it was about a million and a half. We're in the union and now

we have less than three hundred thousand. I'm telling you what, you tell

the customer what he wants to do, what he should be doing. Hey,

you got to do it my way. You're the customer, but you

got to do it my way. And sooner or later the customer is going

to say, I don't think so. And the next thing, you know,

you go from where a GM had like fifty or sixty percent down to what are they now thirteen fourteen, sixteen percent, sixteen percent something like that.

Well, at the end of the day, other people will come in because you wanted to tell them what to do, they found somebody else that wants to give them what they want. And guess what thats when the consumer

moves. And I do think that that's going to be one of the that's

going to be a real challenge for policymakers of the Western world, the EU and the United States. And Carlos Tavaris talks about this, I stole this

from him, I'll give him the credit, said, what are you going to do when you want everybody to drive an electric vehicle? And the only

way to make that happen is to have electric vehicles that anybody can buy, which is you know, the amazing twenty five thousand dollars car. And right

now it seems like the only people who could deliver that in a competent way are Chinese manufacturers. So in China, I want to say ninety percent of

all cars sold or under three hundred thousand RMB or forty five thousand dollars basically, and if we drilled down it would probably be under thirty thousand. But

here's the question too, who's making money? Well, yd I ran out

of company. Jili's mad no no on EV's I'm talking about? Is g

L making money? On EV's I doubt it, don't think. See what

I d We know for a fact is I'm not sure anybody else in China is making money profit. So the never ending price war really has gone a

lot longer than most people think, kind of exacerbated by Tesla a little bit.

But they're also looking at year end, so they're trying to pull in sales from early twenty twenty four when there's still a bit of uncertainty in the economy, and I think in twenty twenty four, mid twenty twenty four, end of twenty twenty four, we'll start to see some of these brands kind of tail off a little bit. But the crazy thing is there's still new

products, there's still new brands. Bid just launched two new brands, right

and they're in the luxuries. You know, Neo is going to go down

mark sort of. God. Every single day I'm not exaggerating here. Every

single day there's a new ev hit in the market in China and it's nuts.

And here's the problem that I see coming for China is, Okay, there's a bunch of little independent companies. They're not going to make it.

The big ones, the state owned lots are going to get propped up no matter what the hell happens. That will won't matter if they're losing money,

because they represent jobs and the government's not going to let those jobs go over.

But the losers are going to be the foreign brands totally well, that's a lot of their own doing. But also you're going to see a pressure

release beout into Latin America into South America, exports the Southeast foreign exports in the export or try to export it. Right, So how how how long

before that those markets get flooded? Right? Not very long? Yeah,

not that big. So what what will happen is and this already starts starting

to happen. China in the lower tier cities are investing much more in charging

infrastructure. For example, Neo is building more swapping stations and the lower to

cities. And we have to remember that a small city in China is still

probably seventy eight minutes so tier three city you work for you, yeah, well, or only four yeah, exactly. So we're at fifteen and a

half million cars this year, I think sold something like US and I think China will be around twenty four. So and China's still growing because the lower

tier cities where we're pretty flat. But yes, it's a huge concern,

not only because of overcapacity, but it's going to be exacerbated if the EU creates their own inflation reduction Act because now we have batter capacity in the United States, in Europe and in China, and that money is still getting plowed into But that's but that's where the world seems to be headed. Is you

have the EU, the United States, and China has kind of with their own, at least in theory, their own separate, isolated EV infrastructures.

I mean, that's what the European and the United States governments seem to want, right. Well, that's so the policy direction they want to go.

Absolutely, I'm not saying I think that's that's what I'm just telling you.

I think that's what they want. That's why it's interesting, you know,

to be a fly on the wall when the US government's talked to Mexico about foreign direct investment, because I guarantee you the governor of Alabama or Mississippi's like give me that money, right or down south where it's less UAW friendly.

So that's going to be kind of the dichotomy for just the United States in twenty twenty four, right, because these are paying jobs, right, and we know that the Chinese want to come in with battery sell factories and evs because Ford and c ATL are doing a partnership, right. So that's one

example, and it just depends you had made a great point. I think

two weeks ago at a conference that year, I was like, stop calling them highbrids. Just say they get fifty miles to the gallon and people will

buy them. Right. So if we stop and until the end of twenty

twenty four, you know, it's going to be easy and popular to bash China on the lad left and the right. But they're going to sit on

the sidelines for the most part until they figure out, Okay, who's going to be the next president, and then they're going to move there. What

do we have to say to get to get what we want? Exactly right?

And the reason that that's the truth is because I've said this a lot of times and people really hate it, but I like saying Americans are checker players and China if they didn't invent chess, they came damn close to it.

I'm telling you what, these guys got a long range plan. There's

the what is it the million sorry, the thousand Year Marathon or something that book that came out the Chinese Business Plan. When I started hearing about that,

the ten year plan to go from basically you know, basically agrarian to top of the top of the line and everything. These guys got a plan.

We have debates, right, but I'll say this, when the Civil War breaks out in China. We're all gonna go. We're watching too much

disaster tellers of their Josh, you think there's already they already have their own little civil war. You know, I heard the same thing. Toyota's got

a hundred year plan. Look, we have no clue what the hell's going

to happen in five years exactly. But here's the thing. I almost got

a chance to see that. I almost got a chance to see that one

hundred year plan. And guess what. One of the executives that was at

the table with Eg Toyota, he started laughing and he said, why would you ever have a hundred year plan? Your grandchildren will be dead by then.

It's the ridiculous idea. And Eg turned around and said something to the

guy in Japanese. And I asked my interpreter, what did he just say?

And she said, oh, nothing, it doesn't matter. I said,

what did he say? And he said, where there's arrogance, there's

opportunity. Yeah that, and now that's very good insight. But I think

the better thing to do as a company or as a country is be very agile. You know. It's the old Mike Tyson line. Everybody's got a

plan, but until they step in the ring and get punched in the mouth.

And you know, three four years ago, I was saying, I loved GM's EV strategy. I thought it was brilliant. I still think the

strategy is great. But guess what, people aren't buying evs like they thought

that they would. So you better be able to adjust on a dime.

You can have the one hundred year plan, but when you get punched in the mouth, you better have the agility to adjust. And I said this

to a friend journalist, and he kind of laughed, but he was like nodding his head laughing. He was like, to me, it's much easier

for a technology company to build a car than it is for an automaker to become a technology So true, right, yeah, Well, there's no lack of trying. In the last thirty years. I mean, GM has tried

to become a technology company two or three times at least impossible. Everything's on

and cheap. That the number one rule. The number one rule is how

cheap can we get it? And as long as you say how cheap when

we get it, you can't develop software. Well, here's an example of

the importance or the misunderstanding or the lack of understanding. For the longest time.

I don't know if they still do, but for the longest time, sourcing guys on the indirect side would buy the batteries. Uh. And we

now know that it's very strategic and we need to buy rare earth metals we need you know, so that and then silicon right chips the whole supply chain.

Yeah, so that's that's indirect. That's on the it guys need to

do that. It's like what we learned the hard way. That's not true.

And on the bomb. Is software accounted for on the bomb because it's

a product cost now, right, it's not this indirect ca if I thought of that is do you know, Sandy is No, software is not on the box. For those who don't know bomb bom material see bomb all the

parts that go into a car. But the software, I mean, this

is a whole other show. And I know we're supposed to wrap up,

but the software content is going vertical in terms of the it has been going vertical the seventies. I mean really and truly it swoops up like a hockey

stick, and now it's almost straight up and down if you don't know what you're doing in software. Just like what Doug said, if we if we

allow everyone else to tell us what to do in their little software box, we can never compete. And when I tell people, uh, you know,

Tesla's ten years ahead in software, Oh that can be cool. Well

you did, all right, go get bashed in the face as you punched.

One of the shrewd moves that married made was kick Apple off of gym vehicles, right the car Plays. Well, we'll see if the customers go

along with they're on that one. Well, long term, I think it's

it's it was a prudent move because as as so, a friend of mine, that same friend at Portia in Atlanta sends me a picture of the next version of car Play and a Porsche, And no one's gonna want Porsche or carryod software. No one. That's real estate. They he and the infant

and the data that they lost. Right, Okay, we're gonna have to

cut it short right now, but we're going to have you guys back.

This was a great conversation, great show. We're going to do it again.

I want to thank you all for being on. I want you all

to have a great holiday, Merry Christmas, Christmas, I've got something for you. Here you go nice even partly Christmas came early. Yes, a

present from Sandy. Santa Sandy, look at that. It's it's a cyber

truck cutout and it looks like it's a It is a bottle. It's a

bottle opener and it says it's elon time on. There you go. That's

right, thanks, and he's two o'clock in the morning somewhere. That one

of your best Christmas present. That's right. That's the most us Jimmy Buffetts

song. He never wrote two o'clock somewhere. Hey, okay, thanks you

guys, and thank all of you for having tuned in. I'll don't line

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