AAH #704 - Honda Jumps Into the EV War

Speaker 1: I'll dontline after hours. It's brought to you by bridge

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Speaker 2: Okay, Gary, lay it on me. I know you want something.

Speaker 2: Do you want one? Well, let's hear it all right.

Speaker 3: So, as as you know, World War two ended this Speaker 3: September of nineteen forty five.

Speaker 4: Okay, okay.

Speaker 3: A car company was established on July twenty fifth, nineteen Speaker 3: forty five, and had production operations in the Willow Run plant.

Speaker 5: WHOA, so think about this. The war is still going on.

Speaker 3: This company is established and there that's where they.

Speaker 2: So I was going to guess, Crosley, It's not Crosley Speaker 2: that you stumped me. You guys have any idea?

Speaker 3: I no.

Speaker 2: Kaiser Fraser Corporation very interesting Kaiser.

Speaker 3: So the interesting thing is is so, so you got Speaker 3: two guys, Henry Kaiser and Joseph Fraser, and they start Speaker 3: this company in nineteen forty five, and then they have Speaker 3: a falling out in nineteen fifty one. So Fraser leaves

Speaker 3: it says the hell then I'm go do something else.

Speaker 3: So then it became the Kaiser Motor Car Company.

Speaker 2: So, and by the way, they built the Liberty ships Speaker 2: during the Second.

Speaker 3: World of War, and in nineteen fifty three Kaiser bought Speaker 3: Willie's Overland correct and so then in nineteen fifty six Speaker 3: they you know, they had a line of sedans that Speaker 3: that Kaiser was building. And then they said in fifty six,

Speaker 3: just gonna do the utes, right, this is all.

Speaker 4: We're gonna do.

Speaker 3: So in nineteen seventy the Kaiser Jeep Corporation was purchased Speaker 3: from American Motors. So Kaiser Jeep was sold to American Motors,

Speaker 3: and then American Motors of course, was sold to Chrysler Speaker 3: in nineteen eighty seven.

Speaker 4: Yeah.

Speaker 2: Kaiser, by the way, he started building jeeps in Argentina Speaker 2: probably in the nineteen fifties, in the nineteen sixties for sure, Speaker 2: and uh yeah it was a complete They were jeeps, Speaker 2: but they were known as Kaiser's and so.

Speaker 5: Bar best for everybody you can get.

Speaker 2: Yeah, now you know that.

Speaker 3: But you know, you guys are probably bored as hell.

Speaker 5: So let's get out of the show.

Speaker 2: Let's get on with show and tell everybody we got Speaker 2: Lance Wolfer here, he's the vice president of sales for Speaker 2: Honda of America. American Honda, American Honda. Okay, we got

Speaker 2: Paul WADDI back from out of Pacific. Great to have

Speaker 2: you here, Ben, nice to.

Speaker 5: Be back, so great to be here.

Speaker 2: Let's talk Honda, Let's talk rails. You guys outsold Stilantis

Speaker 2: last month. Now, part of that talks to issues at Stilantis.

Speaker 2: But man, you guys are roaring COVID. You ran into

Speaker 2: all kinds of production problems, right, I mean, sales cratered Speaker 2: and looks like you're roaring back right now.

Speaker 6: Well, last year was a great year for us. We

Speaker 6: had tremendous growth out pac industry, and this year that's Speaker 6: continuing in a little bit more modest space. But yeah,

Speaker 6: we've outperformed the industry with about eleven percent growth for Speaker 6: the corporation overall. So it's just been strong here, continues

Speaker 6: to be and we foresee it continuing.

Speaker 2: You got the right allocation of all the products you need?

Speaker 6: Yeah, I mean really right now, we're focused on the Speaker 6: right allocation. Specifically, we want to make sure that dealers

Speaker 6: have a great supply, but we don't want to over Speaker 6: supply the market. We want to make sure we're about

Speaker 6: a thirty days supply for our dealers. So when a

Speaker 6: customer comes into a dealership, they've got the availability to Speaker 6: be able to meet their needs. But we're not in

Speaker 6: a position where there's a huge amount of vehicles now Speaker 6: going to ninety one hundred days, right, yeah, thirty days Speaker 6: you know on ground is a great supply for a Speaker 6: Honda ACURR dealership.

Speaker 2: One other quick this CDK cyber hatch er that shut Speaker 2: down so many dealerships. What was the impact on you guys, Well, it.

Speaker 4: Was industry wide and we were similar to everyone else where.

Speaker 6: It impacted dealer's immediate ability to have the normal through Speaker 6: put they would you know, they had to transact a Speaker 6: little bit differently as they went back to different tools, Speaker 6: so they were using their CRM for you know, most Speaker 6: of their activity at the dealership. There's a lot of

Speaker 6: ways that they can still conduct that part of the business, Speaker 6: like with us reporting a sale or working with the Speaker 6: finance division. So they just had to make the adjustment

Speaker 6: to be able to do it, you know, through the Speaker 6: other systems that we have available to them. But it

Speaker 6: was significant initially for a couple of days certainly to Speaker 6: the dealers, and by the end of the month's pretty Speaker 6: much full recovery in their ability to do business.

Speaker 4: But it continues to recover.

Speaker 3: You know, it's interesting you talk about vehicles that are Speaker 3: available in the market, and I think that I mean, Speaker 3: I've covered Honda for a long time, and even I Speaker 3: was surprised when I looked and saw that the Cars Speaker 3: dot Com twenty four American Made Index we at Jenny Speaker 3: Neewan on the show off cars dot Com that Honda Speaker 3: had three vehicles in the top ten most American made vehicles.

Speaker 5: You tied with Tesla, and they're really surprising.

Speaker 3: Part to me is that there was nothing from General Speaker 3: Motors and there was nothing import in the top ten, Speaker 3: and that Honda actually had the most in the top Speaker 3: twenty of any I'm six if I remember nine Honda Speaker 3: in accurate models in the top twenty.

Speaker 2: So remember there is accurate.

Speaker 3: Yeah, I mean, so seventy percent of Honda vehicles and Speaker 3: one hundred percent of accurate vehicles sold in the US, Speaker 3: and twenty three were built in the United States. I

Speaker 3: think that that is something that sometimes doesn't get a Speaker 3: sufficient amount of attention. You guys have really really focused

Speaker 3: on this market and tailoring vehicles to the interests of Speaker 3: the market.

Speaker 6: Well, yeah, the North American market is big for hont Speaker 6: It's an important part of our business. But overall, we

Speaker 6: work to localize our production and source everything as much Speaker 6: as possible in the local areas as far as it Speaker 6: makes sense.

Speaker 4: So that gives us really a good connection to.

Speaker 6: The community we're building where we sell cars, and has Speaker 6: been successful for us really in the United States particular.

Speaker 6: But yeah, we are building a lot of vehicles in Speaker 6: North America right now. Almost everything is built in North

Speaker 6: America today, and.

Speaker 7: More than ever right now, as we're moving towards more Speaker 7: evs and electrification, localized production is probably more important than Speaker 7: ever and you guys are well positioned with a good Speaker 7: footprint already.

Speaker 4: Yeah, i'd agree with that.

Speaker 6: I mean, certainly as we transition to electrication, it's continuing Speaker 6: to be part of our business. We've recently announced investments

Speaker 6: in both Canada and our EV hub and Ohio and Speaker 6: making sure that you know, we're positioned to transition successfully.

Speaker 6: So localization is a big.

Speaker 4: Part of that.

Speaker 2: Let's talk more about EV's You got the prologue. It

Speaker 2: is the lineup right now. In fact, i'm test driving one.

Speaker 2: It's out in the parking lot here at the studio.

Speaker 2: But tell us that, you know, what are your expectations, Speaker 2: what are your customers asking for fill in the blank.

Speaker 6: Well, you know, we've seen Honda Virus transition really effectively Speaker 6: to the hybrids that we've had in the marketplace for Speaker 6: quite some time, but really escalated our hybrid sales last year, Speaker 6: where it was CRV was the best selling hybrid vehicle Speaker 6: in the United States, Accord was the best selling sedan.

Speaker 6: Now with the recent launch of both the prolog and Speaker 6: the ZDX really meets the needs of our customers who Speaker 6: have been transitioning to electrification or wanting.

Speaker 4: To transition to electrification.

Speaker 6: So our expectation is that we're going to be able Speaker 6: to keep loyal Hontab buyers in the brand and anybody Speaker 6: who's ready to transition to electrification. We've got products that

Speaker 6: really are strong competitors at the marketplace.

Speaker 2: I've seen sales targets of forty thousand Prologus is that Speaker 2: this year or what period of time, Well.

Speaker 6: You know, the launch really started is ramping up now, Speaker 6: so I think we can get to that level of Speaker 6: sales and production soon. As far as what our number

Speaker 6: is for the year, forty thousands, you know what we Speaker 6: could do in a twelve month period, certainly, and I Speaker 6: think as we saw when the launch was really started Speaker 6: supplying dealer strongly over the last couple of months where Speaker 6: they've got a good mix and supply of vehicles specifically.

Speaker 6: Now we're seeing sales ramp up pretty significantly.

Speaker 2: Do you see that as bringing on being you know, Speaker 2: aggrigative if through such a word aggregating And here's what Speaker 2: I'm trying to say. Sure, Mary Barr said, fifty six

Speaker 2: percent of EV buyers are new to GM. Interesting, do

Speaker 2: you think that you're going to get that kind of Speaker 2: a conquest?

Speaker 6: We expect seventy ish percent of Prologue and CDX byers Speaker 6: to be loyal Honted consumers. It is an opportunity for

Speaker 6: us to bring new buyers into the brand and thirty Speaker 6: percent maybe conquest buyers. But our first thought is we

Speaker 6: want to make sure that Honda loyalists have an opportunity Speaker 6: to you know, find it EV within the brand. But

Speaker 6: conquest is a significant part of the sales, but HANT Speaker 6: is more of a seventy percent forecast.

Speaker 2: Got it? And have your customers been asking for EV's

Speaker 2: I mean you're kind of late to the party, you know, Speaker 2: not terribly late, but others are way out there in Speaker 2: front of you.

Speaker 6: So we've approached it as a marathon, not a sprint, Speaker 6: and hybrids have been a really important part of our transition, Speaker 6: and you know, bringing these cars to market now with Speaker 6: more coming soon that are going to be utilizing some Speaker 6: of that production, like the EV hub that I was Speaker 6: talking about in Ohio, I think we're actually in a Speaker 6: great place for our consumers. And yes, they've been asking

Speaker 6: for them, and I think we came out with the Speaker 6: right vehicles at the right time.

Speaker 3: So to the point of hybrids, which I'm a bigger Speaker 3: fan of than you are, John, and I'm driving a Speaker 3: Civic hybrid right now, I'm getting fifty miles per gallon Speaker 3: and wondering why anybody would think they need anything else.

Speaker 3: So Honda actually had the first hybrids available in the Speaker 3: United States, the Insight, in nineteen ninety nine, so you Speaker 3: beat the Prius. Everybody thinks Prius is the one. So

Speaker 3: are you at all surprised at the shift in the Speaker 3: market that there seems to be less overall interest in Speaker 3: evs than there had thought there would be, and that Speaker 3: hybrids are really coming back in a very strong way.

Speaker 6: No, because when you look at what we had prepared for, Speaker 6: which was fifty percent of our CRV and A cord Speaker 6: production actually a little more than that, and our sales Speaker 6: are hybrid, So I think we were prepared for this.

Speaker 6: And when you look at the Civic Hybrid that's launching Speaker 6: now just hitting dealerships today, and then the what do Speaker 6: I think of the hatchback will be coming out the Speaker 6: next couple of months, it's really fitting into our plans perfectly.

Speaker 3: Actually, Man, those are great cards.

Speaker 4: Yeah, you're ding and the.

Speaker 3: So what is your strategy to get to that fifty Speaker 3: mix is?

Speaker 7: I mean, it seems pretty clear that you guys, are Speaker 7: you know, putting where the volume is, you're giving the Speaker 7: hybrids as a standard. Are your customers actually asking for

Speaker 7: the hybrids or are.

Speaker 4: You absolutely Yeah, we're seeing a lot of demand for Speaker 4: the hybrid. It's generally the higher.

Speaker 6: End trims within those models, and we're saying the performance, Speaker 6: the styling, and the gas mileage really is meeting customer needs.

Speaker 6: So there's a lot of demands for our hybrids. So

Speaker 6: that makes it fifty percent is really about right.

Speaker 2: You know, if you go back fifteen years or so ago, Speaker 2: there was a lot of confusion in the public's mind, Speaker 2: the general public's mind about hybrids and they don't understand it.

Speaker 2: Has that gone away and this is now why you're Speaker 2: seeing so much demand.

Speaker 6: I think, yeah, absolutely, there's a better understanding of what Speaker 6: a hybrid is and brings to the table, and I Speaker 6: think now that they're starting to really impact performance.

Speaker 4: To the vehicle as well. The most driving.

Speaker 6: It's got about two hundred and thirty foot pounds thirty Speaker 6: two foot pounds of torque with two hundred horsepower. This

Speaker 6: is an amazing performance in this vehicle and it gets Speaker 6: fifty miles to the gallon. So they're bringing more to

Speaker 6: the table than ever before. And I think it really

Speaker 6: creates an opportunity form to meet people's needs.

Speaker 2: Can you get the pricing you need to pay for Speaker 2: the extra hardware and it goes into a hybrid.

Speaker 6: Yeah, people who are stepping up to make the decision.

Speaker 6: I mean there's more to it than just being a hybrid, Speaker 6: and a lot of cases easier as they said, the Speaker 6: higher end trims, and absolutely consumers are stepping up to Speaker 6: the you know, higher end trims that include the hybrid.

Speaker 3: So earlier this month, you guys started doing something that Speaker 3: is rather unusual in the industry. There aren't very many

Speaker 3: companies doing it. You're offering a fuel cell powered vehicle.

Speaker 3: You have the CRV and CRV E colon f c V. Yeah,

Speaker 3: pretty long title in there.

Speaker 5: So talk to us about that. I mean, what's the decision.

Speaker 3: You guys again have been doing lots with hydrogen over Speaker 3: the years and offering it to the market. This isn't

Speaker 3: something you know that this is first rodeo that you've Speaker 3: been in, but it seems to have gone away and Speaker 3: now it's coming back.

Speaker 6: Well, we've been pursuing it, as you mentioned, quite some time, Speaker 6: and most recently. I think the clarity is where we

Speaker 6: had been spending our time putting that in the market Speaker 6: and learning, and I think this is just another opportunity Speaker 6: for us to learn more about that technology and really Speaker 6: work with consumers to find out what fits their needs Speaker 6: and pursue multiple towards zero emissions. You know, BEV is

Speaker 6: obviously something that drives towards zero emissions, and our goal Speaker 6: is to get to zero missions by twenty forty and Speaker 6: be net carbon neutral by twenty fifty as a global corporation, Speaker 6: so there could be definitely an opportunity for fuel Seal Speaker 6: to pay play a role in that. So we can

Speaker 6: centered it misspeaking, But I mean to say we're continuing Speaker 6: to just invest and pursue that technology as well.

Speaker 2: Lance there's a massive tax credit too, right, rebate from Speaker 2: the government for getting a fuel cell vehicle. Isn't it

Speaker 2: something crazy like thirty five thousand dollars?

Speaker 4: It may be. I actually can't answer that question because

Speaker 4: I don't know.

Speaker 2: Yeah, yeah, no, it Well, look, we know this is Speaker 2: going to be very low volume ergo of the costs Speaker 2: are going to be very high because there's no scale Speaker 2: to it, So there needs to be a big incentive Speaker 2: to get people to try these things. So I know

Speaker 2: it's a big incentive. I don't know the number, right,

Speaker 2: I don't.

Speaker 6: Know the details of it, but I know that there's Speaker 6: just an optunity for us to continue to identify ways Speaker 6: that we can meet consumer needs and look at various Speaker 6: technologies as we grow the business, So those investments make sense.

Speaker 2: You know, you've mentioned the Accord and the Civic have.

Speaker 2: Has the market share for Sedan's passenger sedans bottomed out Speaker 2: in the US market? You know, we've seen a huge

Speaker 2: fall off the cliff in the last decade and now Speaker 2: looks to me like they've reached the floor.

Speaker 6: Yeah, and we're all in on Citayans that have continued Speaker 6: to be with the Civic and the Accord, and I Speaker 6: think from a market perspective, yeah, there's an opportunity. I

Speaker 6: think that we can grow that business. I don't know

Speaker 6: if it's reached a bottom or not, you know when Speaker 6: you think about the overall industry, But for Honda, there's Speaker 6: continues to be potential there. We sell a significant number

Speaker 6: of Accords. It's a big part of our business, and

Speaker 6: with the addition of the hybrid to the Civic, we Speaker 6: can continue to expand it as we go forward. But

Speaker 6: our sales of that model are pretty significant still. It's

Speaker 6: a couple hundred thousand Civic a year, so yeah, they're Speaker 6: through part of our business.

Speaker 2: There's what maybe three companies Toyota, Honda, Hondi, Kia as Speaker 2: a group that that have stayed committed to that. But

Speaker 2: in the industry, do you think do you have any Speaker 2: sense if it's.

Speaker 4: I don't know what the industry will do on it.

Speaker 4: I don't know what they see.

Speaker 6: I think maybe gas prices might make it a more Speaker 6: attractive option for more customers than has been recently.

Speaker 4: But for Honda, there's absolutely room for us to continue.

Speaker 6: And support the accord and the CRV industry wise, I Speaker 6: think that's possible.

Speaker 3: But last tundred and ninety eight thousand the cords and Speaker 3: two hundred thousand civics, and it's like a nice business Speaker 3: to have.

Speaker 5: Yeah, there's those companies that don't really wish they had Speaker 5: some of that.

Speaker 4: And we're growing civic this year. As I mentioned, there's.

Speaker 7: Also that theory that you know, there might be a Speaker 7: revival of sedans in some way with the move towards Speaker 7: electrification because of the you know, they're a lot more slippery, Speaker 7: you can get a lot more range out of you know, Speaker 7: a similar sized vehicle, and so we see an opportunity Speaker 7: for some automakers to maybe reintroduce some dands later down Speaker 7: the road that may have gotten out earlier.

Speaker 2: Oh nokodding, Who do you think?

Speaker 7: Well, I mean GM, as they're leaving right now with Malibu, Speaker 7: the an EV is a good opportunity to come back with. Yeah,

Speaker 7: I think overall in the industry, with considering that you know, Speaker 7: you can get you know, a decent size package on Speaker 7: the interior and lots of cargo room, it could make Speaker 7: more sense in an EV application versus traditional ice to edans.

Speaker 3: You guys also continue with a minivan's how's the Odyssey Speaker 3: doing for you?

Speaker 6: The sales throughput on that vehicle has been strong and Speaker 6: the days supplies remained pretty low actually, so there's good Speaker 6: demand for it and we see continued potential in that Speaker 6: part of the market.

Speaker 4: Odyssey is doing great.

Speaker 3: So there wasn't a situation where we're younger generations as Speaker 3: they could get older say oh, you know, I grew Speaker 3: up in that minivan, I got to get something else.

Speaker 6: Well, I mean, I think there's been some transition from Speaker 6: minivan to SUVs that we've seen that market grow, but Speaker 6: it's continued to be a segment where it's supporting us Speaker 6: with its seventy eighty thousand sales a year, pretty significant Speaker 6: and a strong part of the market.

Speaker 4: So it's great for us.

Speaker 2: Are you looking at any opportunity for heavy duty off Speaker 2: road performance? I mean, Jeep has made a boatload of money,

Speaker 2: although they're running into some sales issues right now. Ford

Speaker 2: has hit a home run with the Bronco and where Speaker 2: I'm coming from, I've talked to some heavy duty off Speaker 2: road customers and they're like, why don't why don't Jeep Speaker 2: go out and buy.

Speaker 4: You know.

Speaker 2: What am I trying to say? The like the side

Speaker 2: by side or dirt bikes? You know, why don't they

Speaker 2: have like a range extension of the Jeep line or Speaker 2: maybe Ford with the Bronco. You guys make side by side,

Speaker 2: you make dirt bikes, you know, any thoughts of getting Speaker 2: into something that would compete with the Wrangler or the Bronco.

Speaker 6: Well, I think we've brought to market some recent trail Speaker 6: sports in both the Passport and in the Pilot in particular, Speaker 6: as well as the Ridge Line that have enhanced the Speaker 6: off road capabilities of our vehicles, and I think really Speaker 6: done well for us. We see a significant portion of

Speaker 6: the Pilot right now his trailsport and all those models.

Speaker 6: It's had an impact and they're fun to drive, they're rugged, Speaker 6: and consumers are loving them.

Speaker 2: But you know, I'm thinking more extreme like rubicon trail Speaker 2: capable kind of vehicles. Is that something that Honda would

Speaker 2: look at.

Speaker 6: I'm sure we'd look at it. I can't get into

Speaker 6: future product. Yeah, yeah, but I hear you, and that's

Speaker 6: certainly a part of the market that's interesting.

Speaker 2: Okay, and pickups, you've done fairly consistent work or sales Speaker 2: with the ridge.

Speaker 4: Line the best year ever last year, is that? Right? Yeah?

Speaker 2: So where can you take that truck? Where's more up

Speaker 2: for the ridge Line?

Speaker 6: Well, the ridge Line is doing a great job of Speaker 6: giving loyal Honted customers an opportunity. From a truck standpoint,

Speaker 6: I think that it really fits in the marketplace to Speaker 6: make sure that we can keep Hanta customers focused on Speaker 6: driving hot a vehicle. So right now, it's really I

Speaker 6: think at a great volume point for us at that Speaker 6: fifty eighth thousand level where we could take it. I mean,

Speaker 6: there's certainly, you know, opportunity in every model to grow, Speaker 6: and there's opportunity there, but really trail sport, I think Speaker 6: gives us an opportunity to enhance that vehicle and the Speaker 6: people that would be interested in it, and we could Speaker 6: grow that part of that business.

Speaker 4: But Ridgelighte's really doing a great job for us.

Speaker 3: So what's the nature of a person who buys a Speaker 3: ridge Line rather than buying one of the crossovers.

Speaker 6: I think that you know where we see Honda buyers Speaker 6: gravitate to the ridge line often as somebody who's got Speaker 6: a car in their driveway. A ridge line is an

Speaker 6: option instead of an suv or you see a lot Speaker 6: of people who have SUVs have a truck because it's Speaker 6: still easier to haul stuff around with a ridge line, Speaker 6: throw something in the back, you know, put a you know, Speaker 6: a load of bark dust in the back. I don't

Speaker 6: know if they call it that here, but from the Speaker 6: Pacific Northwest as what we call mulch. But you know,

Speaker 6: really just the versatility of having a truck so and Speaker 6: a lot of people in a lot of the parts Speaker 6: of the country really look forward to that.

Speaker 3: So you also have Accurate under your pterview absolutely and Speaker 3: tell us about how that's doing.

Speaker 4: Accura is doing great.

Speaker 6: In fact, the second quarter of this year we're up Speaker 6: about eleven percent over the first quarter, and we continue Speaker 6: to build momentum with that brand this year and again overall, Speaker 6: we're looking to be up about ten percent for American Speaker 6: handa and Accurate is going to be about one hundred Speaker 6: and fifty thousand units this year and Honda somewhere between Speaker 6: one point two to one point three million units. So

Speaker 6: it's a big part of our business and really a Speaker 6: great luxury.

Speaker 4: Brand for us.

Speaker 2: Lance where do you see the car market going? There

Speaker 2: was a lot of hope at the end of last Speaker 2: year that we would hit sixteen million, And every time Speaker 2: I see a sales forecast, they're shaving, they're shaven numbers Speaker 2: off at I think the CDK hack probably really hurt Speaker 2: June sales, that the sarrow was a lot lower. How

Speaker 2: do you see the second half of the year going well, I.

Speaker 6: Think we'll recover most, if not all, of the impact Speaker 6: of CDK. If somebody needs a vehicle, they're going to

Speaker 6: find a way to get one. Fifteen to five to

Speaker 6: sixteen million is our forecast for the year, in line Speaker 6: with most of the analyst predictions. It seems to me

Speaker 6: to be pacing Rent and Liab.

Speaker 2: It does, but that's a little bit weaker than what Speaker 2: everyone thought.

Speaker 4: It's in line with what we were thinking for the year.

Speaker 2: I think, yeah, Paul, you guys must make forecast on Speaker 2: it too. Well.

Speaker 7: Yeah, so we were I think at the beginning of Speaker 7: the year. I think we were at fifteen eight and

Speaker 7: I think we're dropping down now. We're in the middle

Speaker 7: of doing our Q three right now forecasts, so I'm Speaker 7: not exactly sure where we're going to end up, but Speaker 7: it's going to be less than what we had predicted earlier.

Speaker 2: In the year, so the market's a little bit softer.

Speaker 6: Yeah, I mean we're round pacing the industry, so I'm Speaker 6: keeping an eye on that. So it makes me pretty confident.

Speaker 3: So I mean our value in affordability sort of the Speaker 3: things that are characteristics that bring people to Honda in Speaker 3: which allow you guys to have this market that you're experiencing.

Speaker 4: Now, that may be a good way to put it.

Speaker 4: I mean, we really think Honda into accurate.

Speaker 6: You know, we do a great job of making sure Speaker 6: we've got what a customer is looking for in the vehicle, Speaker 6: and we focus on bringing it to market at a Speaker 6: price that you know, is affordable to the consumer it Speaker 6: meets their needs. We also will look at, you know,

Speaker 6: what we've got from a trim lineup and a model lineup.

Speaker 6: So and you take a look at our hybrid strategy Speaker 6: where that's fifty percent of a cord and CRV that Speaker 6: means fifty percent of petrol and those are generally lower price.

Speaker 6: As you were asking about, you know, our customers willing Speaker 6: to make that investment to get a hybrid. Some customers

Speaker 6: are looking for that traditional or a lower payment, and Speaker 6: so we've got a mix of both that I think Speaker 6: gives us the right position in the marketplace.

Speaker 4: I think that works for us. So yeah, apparently it

Speaker 4: does that.

Speaker 2: Motor racing, do you pay much attention to that on Speaker 2: the sale side? And I'm just curious, you know, Honda's

Speaker 2: commitment to IndyCar. It had sort of suggested that it

Speaker 2: might not be getting not continuing in the series in Speaker 2: the future unless you could find another engine manufacturer.

Speaker 6: I don't have any news to make there. You know

Speaker 6: that you'd have to talk to Honda Racing Corporation or Speaker 6: you know, pr folks about that. But I'll tell you

Speaker 6: that I'm excited about F one IndyCar. I'm a big fan,

Speaker 6: but I don't have any news to make there.

Speaker 2: Okay, So when on Sundays or sell on Monday, you Speaker 2: think that's still there or is it a bit more Speaker 2: subtle than that.

Speaker 4: It's more subtle than that. You know.

Speaker 6: I've always been a racing fan, but you know, now Speaker 6: I've gotten really a F one probably over the last five, six, Speaker 6: seven years, and I think we see a lot of Speaker 6: the US market getting excited about it, and I've had Speaker 6: an opportunity to go to a couple of races. I

Speaker 6: think it generates excitement overall. But yeah, I don't think

Speaker 6: it's a win on Sunday sell on Monday. I think

Speaker 6: it's create positive momentum and excitement for the brand and Speaker 6: we get a.

Speaker 4: Lot out of it.

Speaker 2: Yeah. No, it's interesting to see Honda really re up

Speaker 2: its commitment to f one with the next generation of Speaker 2: power chain that's coming.

Speaker 4: Yeah, it's exciting.

Speaker 3: In terms of the act of selling a vehicle. I mean,

Speaker 3: there had been some discussion that more would be shifting Speaker 3: to online sales and less reliance on dealership models. Where

Speaker 3: is Honda on that.

Speaker 6: Well, I think the consumer sets the pace for how Speaker 6: many cars are going to be sold online versus you know, Speaker 6: the traditional method.

Speaker 4: But you know, we're prepared.

Speaker 6: If a customer wants to buy a car online, they Speaker 6: can do that. It's through a dealership, but we're working

Speaker 6: to make sure that our dealers are prepared to meet Speaker 6: a customer's need.

Speaker 4: So we've got the ability to do that when appropriate.

Speaker 4: So it's really a pay set by the consumer.

Speaker 6: But I think it's something that you've got to be Speaker 6: involved in and you've got to be prepared for because Speaker 6: more and more consumers are going to be interested in Speaker 6: pursuing that ability to buy that way, so.

Speaker 5: Build to order.

Speaker 2: There was top when COVID hit, when you couldn't go Speaker 2: to dealerships in that sure that there was a big Speaker 2: increase in direct orders rather than buying off the lot Speaker 2: because it wasn't much to buy off the lot. Right,

Speaker 2: has that changed at all? Are people ordering more cars?

Speaker 2: Are just buying what's available or.

Speaker 6: Seeing more pre sold units where consumers may be buying Speaker 6: into the dealer's inventory than we saw before COVID. But

Speaker 6: it was certainly at a higher level in COVID because Speaker 6: there just wasn't any availability.

Speaker 4: You had to wait for a vehicle.

Speaker 6: But we are seeing more of a tendency for consumers Speaker 6: to be able to wait for the color of their choice, Speaker 6: the trim of their choice, whatever matches their needs. And

Speaker 6: I think as you look at your question about buying online, Speaker 6: I think that fits into that very well and giving Speaker 6: the consumer the opportunity to plan ahead and buy the Speaker 6: vehicle that's perfect for them.

Speaker 2: Can you quantify that in any way there's ten percent Speaker 2: more that are ordering or whatever, because I find it Speaker 2: fascinating and you brought it up waiting for the color Speaker 2: that they want because as you know, and this is Speaker 2: true all across the industry, all over the world. You

Speaker 2: get white, black, or silver because the dealers ordered that, Speaker 2: because those are safe colors. And so, you know, we've

Speaker 2: seen a great decrease in the variety of colors of Speaker 2: cars over the last couple of decades, and if people Speaker 2: are willing to wait to get the color they want, Speaker 2: I'm just wondering if you can give us a sense Speaker 2: for how much of an increase there might be in that.

Speaker 6: It's a great question, but since it's been on the Speaker 6: you know, down since COVID, I give you an exact Speaker 6: number on that and quantify we can get back to Speaker 6: you with that. But I think you know, one thing

Speaker 6: about Honda is we've always you know, simplified our models, trims, Speaker 6: colors certainly meet customers expectations, but not kind overboard on that, Speaker 6: which makes it less of a challenge. I think when

Speaker 6: you go to a dealership to be able to find Speaker 6: what you're looking for at a thirty day supply, we've Speaker 6: got a pretty good availability in.

Speaker 4: A dealership slot, but it's higher than it was before COVID.

Speaker 4: But I can't answer the question dirrectly.

Speaker 2: But I'm just interested because I hope people take the Speaker 2: time to get what they want. I mean, it's a

Speaker 2: huge purchase for it, and to have the satisfaction of Speaker 2: getting exactly the vehicle you want rather than settle for Speaker 2: some sort of deal and get something that doesn't match Speaker 2: what you want. I think it's healthy for the industry

Speaker 2: if people get what they want.

Speaker 6: I think it's healthy for the industry and the customer satisfaction.

Speaker 6: As you indicated, it's going to be quite a bit higher.

Speaker 6: You're driving exactly what you came in looking for. You know,

Speaker 6: sometimes people come into the dealership and they'll learn more Speaker 6: about the product and they'll make a decision to make Speaker 6: a switch, and that's you know, it really just talks Speaker 6: about the value that dealers bring to the equation in Speaker 6: making sure that a customer gets the vehicle that's right Speaker 6: for them. And they continue to be important as we

Speaker 6: go through the process, even as consumers may look into Speaker 6: what they can do from an online standpoint, but it Speaker 6: is important that we find ways to make sure that Speaker 6: the customer.

Speaker 4: Gets exactly the vehicle they're looking for. They're going to

Speaker 4: be far happier.

Speaker 3: But that would necessitate having efficient manufacturing, which these guys Speaker 3: do have. So that's because I'm thinking the number of

Speaker 3: people who have Amazon Prime and are annoyed if it Speaker 3: takes more than twenty four hours to get their product Speaker 3: delivered to them.

Speaker 5: So there's still this demand that, well, we want.

Speaker 2: It's been gratification. I mean, that's the American way of

Speaker 2: buying anything just about. It's interesting. I've got a historic

Speaker 2: color chart somewhere here in my office that show those Speaker 2: car colors in Europe, the US, and Japan from the Speaker 2: nineteen fifties through the two thousands. And if you look

Speaker 2: at the fifties and early part of the sixties, color everywhere, Speaker 2: color everywhere, and then Europe is the first to go black, white, silver.

Speaker 2: Japan was pretty much always white. I mean it's like

Speaker 2: eighty percent of the vehicles over there or white. And

Speaker 2: sure enough, around the mid eighties, the US starts following Speaker 2: what Europe was going, and then by the time you Speaker 2: get to the two thousands, the colors are almost all Speaker 2: the same and not many reds, not many rus, not Speaker 2: many greens or any of those others.

Speaker 6: So yeah, I guess so, I mean I see a Speaker 6: lot of cars, right, So I definitely noticed the colors Speaker 6: and differences we see when we go to a dealer's Speaker 6: a lot, but we look at the majority of what Speaker 6: they're selling.

Speaker 4: The silvers are very popular, they.

Speaker 2: Are, but that's because the dealers ordered them. Hey look, god,

Speaker 2: we've come to the first the end of the first Speaker 2: half of the show, the Lancet. Great having the show here,

Speaker 2: very interesting, very good to see the strength and sales Speaker 2: that Honda is showing right now coming out of the Speaker 2: disaster of a couple of years ago. So good on

Speaker 2: you guys.

Speaker 4: Well, thank you for your time. It's a pleasure to

Speaker 4: be here. Shure it.

Speaker 2: We're going to take a quick commercial break right now.

Speaker 2: Give a shout out to our sponsor Bridstone.

Speaker 8: When the elements are working at GUESSTI, being confident in Speaker 8: your grip on the road is what really matters. Breach

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Speaker 2: All right, we're back and you can get into a Speaker 2: lot of other things that are going into this industry Speaker 2: right now.

Speaker 3: So big big week for earnings reports.

Speaker 2: Yeah yeah, big week of earnings. Not everybody is reported

Speaker 2: so far overall it doesn't look that good. I mean,

Speaker 2: Tesla had a disastrous quarter. I think I mean sales down,

Speaker 2: profits fell, off a cliff. But they're not the only one.

Speaker 2: I mean, Stilantis had a bad quarter, Nissan had a Speaker 2: bad quarter, Renault had a bad quarters.

Speaker 3: Let's stick with with Tesla for a moment, Paul. Do

Speaker 3: you see that basically part of the reason that it Speaker 3: isn't doing as well as it has been doing is Speaker 3: because its models are getting too old.

Speaker 4: Yeah.

Speaker 7: I think a lot of attention's been on other projects Speaker 7: besides automotive, and that is starting to show very well Speaker 7: now that these products have been neglected quite a bit.

Speaker 7: I think we do have some you know, changes coming Speaker 7: to the model. Why some you know, like similar to

Speaker 7: the Highland for Model three, But these are We've been Speaker 7: seeing this design for so long, and I think consumers Speaker 7: are starting to say, hey, I mean this feels old.

Speaker 2: Yeah, I agree with you. I think the hardcore Tesla

Speaker 2: fans will go, you guys don't know what you're talking about.

Speaker 2: There's been all these updates, there's been all these changes, Speaker 2: But this is a fashion industry. People don't realize that

Speaker 2: this is a fashion industry and you've got to have Speaker 2: the freshest products out there. And history, automotive history shows

Speaker 2: that whoever has the right cadence of dropping in a Speaker 2: couple of new models every year gains market share and Speaker 2: if you do not change your styling, the public grows Speaker 2: old of it very quickly, and over the air updates Speaker 2: is not enough. When Tesla was the only EV game

Speaker 2: in town, that was fine. But now it's facing serious competition.

Speaker 2: And I point out, you know, Hyundai Kia, oh my god, Speaker 2: what they've done with their EV stuff has been sensational.

Speaker 2: And I think styling has got that. I always like

Speaker 2: to quote Steve Pasteiner, designer in the industry that a Speaker 2: lot of people know, who said, of course styling matters.

Speaker 2: If people don't even notice your car, how will they Speaker 2: ever know they want it? And I think that Tesla

Speaker 2: has got itself in the in a rut right now Speaker 2: where the the S and the X styling has not Speaker 2: changed in over a decade.

Speaker 7: Over a decade.

Speaker 2: You know, they had the front end styling, but that Speaker 2: was around twenty fourteen. Nothing has changed since then. You

Speaker 2: mentioned the Highland on the three very minor minor refresh Speaker 2: on the front and that was there.

Speaker 7: Was mostly manufacturing stuff that you know, increased their profitability. Right,

Speaker 7: you know, we're a bulk of the changes, so you know, Speaker 7: for a consumer to come in and they don't see Speaker 7: any noticeable updates, you still feel like you're in an Speaker 7: old product, even though a lot of has been changed Speaker 7: under the skin.

Speaker 5: Okay, but more software. But don't you think that maybe

Speaker 5: what it is is you know, John, you.

Speaker 3: Mentioned that, you know you'd get a lot of reaction Speaker 3: from the tefl Tesla faithful saying, hey, wait a minute, Speaker 3: you know you don't know what you're talking about.

Speaker 5: There's been all these changes.

Speaker 3: So those folks are completely keyed into what is been Speaker 3: changed in what is changing, And as you say, the Speaker 3: normal person who isn't a Tesla fan, not to say Speaker 3: that Tesla fans are abnormal.

Speaker 5: But just a regular consumer isn't going to notice it Speaker 5: as much.

Speaker 3: So the question becomes, have they basically reached all of Speaker 3: the people who are enthusiasts and therefore that is going Speaker 3: to contribute to them hitting a ceiling or maybe even Speaker 3: losing because you know, you can't buy a new.

Speaker 2: Car every other year. It's a good question. I think

Speaker 2: it varies regionally. So if you go out to California.

Speaker 2: I talked about all my friends out in California, they go, Speaker 2: oh my god, Teslas are everywhere, and so there's I'm Speaker 2: not going to say a saturation point because there's actually Speaker 2: more Toyotas out there still in the aggregate, but Tesla's Speaker 2: are everywhere. So when most people buy a new car,

Speaker 2: they want everybody know, I got a brand new one, Speaker 2: brand new one. And if you go out and buy

Speaker 2: a brand new model, why doesn't look any different than Speaker 2: the ones that came out five years ago. And so

Speaker 2: it's like you're not showing the world you got a Speaker 2: new car. Whereas I think if you got a Tesla

Speaker 2: here in Michigan, it's a totally different story. You don't

Speaker 2: see them all that. I mean you see them all that.

Speaker 2: I see them every day, but they're not ubiquitous like Speaker 2: they are in California or other markets. And so I

Speaker 2: think Tesla can still do good in markets where it's Speaker 2: not strong, where it's really showing its weaknesses, where it Speaker 2: has been strong.

Speaker 3: But if the demand we're still seeing being greater in Speaker 3: California for electric vehicles across the board than any place Speaker 3: else in the country, and that's the saturated area, then Speaker 3: they got a problem.

Speaker 2: Well, and it goes beyond that, because you know, here's Speaker 2: Elon Musk trash in California, say, and I moved Tesla out, Speaker 2: and I'm going to move X out, SpaceX. Now I'm

Speaker 2: going to move Neurallink out and you know, just bashing Speaker 2: the state. And I'm sure a lot of people in

Speaker 2: California are saying, well, screw you, I've got other alternatives.

Speaker 2: Now I'll go get you know, I'll go get a Speaker 2: Cadillac Lyric, I'll go get a Hyundai Ionica five N Speaker 2: I'll go get filled in the blank EV. Whereas five

Speaker 2: years ago, none of those cars were there, so they Speaker 2: had no choice. They went there, and they believed in

Speaker 2: what Tesla was doing, and believed in what Musk is doing.

Speaker 2: He's turned a lot of his buyers off.

Speaker 3: So, Paul, do you see the availability of vehicles from Speaker 3: Hyundai and Kia in general motors in Ford eating into Speaker 3: Tesla's market or just growing.

Speaker 5: The EV market.

Speaker 7: I think it's probably a little bit of both, but Speaker 7: I would say more that it's incremental volume. In addition

Speaker 7: to Tesla, I think the Yndai Kia, like you've been Speaker 7: saying that their new evs are really grabbing a lot Speaker 7: of attention with new styling that you know, just it's Speaker 7: very unique in the industry, and I think people are Speaker 7: really catching on to that. So I do think there's

Speaker 7: a lot of people that may not have been interested Speaker 7: in EV and they're seeing some of these new EV's Speaker 7: and what they have to offer, saying maybe I actually Speaker 7: can make this work. And whereas I think the Tesla

Speaker 7: buyer was more like, you know, the early adopter that Speaker 7: wanted to get in, wanted the new technology, and you Speaker 7: know so and then they became loyalists. I think most

Speaker 7: of the volume in the EV outside of Tesla is new, Speaker 7: not necessarily taking from Tesla, although I think that's going Speaker 7: to happen at some point, especially as the models get older.

Speaker 2: Well, look, you know, Tesla's got what five models now, Speaker 2: including the cyber truck. It's not in every vehicle segment.

Speaker 2: Others are going to go into segments where Tesla does Speaker 2: not exist, and they're going to get that volume. Right. So,

Speaker 2: I mean, look at how BYD is wiping up in Speaker 2: China right now. One of the reasons is, besides it's

Speaker 2: a pretty good company, it's in far more market segments Speaker 2: than Tesla is. In fact, BYD is going to surpass

Speaker 2: Tesla in global EV sales probably in this quarter. So

Speaker 2: I think not only is Tesla not been keeping it Speaker 2: styling up to date, its limited model range is hurting Speaker 2: it in the marketplace as well.

Speaker 7: That's again that comes back to where I was talking Speaker 7: about the focus has been on av and robotaxi, but Speaker 7: should it have been more on this entry ev that Speaker 7: now they're pulling forward again and it's going to be Speaker 7: a mishmash of old technology and new technology, not the Speaker 7: whole new technology like they were talking about.

Speaker 2: Look, I think all this talk about robots, the optimist Speaker 2: robots and Neurlink and all this other strection is to Speaker 2: get people the tension away from the fact that these Speaker 2: models are old and the sales are going down.

Speaker 4: Yeah.

Speaker 7: No, I totally agree. I think it's all headlines and

Speaker 7: diversion from the core of the problem. You know, their

Speaker 7: market share is starting to get chipped away at and Speaker 7: they've never really experienced that until recently. Profitability is going down,

Speaker 7: so you could see some problems starting to come to Speaker 7: head and now they got to take some attention away Speaker 7: from that until they can find a new plan.

Speaker 2: And look, it's not like they don't know how to Speaker 2: style cars. Absolutely do. They've got one of the best

Speaker 2: designers in the business. Yeah, I'll bet tranz Von's hotels

Speaker 2: and is chomping at exactly. I'll bet they've got walls

Speaker 2: of all kinds of variations and new designs that you know, Speaker 2: Elon will not give the ok too.

Speaker 7: I agree, he's probably very excited to get one of Speaker 7: his new designs out because they haven't been out in Speaker 7: a long time.

Speaker 2: Right, and you mark my word, the instant they make Speaker 2: a dramatic change to their styling, their sales are going Speaker 2: to pop.

Speaker 3: All right, So so let me ask you, like, let's Speaker 3: shift this to the styling question and go back to Speaker 3: the fashion industry sort of approach. You know, we've we've

Speaker 3: been talking about hand Ikea.

Speaker 5: Now it's just not.

Speaker 3: Their evs that look great. It's like their entire lineup

Speaker 3: looks great.

Speaker 7: And we got to go to the Santa Fe and Speaker 7: in the Santa Fe something new that you know, these Speaker 7: are unique designs that the market hasn't really seen, and Speaker 7: it's you know, they're they're catching a lot of attention Speaker 7: and you can see it in the sales and market Speaker 7: share growth.

Speaker 3: Yeah, and throw throw Genesis into the mix, because you Speaker 3: know that's that's one of their companies.

Speaker 2: As well.

Speaker 3: So the question that I have is is that, Okay, Paul, Speaker 3: do you guys see that consumers are looking at the style, Speaker 3: the fashion of the vehicle and then the propulsion system Speaker 3: or do they start out saying, I'm going to buy Speaker 3: an EV or I'm going to buy a hybrid, or Speaker 3: I'm going to buy an ice vehicle and then they Speaker 3: look at the styling.

Speaker 7: That's an interesting question.

Speaker 4: I think.

Speaker 7: You know, if you rewind back two three years ago, Speaker 7: I would say the majority of people that were buying Speaker 7: an EV were coming in looking for an EV. Nowadays,

Speaker 7: I think we're starting to see that change as awareness Speaker 7: is growing on different propulsion systems.

Speaker 2: People.

Speaker 7: It's still difficult because every automaker has different acronym for Speaker 7: what their hybrid is. And you know, you got the

Speaker 7: pacifica hybrid, which is a plug in hybrid. But you know,

Speaker 7: and then how do you explain that to a consumer, Speaker 7: and you know, there's a lot of confusion out there.

Speaker 7: I think a lot of people are looking for a Speaker 7: hybrid or an EV and they come in looking for Speaker 7: that specifically. I think the styling might be the thing

Speaker 7: to woo them to one brand over another. I'd say overall,

Speaker 7: people that are buying hybrids or EV's are probably going Speaker 7: into showroom looking for that specifically. Now that's going to

Speaker 7: start to change, as you know, like Honda's got fifty Speaker 7: percent mix and you know, if you want to heat Speaker 7: it steering, well, you've got to get a hybrid because Speaker 7: that's part of the you know, that's their high mix.

Speaker 7: So it's changing, but I would say the majority of Speaker 7: people know what they want when they come into a showroom.

Speaker 2: Sticking with the styling thing, Cadillac dropped the bombshell of Speaker 2: a concept car this week, the Solet, which looked.

Speaker 5: To me like a convert tudor convertible version of.

Speaker 2: The Celestic They're four hundred thousand dollars car. I think

Speaker 2: the thing is drop dead gorgeous. I think it's exactly

Speaker 2: what Cadillac needs to be doing. They presented it as

Speaker 2: a concept, but you know they can do this low Speaker 2: volume stuff now that they've got the Celestic assembly process Speaker 2: set up. You don't even have to tool it. You

Speaker 2: just fabricate this stuff. I think they're going to do it.

Speaker 2: What do you guys think?

Speaker 3: I think that part of the excitement is predicated on Speaker 3: the fact that hardly any companies are doing concept cars anymore.

Speaker 3: So you see something that's a concept car, it's like, wow, Speaker 3: this is really cool. I mean, okay, if we go

Speaker 3: back over the last ten to fifteen years, Cadillac has Speaker 3: rolled out lots of beautiful concepts that ed Welburn. Yeah,

Speaker 3: I mean, it's just you know, we just kept seeing it, Speaker 3: kept seeing it, and then then the production cards come out.

Speaker 2: We're like, yeah, what happened? What happened?

Speaker 3: So I'm not so sure. And I mean and and

Speaker 3: you know this Celestic, you know, we're still waiting, right, Speaker 3: We're still waiting.

Speaker 2: That's right.

Speaker 4: Still.

Speaker 7: Well, one of the companies that does still do concepts Speaker 7: is Genesis, and they did a beautiful convertible concept as well, Speaker 7: and that is supposedly going into production.

Speaker 5: Yeah, so I think Cadillac could do that too.

Speaker 3: So if there's a race, Okay, so, which do you Speaker 3: think is going to come out first?

Speaker 7: Well, I think the Jenital like would come to market before.

Speaker 7: I think they've already got those wheels in motion.

Speaker 4: Like.

Speaker 7: Cadillac could surprise me, but I don't think it would Speaker 7: happen in the next two years where I think it'd Speaker 7: be a reality for Genesis to have that.

Speaker 2: Well, let's see what happens with the Selastic. I hear

Speaker 2: through the grapevine production has been delayed. I don't know

Speaker 2: what you guys, that's what I've We thought we were Speaker 2: supposed to start building them last week, right, it actually happened.

Speaker 7: And I haven't gotten any firm you know, mumblings from Speaker 7: anybody at GM saying that it has started yet.

Speaker 2: So so it'd be interesting to know what's their order Speaker 2: book for the Selastic, because you know, they can't even Speaker 2: build to a day, I mean, even at full production.

Speaker 2: The plan all along was they'd build maybe to a Speaker 2: day one in the morning, when in the afternoon that's it.

Speaker 2: So you know your order bank's going to be fairly low, Speaker 2: but it's going to take a long time to fill it.

Speaker 2: So I mean, the priority has got to be you know, Speaker 2: here's people spending four hundred thousand dollars on a car, Speaker 2: get them the day in the car, let's get in Speaker 2: the door. And there's obviously oh yes, you can set

Speaker 2: after that. And my guess is if they put the

Speaker 2: sole to production, it's going to be at least a Speaker 2: half a million bucks at least, right, But I think Speaker 2: they'll do it.

Speaker 7: Do you think that's enough to make them the standard Speaker 7: of the world.

Speaker 2: Again, it's part of the process. I think they need

Speaker 2: to do halo products. They need to do Wow, look

Speaker 2: at that products get into Formula one like they're doing.

Speaker 2: They're really ramping up their EV stuff. You know, by

Speaker 2: next year they're going to have evs up and down Speaker 2: the model line, at least with SUVs. Yeah, they're going

Speaker 2: to be way out ahead of everybody at that point Speaker 2: on the EV side. So I think something like the

Speaker 2: sole a is you know, I don't want to say Speaker 2: another brick in the wall, but another tile in the Speaker 2: mosaic of what it takes to get Cadillac back to Speaker 2: the top. Right, you think they're going to go all EV. Nah,

Speaker 2: you know, let's let's exclude escalate. Yeah, yeah, no, Look,

Speaker 2: I mean the goal was by twenty thirty, right, all electric.

Speaker 2: Now everybody's back and off that. You know Volvo, you know,

Speaker 2: which was so committed to ALIV. They're going, Wow, They're

Speaker 2: going to let the market decide because it's clear that Speaker 2: a significant chunk of the car buying public wants nothing Speaker 2: to do with electrics.

Speaker 5: Well, so let's broaden this out to general motors.

Speaker 3: I mean, they announced the orient plant is going to Speaker 3: stay not in production for what another six months?

Speaker 5: They pushed that back.

Speaker 2: Yeah, they pushed it back to mid twenty six and Speaker 2: so what's to say that.

Speaker 3: There wouldn't be another pushback after that pushback after that.

Speaker 3: I mean, it's just it's irrational exuberance as the stock Speaker 3: market was once described as having. That's what I think

Speaker 3: they were seeing that some of these car companies.

Speaker 1: And will there be.

Speaker 5: Consequences to.

Speaker 3: Companies that had claimed or to executives running companies that Speaker 3: claimed we're going to have all ev by filling the Speaker 3: blank and now they're finding that that's.

Speaker 2: Not the case. There's already consequences in the fact that

Speaker 2: everybody's losing boatloads of money on their electrics. They overinvested.

Speaker 2: And look, the only reason they got in was because Speaker 2: of government regulation that's driving everything. And the EPA originally

Speaker 2: wanted what was it, sixty seven percent market share for Speaker 2: EV's by twenty thirty two. Well, even the Biden administration

Speaker 2: backed off that. They recognize that's never going to happen.

Speaker 2: And so it was this fear of global warming. The

Speaker 2: end is nigh. We've got to do things right now.

Speaker 2: We've got to push this as fast as possible, and Speaker 2: now we realize it. Okay, even if the world is

Speaker 2: going to end, we can't get there. The public's just

Speaker 2: not ready for it, or a significant chunk of the Speaker 2: public for political reasons, are now completely against evs.

Speaker 7: Right, and we have an election coming up. You know,

Speaker 7: what are you going to What do you think is Speaker 7: going to happen if something changes?

Speaker 4: You know?

Speaker 7: There, it's pretty clear that there is a lot of Speaker 7: heavy investment that was way ahead of itself. We've seen

Speaker 7: nearly every automaker change their pace, at least in some form.

Speaker 7: You know, for just announced their building super Duties in Oakville, Speaker 7: which was supposed.

Speaker 2: To be three row three row EV But remember here's Speaker 2: another thing that Oakville move, that's protection against the UA.

Speaker 7: Yeah, no, absolutely, I mean there's a lot of good Speaker 7: reasons to do it, and I'm I actually think it's Speaker 7: a smart move, especially considering the conditions in the market Speaker 7: right now. But now where are they going to build

Speaker 7: their evs or they just you know that are.

Speaker 2: Supposed to come in twenty seven, right, So I mean, look, Speaker 2: Oakville was going to be a three row SUV. Farley

Speaker 2: has complained the battery size and something like that puts Speaker 2: the price in the stratosphere, and Lincoln can't get that Speaker 2: kind of pricing. Apparently Mercedes can't either. It's struggling with

Speaker 2: its evs.

Speaker 3: So look, I the Kia is doing okay at that Speaker 3: EV nine.

Speaker 2: Yeah, it is no Look, I think Honda and Toyota Speaker 2: have made a strategic error in allowing Hundai and Kia Speaker 2: to get so far ahead of EV with EV's you Speaker 2: know pre code. If you had said to me in

Speaker 2: five years, people are going to be spending sixty thousand Speaker 2: dollars on Kias and Hyundais, I would have said, there's Speaker 2: no way the brand can't take it. The brand will

Speaker 2: not take that pricing. But people are paying that for

Speaker 2: their evs. Now, it's not in grandiose numbers. It's not

Speaker 2: enough to be wildly profitable, but that has brought the Speaker 2: brand image of Kia and Hyundai up so fast in Speaker 2: the last five years. And the cross shopping, I mean,

Speaker 2: you tell me if I'm wrong. Cross shopping with Kia

Speaker 2: and Hyundai is largely coming out of Toyota and Honda.

Speaker 2: So Toyota and Honda the luckdawn grow their brand in Speaker 2: tremendously in five.

Speaker 7: Years, right, they're they're in the market in a big Speaker 7: way in evs, and you know, they're building that reputation.

Speaker 4: Now.

Speaker 7: Toyota still has the hybrids obviously, but it's almost like Speaker 7: they didn't want to sell any BZ four x's. You know,

Speaker 7: it's just not a very competitive model when you look Speaker 7: at everything else that's out there. And that's pretty surprising

Speaker 7: from Toyota. I know that they weren't all in on

Speaker 7: EV's and that's okay, that's a smart move. But to

Speaker 7: your point, letting Hondai Kia get so far ahead when Speaker 7: Toyota clearly has the technology to do it, they're just Speaker 7: choosing not to. I think that's going to bite them.

Speaker 2: Well, that's why I call it a strategic error.

Speaker 5: Yeah, although being very far ahead.

Speaker 3: In a very small space is not that devastating in Speaker 3: a business. I mean, and if we look at the

Speaker 3: you know, the valuation of Toyota Motor Corporation, I think Speaker 3: it's okay for them that they absolutely I mean, they Speaker 3: could take in stride, but yeah, and you know, this Speaker 3: is not going to be a five ten year transition.

Speaker 7: This is a decade's transition.

Speaker 3: So you know, it's early early, still a very early Speaker 3: in the scheme of it all.

Speaker 2: But I mean, this Hyundai group is a monster man, Hyundai, Kia, Genesis, Speaker 2: and they just gave these guys almost blanche to compete Speaker 2: at a much higher level price.

Speaker 7: Wise in Genesis. You know, there, I can't believe the

Speaker 7: products that they're turning out. And you know, you look

Speaker 7: at some of the competition that you would think and Speaker 7: Genesis is cheaper, more affordable, I should say, it's not Speaker 7: cheaper more affordable.

Speaker 2: They have to be well, yeah, exactly what vire a Speaker 2: compelling reason? Exactly, but it's going to another Mercedes or

Speaker 2: a BMW, maybe even a Cadillac and go, nah, maybe Speaker 2: I should look at this Genesis. There's got to be

Speaker 2: something more compelling and as part.

Speaker 7: Of it, definitely well BMW's do you know. Okay, so

Speaker 7: they they've managed.

Speaker 3: But the thing I wonder about is that, Okay, so Speaker 3: as you as you have younger generations that you know, Speaker 3: Mercedes isn't going to resonate as much with them as Speaker 3: this new brand. And you know when they when they

Speaker 3: get a phone, they get an iPhone from Apple or Speaker 3: they get something a Galaxy from Samsung. Right, so those

Speaker 3: are basically equal products. And so Genesis to them is

Speaker 3: an equal product to a BMW or an Audi or Speaker 3: probably better than a Cadillac. But so, I mean, I

Speaker 3: think you're going to have that change and then that's Speaker 3: part of the strength that they'll have going forward, right, Speaker 3: there's being natural constituents for their product. Ye.

Speaker 7: And I think Hyundai and Kia, well, Genesis and Kia Speaker 7: in particular are doing a great job not just in Speaker 7: the in the car department, but gaining awareness in other places.

Speaker 7: You know, Genesis is big in the in the golf Speaker 7: and you know the sponsorships that they've had, Kia their Speaker 7: their stadium in La and uh, the brand awareness is Speaker 7: really really growing fast for them. And it's obviously their

Speaker 7: products are great, but they're doing a great job outside Speaker 7: of just the auto business too.

Speaker 3: So john Ford Earnings, Yeah, give us, give us a snapshot, Speaker 3: and what you think happened there.

Speaker 2: Look, they got to fix their quality problems. They got

Speaker 2: to fix their quality problems. They had to take another

Speaker 2: big charge for warranty costs. This has been going on

Speaker 2: for a decade now, I mean, uh, they fixed that.

Speaker 2: The company is going to look a whole lot better.

Speaker 3: So Farley's been there for a few years now, Farley, Speaker 3: when he first started, he said he was going to Speaker 3: address the quality problems.

Speaker 5: How do you see that working out in the long run?

Speaker 2: They are they claim they're making progress, they claim they're Speaker 2: they're starting to see in gdpower IQs Initial Quality Survey stuff, Speaker 2: their numbers are really they came up in like nine Speaker 2: places or something like that, which is good. But initial

Speaker 2: quality only measures the the quality of a car after Speaker 2: three months of ownership. And as I like to say,

Speaker 2: everything should work for three months. I mean, come on,

Speaker 2: So I think a better measure is the i QS, Speaker 2: the initial or the the VDS Vehicle Dependability Survey, which Speaker 2: looks at cars after three years. And I'll bet you

Speaker 2: they're not. They're not doing that well. Right now. I

Speaker 2: would say Ford's got to look at what Hyundai did Speaker 2: of how it pulled its quality up. You know, Ford

Speaker 2: appointed a guy UH to UH to be sort of Speaker 2: their qualities are, but I think the guy is a director.

Speaker 2: What Hyundai did is they appointed a vice president who Speaker 2: reported directly to the chairman, mister Chung. And so that

Speaker 2: sends fear in the organization. If your quality guy says,

Speaker 2: hey do this, they know you're going to run and Speaker 2: tell the chairman.

Speaker 5: If you don't do it, you're going to do it.

Speaker 2: And so I think that's what they got to look at.

Speaker 2: I would say Ford should even look at what they Speaker 2: did in the nineteen eighties when they really turned their Speaker 2: quality around. You know, quality is job one was the slogan,

Speaker 2: and they did it. I mean, all the quality measures,

Speaker 2: everything showed Ford right at the top. And remember the

Speaker 2: Taurus knocked off the camera and the Accord to become Speaker 2: the best selling sedan in America because the quality was Speaker 2: so good at it. Ford's got to look at its roots,

Speaker 2: see what it did before. I think they got to

Speaker 2: appoint somebody who reports right to Farley and and maybe Speaker 2: that would start changing things around. But I mean, Farley

Speaker 2: hit his career at Toyota.

Speaker 3: He knows all this stuff.

Speaker 2: That's right.

Speaker 3: That's right again, what's taking them so long?

Speaker 2: I wish I knew the answer to that. That's that's

Speaker 2: the you can't say sixty four thousand dollars question. That's

Speaker 2: like about the four billion dollar question.

Speaker 3: And they lost one point one billion in the quarter Speaker 3: on their EVS in software.

Speaker 2: Yeah, but Gary, everybody's losing money on evs. Ford is

Speaker 2: the only one with the guts to publish what the Speaker 2: numbers are. GM's losing, Toyota's losing a name, any car

Speaker 2: company except for Tesla and BYD and they're all losing Speaker 2: money on their evs. We just happened to know how

Speaker 2: much Ford is losing.

Speaker 3: But the question becomes how much can they afford to Speaker 3: continue to lose? And the other guys as well. I

Speaker 3: mean that this sort of becomes real money at some point.

Speaker 2: Right, well, it already is real money, but then you Speaker 2: look at what are the fines that you have to Speaker 2: pay if you don't meet you know, the emission standards Speaker 2: or the fuel economy standards, and you can pay them.

Speaker 2: I mean what a Stillantis just got hit with like Speaker 2: one hundred and twenty eight million dollar fine. But car

Speaker 2: companies don't like being lawbreakers. They can afford the fine.

Speaker 2: It's it's an image issue, but it's a serious issue.

Speaker 2: And again I come back to the only reason they Speaker 2: went down this path is the regulations say you have Speaker 2: to do this. So I cut these execs a lot

Speaker 2: of slack in that regard. I bet they wish they

Speaker 2: could roll back three years and make their decisions again.

Speaker 2: They'd still invest in evs, but not to the extent Speaker 2: that they have.

Speaker 3: Paul, do you see any impact on Ford's perception in Speaker 3: the market given these quality problems.

Speaker 7: I'm I mean, I don't see how there can't be.

Speaker 7: But you know, for Ford's still a strong brand and Speaker 7: you know, there's a lot of loyalty there, especially where Speaker 7: we live in Michigan. But yeah, it's going to catch

Speaker 7: up to them eventually. I can't believe how long it's

Speaker 7: gone on. And to your point, you know, when Farley

Speaker 7: came in, I really thought it was going to be addressed.

Speaker 7: You know, Heinrichs was one who got pushed out, and Speaker 7: I think he was the closest one to making some Speaker 7: headway in that area of quality. But I thought Farley,

Speaker 7: and to your point of coming from Toyota, he knows Speaker 7: what quality manufacturing looks like. And the fact that he's

Speaker 7: been at the home for this long and it hasn't changed.

Speaker 7: It almost seems like it's gone backwards in a few areas.

Speaker 5: Is surprising to me.

Speaker 3: Bring Jim Hackett.

Speaker 2: Back, No, Hacket, No, they don't want to do that. Look,

Speaker 2: you know, obviously Farley and his team are hyper aware Speaker 2: of this, hyper aware. I have no idea why they

Speaker 2: can't get their arms around it or haven't. Their latest

Speaker 2: report suggests they are making progress. I hope they make

Speaker 2: a whole lot of progress. But you know, it suggests

Speaker 2: that no one at the company really can put their Speaker 2: finger on the pulse of what is the root cause Speaker 2: of the problem.

Speaker 3: I wonder if it's you know, not screwing the cars Speaker 3: together in the factory as much as it is you know, Speaker 3: the software and the interfaces and things like that which Speaker 3: are causing the quality problems. I mean, I think that

Speaker 3: all forward plant people are really good at what they Speaker 3: do in terms of putting this stuff together. I just

Speaker 3: wonder whether we're getting to the point where there is Speaker 3: you know, eight S systems and sensors and the associated Speaker 3: software and the controllers and the interface.

Speaker 2: I think that's part of it. But the real thing is, look,

Speaker 2: it's been across model lines. It's been happening for many,

Speaker 2: many years. To me, what it suggests is it's a

Speaker 2: corporate structure problem that you can't blame engineering, you can't Speaker 2: blame part of manufacturing, you can't blame purchasing. It's some

Speaker 2: combination of all that that is a breakdown in communications, Speaker 2: a breakdown and follow up or something, But there's something Speaker 2: to the structure that they haven't quite identified yet, is Speaker 2: my opinion.

Speaker 3: Although when we had Dave Andrea from Platt Moren on Speaker 3: the show and did the OEM supplier relationship and we Speaker 3: saw Forward just plummeting, and so then you got to wonder, Speaker 3: you know, is General Motors saying, hey, we're going to Speaker 3: pay you more to give its better product so we Speaker 3: can put that out there, and Forward saying we got Speaker 3: to save some money here.

Speaker 2: You know, that's a great question. I don't know as

Speaker 2: that GM is paying more money. I think it's more

Speaker 2: early involvement. I think it's better communication. And you know,

Speaker 2: once you, as a supplier have more trust in an automaker, Speaker 2: you're going to do more for them. They got a problem,

Speaker 2: You're going to throw your a team on the problem.

Speaker 2: You hate some car company, they're treating you like dirt.

Speaker 2: You have terrible relations. You got a problem. Okay, we're

Speaker 2: busy on other stuff. We'll get to it next week.

Speaker 2: And that's where the the intangible benefits of having good Speaker 2: supplier relations shines through, and cost accounting does not capture that.

Speaker 2: You look at what are we paying for this component?

Speaker 2: What are we paying for this commodity, and when it's Speaker 2: just a strict transaction, you miss these other things that Speaker 2: suppliers will do for you. If you have a really

Speaker 2: good relationships, Handa and Toyota have brilliant relations with their Speaker 2: suppliers and they'll go to the mat to help their Speaker 2: their oem out. Whereas if you have terrible relations what's

Speaker 2: my motivation to help you? You're just trying to screw

Speaker 2: me on price.

Speaker 7: Do you think Ford backing away from, you know, some Speaker 7: of the vertical integration that they had in the past, Speaker 7: Do you think if they brought some of that back Speaker 7: that some of these problems might be alleviated.

Speaker 2: No, Look, you know, I mean that it seems unsustainable Speaker 2: to do that. But Ford invented vertical integration, right. The

Speaker 2: rouge plant was that, you know, raw materials came to Speaker 2: one end and car spit out the other. But what

Speaker 2: they got away from was put the blame full on Speaker 2: the uaw is. You know, they were paying such high wages,

Speaker 2: such high healthcare costs, pension costs, that the automakers went, Speaker 2: oh my god, we can buy this stuff so much Speaker 2: cheaper from suppliers, and so the pendulum swung all the Speaker 2: other way, I think they outsourced too much. But you know,

Speaker 2: they're not going to bring this stuff back in the Speaker 2: house if they got to pay UAW wages when the Speaker 2: Chinese are setting up shop in Mexico and saying, hey Speaker 2: will sell it to you for thirty five percent cheaper.

Speaker 2: So I don't see vertical integration coming from that that way. Now,

Speaker 2: Tesla doesn't pay Mexican Chinese wages, and they're very vertically integrated, now, haven't.

Speaker 2: I said that there's a lot of Chinese parts and Speaker 2: even in the US made Tesla's. But look, I think

Speaker 2: they would love to go to vertical integration. But as

Speaker 2: long as there's a supplier community out there that's willing Speaker 2: to sell it at a cheaper price, you can't make Speaker 2: the numbers work by bringing it in you.

Speaker 5: Look at it.

Speaker 7: You know BYD that's part of their magic.

Speaker 4: You know.

Speaker 7: Do you think that there's even a possibility that a Speaker 7: domestic company could compete on that kind of a level Speaker 7: because they don't have that vertical integration.

Speaker 2: Well, you know, I know some suppliers that sell to BYD.

Speaker 2: They said those guys are brutal. You know, you think

Speaker 2: Stilantis is treating it's suppliers bad or for it doesn't Speaker 2: get a good rating. They said they resource their components

Speaker 2: every six months. Wow, six months, So it doesn't matter

Speaker 2: if you sign a three year supply contract. In six months,

Speaker 2: are going, hey, we can get it cheaper, you know, Speaker 2: and if you can't meet the price, we're going to Speaker 2: resource it elsewhere. I don't believe that's sustainable. But right

Speaker 2: now BYD is growing so fast all over the world, Speaker 2: you know, not just in China, that suppliers are hitch Speaker 2: my wagon to this thing because it's pure growth. And

Speaker 2: even though they're they're squeezing me like crazy on price, Speaker 2: the growth is something I can't will.

Speaker 7: They know that the business is going to be there, Speaker 7: even if they're taking a little less profit now.

Speaker 2: So, yeah, BYD is it's monster and it does do Speaker 2: a lot in house. And I'll bet the people who

Speaker 2: are sewing up seats or molding headlamp lenses are not Speaker 2: getting paid the same amount of money is the people Speaker 2: assembling on the line.

Speaker 1: Right.

Speaker 2: I wouldn't do it, guys, Listen, A lot of people Speaker 2: won't do it. This is why ELI wants to go

Speaker 2: to Optimist Robots. And that's something that we really have

Speaker 2: to keep an eye on. You know, he's famous for

Speaker 2: over promising and under delivering. But as I like to say,

Speaker 2: eventually he does deliver. So he's saying Optimus robots making

Speaker 2: cars next year. I'm not sure I buy it, but

Speaker 2: sometime this decade, you bet it's going to happen. You

Speaker 2: don't think so, Gary, Why not?

Speaker 3: So if you look at every major robot manufacturer on Speaker 3: the planet, how many of them are offering anthropomorphic robots?

Speaker 4: Yours?

Speaker 5: I can tell that might be zero?

Speaker 2: No, no, no, Boston Dynamics is working on it. There's

Speaker 2: some China company that's working on it. BMW's even joying

Speaker 2: around with putting you know, okay, but the robot.

Speaker 3: Okay, but okay, So if we look at Boston Dynamics, okay, Speaker 3: so what are they using their robot for. They're not

Speaker 3: using their robot to build things. They're using their robots

Speaker 3: to say, guard perimeters and to go around BMW is Speaker 3: talking about using these robots basically for transport of goods. Okay, yeah,

Speaker 3: that's fine, But I mean the you know, there's a Speaker 3: reason why cars look like cars, right, because it turns Speaker 3: out that over one hundred and twenty years that has Speaker 3: become a pretty efficient design. Okay, overall it's pretty efficient design.

Speaker 3: So the classic six access robot design, it's pretty classic Speaker 3: design that sort of fits the requirements of manufacturing operations.

Speaker 3: And therefore, I mean, yeah, maybe they'll be a sell somewhere, Speaker 3: will be doing something with the Optimist robot, but by Speaker 3: and large, I don't see it.

Speaker 2: You could be right, you could be right.

Speaker 3: I mean, you know, the tooling companies, they've gotten really Speaker 3: damn good at what they do in terms of positioning Speaker 3: and manipulating.

Speaker 2: Also, what I would say is, you know, I'm still Speaker 2: thrilled by this Tesla unboxed assembly process. And I could

Speaker 2: see where Pick and Place could do the whole car Speaker 2: where you don't even need humans. You know, you don't

Speaker 2: need you know, walk around robots, you don't even need humans.

Speaker 2: I could see you where you could design a car Speaker 2: or pick and place robots would just assemble six different modules.

Speaker 2: Then you put the modules together at the end and Speaker 2: you got a car. So yeah, you may not even

Speaker 2: need optimists. Brave New World, Brave New World. Now with that,

Speaker 2: we should wrap up the show. I think, Paul, thanks

Speaker 2: for coming back, Thanks for having me. Ye, Gary, this

Speaker 2: was good and we've got chief engineer of Escalade next Speaker 2: year or next next week, next week, right next year.

Speaker 2: Don't have to wait that long. People wait back then.

Speaker 2: By the way, if you like this kind of kind Speaker 2: of conversation, please subscribe to our channel or subscribe to Speaker 2: our newsletter that you can get on the Auduline website.

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About this episode

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