AAH #690 - What The Heck Is Happening With That $25,000 Tesla?

All online after hours is brought to you by bridge Stone Tires Solutions for your Journey. Mister Vassil asked John, how are you. I'm excited because you've

prepared a list of questions here that we should be talking about on today's show that I'm chopping at the bit to get to. Indeed, and we'll be

talking to our friends Bob Gritzinger from Words Auto. Bob, it's been a

while, we haven't seen you. It's glad, glad you're back in the

studio, new digs. If the place has changed, it's turned around.

It's just beautiful, well, sort of beautiful in the studio kind of way right in the uncomparable inca incomparable. I was about to say that Drone irrepressible.

There you go from seeking alpha irrevocal or irrevocable. That's even better and

indomitable. We'll see, we'll see about how to prove that. All right.

All right, So, so, as John mentioned, but we have a list of questions here, and what we're going to do is so the way that this is set up, I look at Bob as being our product expert. Easy now, okay, Drone is absolutely our business expert. He's

been writing about the business of the auto industry for two or three days.

Indeed, in John, you're good for everything you know and good for nothing too. I'm really good at that. So what we're gonna do is wait,

wait, hold on, and you are I'm asking the questions. He

has nothing to do, he has nothing to do, and all day to do it. Then we've got this. So so okay, now now one

sort of question. So what I want to do is make our way through

Tesla for GM Toyota. Okay. And so when you're answering these questions,

try not to jump ahead. Oh you see what I'm saying. That's really

hard. It's an impossibility. It is. It is a built in impossibility

based on the list here. But he's he's calm, yeahs oh, I'm

calm. I'm just it's an impossibility. Go ahead. I'm just saying,

try okay, okay, okay. So we'll start out. Let's see,

so last week after the show, so we didn't know about this that that Tesla said, or the rumor came out from from Reuters that they're going to cancel a twenty five thousand dollars cards is lying. That's what that's what Elon

said. What Elon said, all right, And so what I want to

know from you guys is this a good idea? Is this a bad idea?

Or will it not matter to Tesla? Oh? Those aren't questions on

your list. But I'm with this is good, it says, yeah,

come on, bh. I think it's bad that he can't do a less

expensive vehicle. The industry needs that, the Tesla people need that. I

think that it's I'm not sure you know what's driving that. I thought he

had all of the technology the manufacturing skills together. Now so apparently you cannot

build that inexpensive of an electric vehicle or he do it, except that BYD is doing it and even cheaper than that. Wells you know, don't they

have the wigers building that or something. I mean, that's that's kind of

the point. I think that there probably is something to the story. I

mean, I know the Reuters reporters who reported it, and they would not have reported this story if there was wasn't some basis too. They're not lying,

they're not lying. If anybody's lying, Elon's lying about the story just

to throw people off the track. I think he may be rethinking the twenty

five thousand dollars car and how quickly he wants to bring it out, simply because everything in the EV business has been turned upside down in the last ninety days. Suddenly we hear a lot more about Chinese entrance to the market.

We hear a lot more about regulation in the United States. I read a

story yesterday in the Financial Times that Chinese evs are piling up in the ports of Europe unsold. There's a lot that people thought they knew about EV's and

consumer demand for evs that is not known. So what that story said was

two things. It said one that he had canceled the twenty five thousand dollars

car, and two he was going to be introducing a robotaxi in August of this year. Now, this is at least the fourth or fifth time he

said he's going to be introducing a robotaxi, So we have to take that with a grain of salt. That doesn't mean he's not going to do it.

So I'll be waiting and paying attention in August to see if there's something either a robotaxi that he's coming forward with or another excuse as to why he's not bringing them. But I think it's important that the bigger story than the

twenty five thousand dollars car, I think is the fact that all of our earlier assumptions from a couple of months ago about the EV market and how it's progressing has basically been turned on its head. They'll say all of our because

I didn't make those same assumptions except for Gressinger well up against it. So

Bob, Bob jumping ahead. Bob thinks he can't do it. Their own

thinks that there's a there's an ulterior motive predicated on him introducing something else.

What do you think, Well, we don't know enough yet, I think to make a firm conclusion of what's going on. As we said, Reiters

doesn't lie. I mean Elon could have come out and said, hey,

they didn't get the facts right or something like that. This was Nori's story.

We know him very smart and very careful, and he would not be writing that story. And not only that, I think he said in the

story he found three separate sources were careful to document this exactly right. Yeah,

So what I want to know is what does this mean exactly? So

I'll give you some examples of this. The plant in Mexico. Nothing's being

done. There was no construction going on there whatsoever. This was supposed to

be where the twenty five thousand dollars car using the unboxed assembly process was going to get built. The Mexicans are pissed off. They're pounding the table,

telling elon, come on, we got to have some sort of ceremony some of the show that this is going on. Nothing's happening. Meanwhile, there's

a big expansion going on in Austin. I don't know what that's for.

Maybe some of the people in the audience know. If you guys are in

the chat room and you've got the answer, what is this big expansion going on in Austin? Has has he repivoted and decided? You know, I

don't have to go to build a whole new plant in Mexico. I'll add

an adjunc to the Austin plant and do that. But then there's reports that

the low cost car is going to be built, maybe in China too, or maybe in Austin. They're talking about a new plant in India as well.

Right, and that's a whole nother ball of wax. Right, But

so I believe Tesla really will continue to push the technological, especially manufacturing technological envelope. I hope this this news and look where there's smoke, there's fire.

Reuters has caught onto something. I don't know if what they caught onto

is the Mexican plant's not going to get built or what. But I really

want to see Tesla do that unboxed assembly process. I'm so geeked about it.

I think it's sensational. You know, we had the Kerasoft guys,

you know, Matthew from Kearrasoft in here saying, look, we've done our studies. This is absolutely feasible. You can take a ton of cost out.

All I'm getting at is, there's so many things going on out there.

I don't think we really know for sure what's going on. What about

giga casting is that is that going to play a role. I remember the

first story about the twenty five thousand dollars car talked about how giga casting, this casting of aluminum into large parts as opposed to all kinds of stamped and welding, stampings and weldings and so forth, was a big part of how you get the cost out of this vehicle. I mean, well, but

you can do that for any vehicle. You don't have to do it for

twenty Every single Tesla uses giga castings now, so that's not new. You

know, there's been rumors out there that the entire chassis would be a one piece casting, for example, as opposed to multiple pieces. But if you

go to the unboxed assembly process, as at least what they've shown, you know, that's essentially six different modules that come together. But in the front

and rear module there's definitely giga castings in that. Look, the whole industry

is looking at giga castings right now because you eliminate so many stampings and weldings.

All right, So let's let's move on to the the robotaxi. It'slf

that Elon is talking about now. One of the things he's said in the

past is he's got so many vehicles driving around right now collecting so much data that they'll be able to process all of this data in the Dojo computers and things will be just just swell. Okay, So what would the implications for

Tesla be if it is able to pull off the robot taxi? Would this

be a separate vehicle or would this be utilizing if you had a Tesla, it would be like your car could be used as a robotaxi as if you recall. That was another thing that Elon said was like basically, you know,

get one of our cars make money by you know, having a drive around by itself. Yeah, that was that was part of the justification and

paying up to what fifteen thousand dollars for full self driving I think it's down to twelve done quote unquote down to only twelve thousand dollars right now. That

was the justification that you'd be able to make money on your car. So

of course you want to spend that kind of money. But the robotaxi would

seem to be something like GM's Cruise Origin or I can't remember the zooke's name, you know, and it's a six seed with facing seats in big open doors and it's on demand, you call it with an app and that sort of thing. Look what everybody's looking at is if you do the math,

the numbers look really good. I mean, Made Mobility just came out what

last week or something like that, and they said, once we get the driver out of our cars, our profit margin shoot up to sixty sixty percent profit margin. So I mean that's very alluring, and that's why Tesla and

everybody else would want to get into that business, right and in an urban setting. The other side of that is, if I'm living in a city

where robotaxis now are being used, I have to ask myself, why do I want to own a car? Do I really want to own a car?

Is that something that I need and want to do? What do you

think about? I mean, if you could get away with robotaxis already New

York City, why own a car? You can get around, but traffic

goes down. He's of ownership. Just the money that you're saving on parking

and insurance and everything else inherent in owning a car in New York just kind of goes away. Well, in June, the congestion charge is going to

go into effect south of sixtieth sixtieth and so you think they've been talking about this for a number of years, but they figure they've got it. This

will unless parts some court case or something is going to block it. But

I mean, I think it is likely to happen. So, you know,

a ROBOTAXI then of course would not have to pay the charge as mass transit sure vehicles. You know, it seems like using the existing vehicles.

Tuessel as are already favorite of Uber drivers just for saving gas. So if

you could you know, download from the cloud, the the ability, the you know, autonomous features are there. Maybe you need a few more sensors

and now you have robotaxis. But how quick? So the Uber driver could

stay home watch TV while his vehicle was out right right well, and I mean, you know, don't put anything past musk. The guy can land

a rocket on a ship in the ocean. You know, a piece of

a rocket blows my mind. And so but the conventional wisdom when when GM

ran into this problem with Cruz was that we're not anywhere closer to real autonomy, right, But but how close are we actually? Mercedes Benz puts out

a car now it says is level three right, which I saw an advertisement for this week on television saying that you can literally take your eyes off the road and not pay attention to the car. California and Nevada, I believe,

are the only two states legal right now. So yeah, we're getting

there in steps. And you know, if you look at geo fenced areas

autonomy is already there. I mean, Waimo has been operating autonomous vehicles for

years in several markets. They're expanding now. GM has just gotten the okay

to resume in Phoenix. Now they're doing it with human beings in there because

they want everybody to rest assured that things will be fine. But the first

chance to get they want to yank the driver out of there. Of course,

of course, all right, Bob, you said, you said, Elon Musk, we can't underestimate him. He basically does everything, and he

does everything fairly. Well, well, I don't know if I said,

well, come on said there's another whole school of thought that says we can't underestimate him enough. He's a he's a technical wizard. Okay, okay,

but maybe the emphasis on wizard and maybe it gets a little weird there when you get into the magic and okay. So so so this this, I'm

this is this is a perhaps clumsy segue to the cyber truck, which has I mean, I think everything that I read on social media about this, so the cyber truck is is that like it is really the proverbial dumpster fire in terms of the experience that people are having with this thing. Okay,

so it seems you know, and this is brings up to date. I

mean, what is the nature of the experience that people are like driving a mile and it's suddenly stopping. Oh you know, I mean I may not,

it'll charge it. You cutting themselves on one of those you can't see

out of it. The only the I mean it's really good, not even

really good part, right, So I think the the Forte is all of this you know, off roading capability, and you know, damn Neil managed to uh prove that that's not perfect. But you know, anybody can make

a an electric super truck off road vehicle. Look at the Hummer. I

mean, look at any RC car. They can climb walls. So I'm

not sure that making it look so bizarre was the ticket. So so what

I want to know is is was that a good idea for Tesla in terms of making an investment in doing that drone rather than it saying Okay, we're going to make an investment in something else. Well, I think it's all

part of building the Tesla brand as being something innovative, something that's completely different.

I remember looking at it the first time and saying, this guy's really nuts. Nobody's going to buy this thing. Then I remember somebody else saying

it's interesting. You look at it, you think about it a while,

and then no other car, no other pickup truck, looks like it.

So I think that they'll always be a market for something that's offbeat, that's completely different. I think people will buy it just like they bought other Tesla's,

because it's a Tesla, because the brand has come into its own as a brand, and so I don't think it's really a bad idea. You'll

never really know the numbers as to what the investment costs, but you could find yourself. I think it's possible that Tesla would would find this to be

a product that will be evolved in its next generation. Perhaps they'll get kinks

out of it, and then it'll change the way people think of what a what a large pickup should look like. Kinks out of it, like,

they'll make it functional as a pickup truck, because right now it's really not well, it's not for work people. It's for people who want people to

look at them. That's what it's for. There's nothing about it that would

suggest to a carpenter, or a plumber or a roofing contractor. I got

to have one of these because it's going to make my job easier. They

know it's going to make their job harder. But but don't forget half the

people who buy pickup trucks don't really need a pickup truck for anything but personal transportation, because they like to drive something big on the road, and for that purpose, it's I think it's very functional. All right, So let

me put this to you, John, Okay, would the money have been better invested in, say the Model Z. That would be something that would

would have some volumes. Yeah, really good question. I mean, you

know, first off, the whole line, forget the cyber truck, but the three, the Y, the X, the S desperately needs styling refreshes.

I mean they're getting really old. They're starting to lose sales market share

in China to these newcomers that are coming in with the freshest, newest stuff on the block. So Tesla right off, the bat needs refreshes across the

line. But the cyber truck, it's interesting. Remember when it was first

announced it was going to be a forty thousand dollars truck. Well, the

ones that are out on the road right now are anywhere from eighty to one hundred thousand dollars, So that changes the whole ball of axe when it comes to how many of these things can you sell. It's a very capable truck.

I think it's a pretty cool truck. It does not appeal or will

not work for commercial truck owners, the plumbers, the contractors. It's not

that it's like you said, Derona, it's a look at meat truck and it's a pretty cool truck in that regard. At the end of the day,

it's going to come down to what are the sales numbers and what are the profit margins it generates. My guess is at the price it's at right

now, the margins are going to be fairly decent. But then you come

down to volume. And you know, we had Warren Brown on the show

earlier this year who predicted that max MAX sales in the US where it's going to be like thirty six thousand a year. You know, meanwhile, Ford

and GM are selling I don't know, seven eight hundred thousand pickups a year.

So to put it in perspective, Elon will have carved out a nice little niche, and if it's a very profitable niche, then yeah, it was worthwhile. But it's not going to be doing I don't think one hundred

and fifty two hundred and fifty thousand units a year and really put some damage into the Detroit three with their truck segment. All right, Bob so So

picking up on something John said, Okay, the need for refreshes for its distem products. Do you think refreshes are sufficient or they really need to do

like a full model change. I mean, how old, what's the newest

tesla? It's got to be ready for at least a refresh. I think

that most of them. Yeah, model why and that was what twenty twenty

it came out. I don't know if I think that's a typical mid cycle

refresh time. It's time. You know. The others are like, well,

we're talking about pickup trucks. That's the the the model lateens for time

for a pickup truck, normally, not a sedan or a crossover. You

know, those vehicles are redone seven years, totally redone. The rule of

thumb was always eight. You know, you do an all new platform,

you'd refresh it in four years and replace it in eight and eight. So

but that's going down, I mean, the time frames going down, true, And so is this affecting you know one everybody who wanted one, is you're getting to the point where they've purchased and now they're ready to buy their next Tesla and there's nothing new to look at in the showroom except a cyber truck. Maybe. Well look though, you know we've had Tom Libby on

the show too, who's talked about owner loyalty. Tesla has the highest owner

loyalty in the business by far. By far, they get like seventy percent

of the people who buy a Tesla go back and buy another one just like the old one. But that may work for that subset of buyers who are

into Tesla's But you know, it's clear that Tesla is losing market share in China. It's already lost EV sales leadership to BYD which is coming out with

more models, which gets to your point, Gary, right, Well, I mean Mark Wakefield basically told us that, you know, China is is so rapidly refreshing its vehicles and just you know, coming out with and they have the freshest product out there so I mean, if this is the normal way vehicles now are going to be developed and put on the market, bang bang bang bang bang. You know, how long can he milk the products

that he has? How long can anybody milk the product that he has?

Or that Are the Chinese going to come and change the standards for the industry by virtue of the amount of time that they sooner the amount of time that they used to refresh vehicles. Maybe they're going to change everything for everybody,

not just for Tesla, They are changing it for everybody. I think everybody

is looking and trying to figure out how to how to keep up. I

mean, look at you go to Warren that tech center. They're just building

and building because they need more space to house more engineers, more tech, more people. You're talking to GM Tech GM Tech Center. Yeah, I

mean because they needed for competitive reasons. Yeah, they've they got to everybody

has to ramp it up. And then and then you see layoffs and say,

you know, don't they need those people, they need all these they need more of those people. Well, we gotta pay for the buildings,

Bob things. Right, Look, the skill set need is changing exactly,

So you know, I'm sorry, but if you're an ice power train guy, we don't need as many of you. We need people who know electric,

all right. So we're gonna talk about people here a little bit.

Okay, all right, So so staying with the state, So we're gonna switch from Tesla. We're gonna move to Ford, but we're gonna start off

with the Ford Lightning pickup truck, the electric Ford Lightning. Now. Ford

said originally it had one hundred and twenty thousand pre orders for the Lightning last year, it's all about twenty fourth thousand this year. It has basically gone

from three shifts to one shift. And it took people that were working in

the plant that we're building the electric vehicles and said, hey, why don't you go over to Wayne, Michigan where we have this factory where they're bringing where they're building Broncos and Rangers, and they're really really popular. We need

you there. So deron what are the business implications of Ford having this this

grand plan for selling a whole bunch of Lightnings, and that grand plan doesn't seem to be so they made Ford made a strategic decision that it wanted to be to market first with an electric pickup truck, and in order to do that, they basically took the architecture of the existing and fifty and they adapted it so they didn't really optimize it for the idea of it being an electric platform. They took an ice platform, an internal combustion engine platform, and

adapted it to a battery platform. And I think you have to with sort

of with the advantage of retrospect, you have to say this didn't work out for Ford. I was right. I wrote a piece for Seeking Alpha and

I was going to use the word failure, and I thought, you know, I don't want to antagonize people there. I just said, well,

it's fallen short. It's just fallen short because it doesn't sting quite as much.

But internally, I think the project basically failed. Now this was The

people who will defend it will say, well, this was an experiment to see how much demand there really was. But it's quite an experiment to put

three shifts onto something. You are anticipating a lot of demand that's just not

there. So you have to ask yourself what made me, what made me

really anticipate that amount of demand. We need to scratch into some of our

research and we need to scratch into what we think we know about the market that we don't know. That led us to think that there was going to

be three shifts worth of production for this vehicle, which, as you point out, there was basically only one, barely one shift for it. So

I think this development probably has people shivering it forward for sure, because now they're working on the second version of this, which is an optimized platform for electric trucks. It should have some advantages to it, but they've already said

now that they're putting it off for something like a year, or they're going from one year to another year. I don't know how many months exactly,

but they're going to delay it. I think all of these manufacturers have really

made a bad call on the EV market. There's much more risk involved,

there's much more questioning of consumer demand. I mean, when you really ask

yourself, force yourself to ask why does a person buy an electric vehicle?

Why? It comes with all kinds of disadvantages and it doesn't really do too

much that a that a that an ice vehicle does, but it also has advantages. It has some advantages. I mean there's one fuel, uh,

you know, significantly cheaper less maintenance by far, although tires apparently could be an issue with the extra weight suspension. That kind of thing breakwork now reagen

breaking saves your brake pads. So there's there's all of that. But uh,

to your point in overestimating this market, I think everybody. Everybody does

it. It's it's the nightmarish hell of the hand raiser, right, you

know, they want to they want to go with we've got you know, one hundred and twenty thousand orders or people who said they want to buy one and they're basing I think way too much on Tesla sales, on on you know, hockey stick growth patterns that are way unrealistic. Well, one of

the one of the theories leading theories of why this happened, and you can read this in the comments of many of the stories that run on evs and that are controversial, is the fact that the that the market value of Tesla's stock has attracted many of the strategists and executives of these companies to say, you know what, if we can reposition ourselves as an EV company, you know, maybe we won't be selling for one hundred times earnings or fifty times earnings or whatever. Tesla selling, but it won't be six it will be

six times earnings. It'll be fifteen times earnings, or twenty times earnings or

twenty five times earnings. Now, someone like Mary, who's a very fine

person and for all the reports, is a great executive, she's sitting with a stock that hasn't moved all that much since she became CEO of the company a decade ago, and in most cases, if that happens, you lose your job. She's very fortunate she keeps her job. But if you do

that in most companies and you can't move the stock price significantly over ten years, you don't stay in that job. Same at Ford Motor Company. Ford

is a different situation because it's a family company and there's really only once shareholder that actually matters. But they've shown that they have no hesitation to go through

CEOs over there that aren't able to raise the price of the stock, and they've done it in the past. So this is a problem, and this

is maybe why they thought, Okay, if we can become an ev company, we can get the world to buy our stock. Well, those idiot

investors didn't really think about it to say that way. I think Tesla is

really a unicorn. It's what it really is. It's a one off and

it's a company that, for lots of reasons, rationally irrational, sells at a very high stock price compared to its earnings. But it does. And

that doesn't mean you'll be able to do that because your GM or your Ford or stillantis. Right, Yeah, exactly. Hey we should take a quick

commercial break. I know we got a lot more to get back to,

but first a shout out to our great sponsor, Bridged on keeping your heart racing in and out of the gym. That's what really matters. Bridge.

Don't pretend to sport as tires with a fifty thousand mile limited warranty. All

right, we're back, all right, So sticking with Ford, I want to talk about one of John's favorite subjects, the Ford Skunk Works. Now,

the Skunk's Works program is developing a third generation, third generation BOB where they're even moving beyond the second generation, which is pretty amazing. You're saying

the first generation was the Lightning. Yeah, Lightning and Makia and transit transit.

So this is supposedly going to be a cost effective and small EV, John, do people want small evs? Not in America. I mean,

look, don't get me wrong, there's a market for these things, right, small cars, but small cars historically have never done well in the US market. The best small car of all time in the US was the Volkswagen

Beetle, which, with practically no Japanese competition or Korean competition, they got up to what five six hundred thousand units a year, which wows. A

Volkswagen with all everything together today is not even at that level. But again,

historically, small cars have not done well. And the most articulate person

the world on this was Henry Ford himself, who said, small cars, small profits, big cars, big profits, right, John Pink the dews before the sound. So it's like the one who's still true, and it's

still true, so you know. But having said that, I think it'd

be cool if Ford came out with a twenty five thousand dollars profitable and I mean not inky dinky profit, but double digit profit margins a car, because all the lessons learned from doing that can apply to every other ev so, so in other words, they would come out with what we now see as the Maverick in terms of being a small, popular, highly popular vehicle.

That no one thought you could do. That's right, if Ford can do.

I'm not saying an electric Maverick, no, no, I'm just saying that a vehicle that that changes the that hit model sweet spot in the market where people go, oh my god, I got to have that thing.

They can't build those Mavericks fast enough. So, Bob, you're looking at

cars all the time. I mean, what's your sense of the acceptance of

any kind of small vehicle or otherwise? I think as you look at the

market for it. I mean, first of all, I guess somebody out

in the suburbs could use it as their commuter car or their air and running car. But the real problem with these, I think is that they're intended

for an urban consumer, and that's kind of the almost the worst place to have an electric vehicle because you can't charge it. How you know, where

do you drop your eension cord from? When you live on the thirtieth floor

in Manhattan. It's hell of an extension, hell of an extension cord,

and the trip hazards are phenomenal. Could make Could I make a plug for

a vehicle that I drove recently that I thought was a spectacular small car the Buick and Vista, which I would classify as a small car. I drove

for a week in my capacity as a North American car and truck and Suv of the Year Duror, and I was astonished to look at the MSRP as twenty eight thousand dollars and this thing had everything I think it was. It's

made in Korea. I think it has a three cylinder engine possibly in it.

So and I don't really care about all of that. It was it

had enough pickup for me. And I just found myself thinking, you know

what, I've been complaining for years that Detroit doesn't know how to make good small cars. This was a terrific small car. What do they think about

What do they think about it? At wards? I can't go too far

because we're right in the middle of our awards ten Best in Players and UX evaluations, and notwithstanding all that, but it was a nominee that was well received. Interesting it is it is. It definitely has a buickness about it

that's surprising. It has, as you say, all the features of a

larger vace materials, nice design, comfortable, huge ingress, egress, the doors open wide. They put some smarts into that. So so do you

guys, either you guys know or maybe you know John where that was designed and engineered. I guess as it was all done in Korea, I think,

so I know. So I've got to ask you. You said Detroit

knows how to make a affordable small car, and it would seem to me that does it. South Korea does? Well. Listen, it's it's a

it's a South Korean subsidiary of a Detroit company. I call that a Detroit

company. And good for them for building it there. They they had that

reason to do that. And listen, we're a global economy and a global

world today. And I still count that to Buick's favor and to GM's favor.

And I think a lot of the design, did you know, happen back here? I think, Oh, I don't know, But for sure,

the calibration of the car that's being sold in the US market was calibrated out in Milford, Michigan and various different places of the country hot weather, cold weather, high altitude, and blah blah blah testing. But you know

the way, when you really get a car tuned right, calibrated right, that's when you say, wow, this is a good car. You can

have the same car with different calibrations and go wow, one is so unsatisfactory, and here's the one that I really want to drive. So there is

some detroitness in the car, at least in the US version, because it had to be calibrated for the North American market. And I'm not sure it

wasn't engineered here. I mean, I know it was manufactured in South Korea.

It may have been for all now I'll bet that. I'll bet the

engineering was done in Korea. They've got very good capability there. GM does.

But if you if you make that an electric, does that work?

I mean potentially, because it's seems like it's such a good vehicle that you've made a small car that is desirable, whether it's I see or electric.

So I don't, I don't know if that is adaptable. First of all,

I don't. I'm not taking specifically, but a car like that,

well, you know, is what you mean. We know that battery chemistry

is changing all the time, and all of these companies are looking at batteries that are going to be a lot smaller, that are going to be a lot cheaper, that are going to be a lot less energy dens that are going to charge more energy dence, sorry, more energy dens that are going to charge quicker and may may look much different than the first generation of electric vehicles, which are very heavy, very bulky, not great for our roads, not great sometimes for safety, but and taking huge depreciation hits as a

result. Yeah, you know, I mean, the batteries just have to

get better. I mean that's they just have to get better. Or the

or the vehicle or the car companies are not going to make any money on them, and the small car has to happen because well, and we don't want to get too deep into any kind of politics, but depending on what the administration looks like in this country a year from now, we're either going to have regulations that are going to get much tougher or probably regulations that are going to get looser in terms of the kinds of finds that these companies are facing if they don't meet the emission standards and the cafe standards. All right,

we're gonna go back to the skunk works. Sounds fair exception had lost

this is it smell bad at those places at the skunk Why they call it that? All right? So they're working in the middle of the night.

So they're talking about part of what they're going to be doing would be a radically new way to build vehicles, perhaps like the Tesla unboxed approach. Okay,

so let's say that you've got these guys out in Irvine, who you know, they come up with this process and it's it's really a cool process.

Is that where the skunk works is an Irvine right? Okay, So

so they come up with this thing. So, so what I want to

know from you guys is whether you think the guys in Dearborn would be accepting of this new approach to doing things. So, for example, it occurs

to me that you know, Ford also is slow walking the Blue oval City project where it will be manufacturing vehicles. But one of the things that they

pointed out was that the paint shop has gone in and you know, the assembly lines are going in. Okay. So one of the advantages of the

unboxed process is you do not need a big paint shop because you're basically painting smaller modules. Right, So they're saying, oh, my goodness, we

just spent all this money on this Blue Ovale City paint shop. Are they

going to say, eh, maybe we won't use it. I think you

should first just spend thirty seconds explaining to everybody what unboxed is, because I don't understand that that well, and I'm sure some of our viewers don't.

It can't be touched on it, but yeah, so, I mean, Tesla showed this last year and it blew my mind because it gets rid of the moving assembly line. And if you think of the traditional assembly line,

it's the body in white is kind of a box that moves down the line, and you've got workers at stations who add parts to it, and then at the end of the line it's all put together and drive off. One

hundred and twenty years old. I mean, this is exactly exactly so,

but it's also very inefficient. It's at least at least thirty percent inefficient the

moving assembly line. But the unboxed attacks that by breaking the car into a

six modules, a front end, a rear end, a left side, a right side, a roof, and a floor and the batteries integrated into the floor. And so you build these modules on their own feeder lines and

they all converge at the very end and you put all six modules together and Vola, you have a car. Is each line an assembly line? I

mean, is each one of those six When you get rid of the assembly you still have the assembly line. It just affects you paint chop at the

end. Correct, you have assembly lines or I would even say a collection

of work stations. They probably ideally would be cell shaped C shaped cells.

And then you just bring these modules together. And whether it's with structural adhesives,

maybe some rivets, we don't know. How do you paint these things

if you don't have one paint shop? Okay, so well you do have

a paint shop. But to gary point, you're not taking this entire body

in white, you know, doing the e dip thing, you know, and uh, and then sending it through. So you send these parts separately,

right, Okay? Yeah, I don't know if you guys can hear

Sean Off Mike here, but he's saying, you paint the Okay, now, I can visualize that. Paint all the panels separately, not all welded

onto the car. Okay. So now, and Matthew vacheran Peril from Kerasoff

told us, you know, instead of sending one car at a time through the paint shop. Now you can send four sets of body panels through the

paint shot, so you can essentially paint four x versus the traditional way of Is anybody doing this yet? Nobody's gonna yet, and so so. So

the question is is that, okay, this is so revolutionary, right that you, as you pointed out, you know, the moving assembly line one hundred and twenty years old, invented by Ford. Okay, so if the

skunk works guys come and say, hey, this is a way to do it, does deer won't accept it? I think there'd be tremendous pushback.

I mean they'd see all the numbers that yeah, yeah, yeah, but you know what, we got some history of this other way of doing it.

So do you guys think they would just say, yeah, bring it on? The auto industry is the Titanic, and no matter how big the

iceberg is, it takes them a long time to turn the ship. And

you know, ask Mary, Bara, ask any of these. If the

metaphor is a Titanic, that's not a good metaphor, not a good metaphor.

But it's a ship, and it's a battleship. It is hot.

You don't turn right on a dime. So to your point, I think

the pushback is, you know, yeah, we know what we're doing.

That's nice, but go and do some proof of concept over the next decade and get back with us. Yeah, except you don't have a decade.

This industry is And what's the point of the skunk works if they're not going to accept this thing? Well, well, look you know when they're about

all kinds of skunk works. Yeah, I mean, you know, come

up with suntworks. When Ford did the moving assembly line, they didn't just

say hey, moving assembly line, boom, No, the experimented along the way. The first quote unquote moving assembly line was when they were assembling magnetos

for the Model T. And it wasn't a moving assembly line. There was

a long flat steel table with people at different workstations, and they would do their job and slide it on the table down to the next guy, and the next guy would do something and slide it down the table, and then they did wheels that way, because remember they were would spoke wheels and somebody would do this part of it, slide it down the table, and then they got the idea. Is of this inspired by the meat packing industry or

something, right, they chopping wings off the chicken? Yeah, no,

that you know in a waterhouse, you know, a carcass goes down the line and different people along the line slice off the road. And then they

went, let's just reverse it, so instead of slicing parts off, you're bolting them on. All right, So do you think they'll they would be

accepting, yes or no. I think they've got to do something. I

think anything that becomes sort of revolutionary or pre revolutionary they've got to consider because they've really been fighting first Japan, then the Korea, then China. They

can't continue to fight the last war. They've got an attempt to do something

intelligent that will get them in front of the game. I think will they

will? They don't know, John. I think it's going to take a

green field plant. You're not going to building one? Yeah, well,

I know it's too late for that. That thing's already been said. How

many billions have they spent time? Well, it's going to be a lot,

but no. My guess is they're going to need to build a green

field plant in Mexico, same same that Tesla was going proof of concept.

Yeah, and it wouldn't be in this country. If they do it,

it won't be here. It'll be small, it'll be a proof of concept.

And you know they'll do it in Mexico or Career or someplace like that because they don't want to start fighting with the union on top of everything else.

And believe me, there'll be a million reasons why the union doesn't want to do this. It's not safe, it's not efficiuld. Well, remember

when Mark Hogan tried to do what was it called Blue Macaw? Yes,

and he was going to do this modular stuff and well know in the United States and Steve if y'all did it, they did it in Brazil, but he was going to want it, was going to bring it here. And

Steve Jogic, who was running the UAW, was like, over my dead body, get rid of the sky. And they demote, well, they

gave him a lateral, a lateral promotion. They took Hogan off that project

and stuck him in charge of what they called I think it was EGM and I don't even know what that. We never heard of him. That was

that anyone to work for Toyota, Yeah right, and got on the board.

Yeah, all right, we'll get to them. After we got to

do general motors first. Okay, So when Ford's big announcements about what they

were doing and pushing back on some of these programs, they said, you know what, by the end of the decade, everything we have basically will be a hybrid vehicle. Okay, So so Ford is making a big,

big pivot to hybrids. What's GAM doing? If they could only bring back

the Vault fast enough? But I think I think Stilantis beat them to it,

right with the charger, with the RAM charger. Yeah, the extended

range electric pickup exactly, yes, which is you know, yeah, it's two power trands, but still it's brilliant. It's exactly the kind of thing

that gets people to electrification and without limiting their ability to get around as quickly as they want to and fuel as quickly and all of that. But I

don't know what GM. I think GM has to reintroduce hybrids, and I

think they're probably working on it as we speak. I think that the pivot

that they've had to make in the last ninety days is going to require a lot of engineering, a lot of work with suppliers, a lot of just kind of rethinking everything. So my guess, and it's only a guess is

that they're working on it, and as soon as they're ready to announce it, they'll announce it. But they basically got to do it. Otherwise they're

cooked. They're basically cooked because they've thrown too much money and put too much

commitment behind evs and probably put out a forecast of when they're going to be with evs that's not really attainable. But what is attainable is meeting and improving

mileage and emissions with hybrid's gas electric HYBRIDGS. Okay, so John, I

mean one of the things that occurs to me is is that we're just talking about money, like it's just you know, they just turn on the tap and it just comes out. And you know, Jerome just said General Motors

spending a tremendous amount of money on evs. But yeah, now they'll spend

some money on doing hybrids. I mean, is there not a limit to

some of this? Well? There is, but you know, so GM

and Ford spend roughly eight billion dollars a year on new product development and another eight billion dollars a year on capital investments, new plants and equipment. Meanwhile,

BYD is spending nineteen billion dollars on capex, So that's what you're up against. You better get the money. And if that means you can't do

share buybacks, that's what it means. If it means you can't pay a

dividend, that's what it means, because that's what you need to stay in the game. You better find the money to do it. But doesn't that

sort of you know Deron was saying earlier about all of these companies want to have Tesla like numbers. Well, and to do that would be probably not

your credit runs out eventually. I mean, this is what happened to General

Motors in two thousand and eight when the credit markets froze. When the credit

markets froze and you have a bad credit rating and you can't renew your loans.

So General Motors has basically promised its investors and promised the Treasury Department won't get in that situation again. And it has a fairly strong balance sheet,

so it will borrow, it will sell stock, it will buy backstock, it'll do what it has to do, but it has to stay with a good credit rating or the covenant that it made with the public has been broken and it can't afford to do that, because once investors just completely desert a company, it's out of business. So GM has to borrow judiciously, it

has to manage at stock judiciously. It may have to go to the government

and say, look, you're going to have to and it's not unprecedented.

You may have to help us with an interest free loan. We did what

you asked us to do with evs, and now we need to pivot because consumers don't want evs as fast as we thought that they would and hope that they would. You're going to have to help us, or you can worry

about where all these people who work now at General Motors are going to be working in the future. Okay. So, Bob, you mentioned the Vault

earlier and they should bring that back. So switching from the Vault with the

v to the Bolt with a b Okay. So that was their volume play.

That was their low cost under thirty thousand dollars electric vehicle that was selling like hotcakes. And then they said they canceled it anymore. Okay, and

that never mind. We're didn't cancel it. We're going to bring it back,

but it's gonna be some years before they bring it back. So my

question is is that, Okay, where will scale come for General Motors in the EV realm you're asking me, I mean, what you know General Motors does to John's point earlier, you know, for GM there, I think their measure is, you know, a pickup truck sells eight hundred thousand copies.

How you know to get that in evs, you know you need significant volume beyond a bolt. I mean you need that full lineup. And so

they're working on trying to do that, and then oh, well that rug got pulled out. I think that there's more maybe government push and a desire

for that hire, for that stock rice. Then there is a reality behind

all of this. So there, Wyota has the right idea. And they

said have they said when they're going to put bolts on the new bolt on the road? I thought it was two years from now to two years?

Yeah, I want to say twenty twenty six. And they're going to build

it where in Oregon SAT. They haven't said no because orion Is is electric

truck. Well, but that that project's been delayed again. But I live

right around the corner from it. There there's still a lot of action,

I know, I mean and there are a lot of suppliers who are clearing land and doing things. I don't know how much of that plant they might

have got it hopefully. I mean, if you haven't done that much of

a change over, just put the new bolt in the old bolt plant.

Yeah, didn't they switch that plant to the cruise origin? No Cruise origins

getting built in ham Tramic. Yeah, yeah, but it was originally no.

No. Orion's a pickup okay, But is General Motors going to have

anything that it's going to be selling in volume in five Well, GM says by the end of this year they'll be at a run rate with their evs in the three to four hundred thousand range. I thought it was two to

three hundred thousand. Originally they said it was going to be four hundred thousand.

Yeah, okay, I thought they had cut that back to three to four Maybe maybe you think maybe, I think it's two to three three.

So, and remember everything sits on the same platform. Everything's an ultium platform.

Everything's ultium battery. It doesn't matter if it's a Chevy, a Cadillac,

a GMC, or a Buick. It's all. And they're doing it

in China to forget Hummer and Hummer well GMC, But in any case, that's how they're they're they're playing the top hat game. Under the top hat

everything's the same. But you know, whatever brand or model segment it's in

just gets a different top hat. All right. So the final question about

so Cruz was mentioned earlier in the conversation. So Cruz has lost Kyle Voight.

It's its founder and its leader. Dan Amon who came from the Mothership

and was sent out to California gone, And there were several other topics.

You know, another co founder with Void, he's gone, gone, Gone, gone gone. They had the problem in San Francisco. Now, John,

as you mentioned, they just got approval and they're starting up in the Phoenix area and I think that was announced even today, but with safety drivers with it. But General Motors was talking about making billions of dollars from Cruz.

Daran, is this gonna happen in not anytime soon, But I think it will happen someday. I just think it's very very difficult to predict when

the technology, the regulation, the consumer acceptance, all of it converges to a point where people say, you know what, I'm gonna get I'm gonna get it to a vehicle that doesn't have a driver, and it let them take me wherever I need to go in Chicago, New York, San Francisco, Portland, Atlanta. Where questioning the technical feasibility, my question is basically,

is this a good business? Well, it needs scale for it to

be a good business. So that's why I mentioned all these cities. It

can't just be in San Francisco and Phoenix. It has to be in twenty

or thirty or forty American cities, all of which are generating this kind of revenue for these things to happen. And there's no reason why that can't happen

once the code is broken. But it is much more difficult, as we

know, to break that code. And we think one of the things that

was interesting was back to Tesla. In the Walter Isaacson biography of Elon Musk,

he was talking a lot about how AI and the acceleration of AI is going is going to really revolutionize the research process behind autonomous driving and is going to bring them closer faster, And I'm really interested now that he has said that he's going to use AI at Tesla, and they may be looking at something that as soon as this August, whether GM is now racing behind the scenes to get this kind of AI capability. There are people there who really

know AI, but they're obviously in very great demand right now for their own startups, and there's a limited number of them. It's not like our universities

are churning out thousands of people who know how to use AI. So that's

kind of a scarce resource. It's kind of the kryptonite, if you will,

that everybody wants to own. All Right, clock's running out here,

So we had to the last company. We'll talk about Toyota. So here's

my question to all three of you. Want an answer from each of you.

What are the chances that Toyota surprises everyone by coming out with an EV that will be as revolutionary as the Prius was when it came out. So

I'll start with Bob. Sure. I mean, they have all of the

ability, they have all of the resources, and they have been building essentially electric vehicles or electrified vehicles that everybody that the market loves for years. They

know how to do it, you know, speaking of refreshes. I mean

if they had redone the Prius, what ten years earlier, they could have sold a lot more of them. But I don't see any roadblock at all

to them doing it, doing it right, getting it done, and making it. Toyota is really good at making mass market things that vehicles that aren't

at the fire fringes where you're only selling a few. They sell to the

middle. Yeah, John, one hundred percent that they'll come out with a

car, electric car that will knock everybody socks off. And you know,

they've got their own skunk works that they call the BEV Factory going into their experimenting with giga castings. They're experimenting with pseudo based on the pictures and things

that they've shown, kind of like the Tesla unboxed process. So I have

no doubt whatsoever that probably around late twenty six early twenty seven, Toyota is going to come out with an electric car and says, here we go, boys, this is what we're talking about. And I think it'll be a

smash hit. I think it's quite possible. And I think the one area

that they're working very hard on that it could be is solid state batteries.

We know that solid state batteries are conceivable. They work in small number you

have to learn how to mass manufacture them. They're experts in mass manufacturing.

They're working very hard to be able to make these things at scale. If

they can make in the next couple of years a solid state battery at scale, they're going to get everybody's attention with their EV. What do you think,

Gary, Yeah, I agree with what Bob was saying. I absolutely

think that, you know, they've got the wherewithal to do this. They've

got all the pieces, they know all the criticism, and you know, and you go back to you know, and this maybe this is more of a Japanese company thing, but you know, Hondo talk about blue skies for our children, and this is why they're making the transformation electrification. And Toyota

has a very well stated corporate dictate about going for environmental success and I think that that's just part of their nature that they make that happen well. And

it will be, as I was saying, more mass market. It'll be

the the camera of EV's or the Rev four of EV's. It won't be.

It might not be hyper fast, it may not do one pedal driving.

We all love it and early adopters love it, but somebody coming out of the everyday camera that coasts down to a stop and they touch a break.

That's what Toyota would build to something that feels exactly like the ice camera you just got out of. Here's your car, all right? So okay,

final question. Should Toyota be as concerned with the rise of Hyundai and

Kia as Detroit wasn't concerned about the rise of Toyota. Oh, I can

tell you a Hundai's gut to Toyota and its gun sites. That's exactly who

they're going after. But I would add Bid as another company that Toyota's got

to be extremely concerned about. In fact, I keep saying, the entire

Japanese auto industry is on the brink of losing the Southeast Asian market to the Chinese, and that's probably three to four million units a year of production.

They're just going to get their clocks cleaned there. Well, Toyota and Japan

have another problem, and it's a societal problem. It's an aging society.

It's going to it's going to have increasingly tough time looking for talent and fulfilling its factories because it's an aging society and it has done nothing really to figure out how to solve that riddle. I think that Toyota will continue to put

more of its resources outside of Japan and in places like the United States and in Europe where it's been slowly moving ahead. Uh it'll it's a it's a

rational company, and it's a logical company, and it doesn't, you know, try to uh fool itself with with slogans and campaigns. It's it deals

very much with the real world. So I have a lot of faith in

Toyota in terms of its ability to solve these problems. But do you think

I mean, yeah, they're definitely worried about the Santa Fe and you were, yeah, you're very I'm very impressed with what Hyundai's doing, and I know that Japan is probably not underestimating them in any way. They don't underestimate

They have a lot, they have a lot of sort of built in humility, and they know when they're up against a worthy adversary. And I would

say that I'd be astonished if if the senior brass at Toyota wasn't very, very concerned about the kind of global competition they're facing right now from everywhere.

Bob last Wordni, the Hondai group everybody's should be looking at, because they are producing some of the best stuff on the market. And I go back

to I remember coming from a press trip and they had left a Kia Rio for me at the airport and I got in it. I started driving.

First of all, I closed the door. I thought the handle, the

whole door was going to fold in on me. And I remember thinking,

I am not going to drive my children to school in this car. And

every product from that company since then has been markedly better, markedly better, And now they're just world class and everything. And that Rio was an improvement

on the Excel. Oh true, exactly. Yeah, they don't even want

to be reminded of that. Don't even bring that up in conversation. Felt

like the suspension was going to fold under it on a bomb. It was

scary. Yeah, the Excel smelled like somebody had left their lunch in the

backseat. Well good, Hey, great job, Gary, excellent question with

great topics to talk about. Well you you guys did a nice job.

You did a nice job. Bob Jerome, thanks so much for coming on,

Thank you for having me, and of course we want to thank all of you for having tuned in and you're look you got this far in it.

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