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Speaker 1: I'll online after hours is brought to you by bridge Stone Tires Solutions for your journey.
Speaker 2: Hey, welcome aboard everybody. We're gonna do another show, right Gary,
we are indeed, And let's introduce Alison.
Speaker 3: Alison Malik, the founder and CEO of Middle Third, and she will tell us what Middle third is all about.
But first, first, first first, Gary has got a question to try. So basically, So basically I have I have
two questions.
Speaker 4: One who was worried about one one?
Speaker 3: One is one is fairly easy, one is impossible.
Speaker 2: Okay, let's do easy.
Speaker 3: Okay, So the easy thing is okay, eighteen years ago today, that would be January ninth, two thousand and seven. What
product was announced that has transformed everything including auto.
Speaker 5: January ninth.
Speaker 2: Oh, I'm going to guess the iPhone and you would be correct. That was easy. Okay. Now let's do impossible,
all right.
Speaker 3: So President Carter's funerals today. So this is a political
question or a governmental question, not political governmental question.
Speaker 2: Okay.
Speaker 3: So now, on September twenty ninth, nineteen ninety three, the partnership for a next for a new generation of vehicles was announcement on GV was announced by the Clint administration.
What program was announced on January ninth, two thousand and two during the George W.
Speaker 5: Bush administration?
Speaker 2: Uh, wasn't that some hydrogen VD.
Speaker 4: Yeah, they switched from electric to hydrogen or improved fuel economy.
My old ev one buddies at GM were recounted it to me often, but I can't remember what the program was called.
Speaker 3: Well, you guys are thinking about this.
Speaker 5: You know, we just mentioned George W.
Speaker 2: Bush.
Speaker 5: And interestingly enough that on January eighth. Okay, so this
is the ninth. On January eighth.
Speaker 3: Nineteen ninety two, his father, as president, on a trade mission to Tokyo, had a very upset stomach in the lap of the Chinese Prime Minister Japanese pre Yeah, but.
Speaker 2: Anyway, it was lap. So so back to the so
hey when that happens.
Speaker 3: So PNGV was succeeded by.
Speaker 2: I don't know we're saying of hydrogen vehicle.
Speaker 4: Fact, I don't know the program name.
Speaker 3: It was the Freedom Car Partnership Freedom Car yeh yeah, sure, why not?
Speaker 2: And that was hydrogen it was it was It was largely focused on fuel cells.
Speaker 3: Okay, so we get somewhere we can bet yeah, yeah, yeah, And then that lasted until May twenty third, twenty eleven, when the this this, this name is insane, the US Driving Research and Innovation for Vehicle Efficiency and Energy Sustainability you US Drive was established. But enough about that, Yes, Allison, Yes,
Middle Third?
Speaker 2: What is it? So?
Speaker 4: Middle Third is a consultancy that I run, and it really reflects a lot of the experience that I've had over my career. I joke, I've been around a lot
of blocks, I've done a lot of things, and the thing I am best at at this point is translating capturing that middle third to help people from different industries, different backgrounds understand each other. I started in electrification as
an engineer at GM, then had the opportunity to work in corporate venture for GM, then left and co founded a startup. So I've seen a lot of different ways
that this industry works and felt that middle third was the best way to capture sort of what I can bring to the conversation.
Speaker 2: That's great, Hey, I just got back from CEES. They
were talking so much about autonomous vehicle there. You helped
found main mobility. Main mobility was exhibiting there as well.
I'm just curious to get your idea of where autonomous vehicles and robotaxis are going. And I think those are
two separate things really in the sense that robotaxi can be a stand up business that you run as a robotaxis.
You know, you started with main mobility. Autonomous vehicles might
be something that big OEMs or maybe even smaller ones incorporate into their vehicles. But you know, GM just pulled
the plug on crews. We've seen Volkswagen and Ford several
years ago pulled the plug on their efforts. So let's
start with autonomous vehicles. Where do you see it going?
Speaker 4: I you know, I've been on this kick for a long time that with autonomous vehicles, it all comes down to the business model. And if you look at companies
like May Mobility, like wame Oh, they've been very focused on the tech, but also the business model, the less sexy headlines. But where we're actually seeing more traction in
autonomous technology mining middle mile logistics. Vehicles that just go
from one point to the other. They've got pretty set routes,
they can be more controlled and that it's taking off.
It's just the way things operate. Most large scale tractors
today are highly automated agricultural tract Yeah. So when we
think about agricultural tractors, like it's out there and it's in action, but it's it's almost because it's like less sexy markets, people don't talk about it as much.
Speaker 3: Okay, So it's like when Deer came out with their autonomous tractor.
Speaker 5: I mean basically it goes.
Speaker 4: Really easy autonomy.
Speaker 1: So I mean.
Speaker 4: So the back and forth really simplified, John Deer. Autonomy
isn't that sexy, but it gets it gets you the miles.
But the other thing is is business isn't about the car.
Business maybe aside isn't about being sexy. It's about making money.
Who's going to pay for it? And that's where I
think you're starting to see the reality settle in who's going to pay for it? And as somebody that works
with lots of startups and spends lots of time thinking about early value propositions, I think that's where the OEMs kind of got ahead of themselves. It's just not being
excited about the business model, not the tech. I'm not
talking about the tech. I'm literally talking what is the
cost of carrying that fleet, what is the cost of getting the engineering work done? To actually put it out
in the world and are the margins there. Transportation is
multiple trillion dollars in the global economy, and frankly, the margins stink in most applications, so you can it's not a good idea to just jump out and like start a business and hope it's going to work. Like, really
crunching the numbers for those that are getting out of maybe their core business is critical. And I think that's
where you're starting to see some of the level setting as people are looking at like Okay, we're going to keep investing in the R and D and then also funding a fleet, Like how do you keep that on your books? Can you make the margins that you need?
Can you deliver the right kind of rides that make money?
Speaker 2: But now you're talking to things. You're talking robotaxis right
when you're saying a robot.
Speaker 4: Taxi, Yeah, so robo taxis would definitely be the fleet.
Speaker 2: So let's look at some of the examples out there.
I'd love to get your feedback on at Tesla FSD.
I mean, they're charging crazy prices for it. The prices
come down, but it's I don't know where they stand right now. Seven eight thousand dollars eight thousand, it was
as high as fourteen thousand. Not a year, but you
know for lifetime. Ford and GM with Blue Crews and Supercrews.
I think they're charging about two thousand, five hundred dollars something like that. But there's a willing, ready able audience
they want to pay for that. Now. I'm sure Tesla's
making money on it's FSD. I don't know if GM
and Ford are, but they seem pretty geekd about it.
They see a lot of demand for it. What are
your thoughts.
Speaker 4: Yeah, So when we think about autonomy, the systems that are for sale today are level two and you know, to get sae Wonky level two into level three, I still need a person. That person still needs to be
engaged at least somewhat in the driving experience, and so that is a driver feature. I see that as a
driver feature. It gets great data. So one of the
things that Elan has talked about is these vehicles out driving is like I'm getting all of this data. I'm
going to have the biggest database, which is great and really useful, but it's still a little bit different than no fool in. I never need a person to take
over is a more advanced engineering challenge, and so that's where you know, as GM talked about closing down crews, they want to bring the technology in house because as you think about it as a continuum in terms of development, it's all very similar, but because they still have to have the person engaged, it makes more sense as a feature in a car versus an underlying capability that unlocks a new business model like a robotaxi fleet.
Speaker 3: So okay, if we look at what Ford or General Motors is doing, so basically, you know, when they broke up rg.
Speaker 2: AI, that was the Ford VW or VW thing.
Speaker 3: They said, okay, we'll bring people in the crew saying oh, we'll bring people in. But I mean, is it basically
that they're bringing people in but only to enhance the level two plus system versus saying we're going to get to four or five in a consumer product.
Speaker 4: I do not have a crystal ball about their decision making on consumer product, and I have a feeling that time scales and just living through the current whatever the transition is in terms of powertrains is going to be really distracting. And I think that's part like beyond just
av GM has been pulling out of their partnership in China, out of the battery plant partnership in Lancy, Michigan. Like
there's contracting happening there is, absolutely, like you can see the effort to just focus on the core product, and focusing on the core product necessitates an incremental approach to development.
So absolutely they'll keep working on two two plus for maybe even in other markets. So GMS and I think
Toyota are both invested in a company in China that's doing autonomy, So you're you'll see maybe more partnerships to help bring that around. But I don't know if level
four for a consumer product will be like top of the development plan.
Speaker 2: What's interesting is, at least in the West, and with the West, I throw you know, Japan and Korea in there, just you know, for Shorthand, the automakers have pretty much given up on trying to do autonomy themselves. It seems
to me that they're just deciding we're going to buy it. Meanwhile,
in China you've got a number of a lot of makers who are still charging full speed ahead on doing autonomous developing autonomous technology in house. What would you do?
What do you think is a way to go well.
Speaker 4: So one of the things I didn't bring up before is that I've also worked a bit in global policy, and the reason in China that I think it makes sense for automakers to be able to continue to do this is there's a huge support from the government, both in terms of R and D but also in terms of creating cities where they're allowed to operate on the roads. Here,
like Nitsa still hasn't even figured out their exemption process.
It's kind of messy, to put it nicely. Europe's a
little bit better, Japan's a little bit better as well.
But in China, you've got government support, you've got the ability to operate on public roads, and you have Yes, you have a lot of people buying personal vehicles, but you also have a lot of people that already have the mindset to use shared transportation, and that as much as we want to say a robotaxis, are you in your car by yourself? You might have to share a
right like, there's the ability to explore the business model, and I think that especially in places where people use more modes than primarily their own vehicle, there's just more space to experiment. Paired with that governance unlock, I think
it creates a big opportunity in China that doesn't exist as readily in other places. Japan, you actually do still
see a lot of interest. So Toyota is invested in
a couple of different companies. They've still got the woven project.
They are an investor in May Mobility looking to bring well.
I think May is now operational in Japan, so you see that kind of support. Yes, it is through partnership,
but that's much closer than what I think you see with OEM's operating in the US.
Speaker 3: So we say May is operational in Japan. So what
is it doing? I mean, is it fixed root or
is it random root.
Speaker 4: I'm going to claim it's been not claim. I'm going
to state it's been about four years since I've been there, and I have not kept up with all of the press releases, but generally roads known roads. So one of
the things that I've been a firm believer in for autonomy since I started the conversations with Crews Automation when I was back at GM is on the technical side, it's just a problem of how do you actually create a validatable set and if you're trying to validate for everything, it's going to take you forever. But if you can simplify,
like straight up engineering, how do we reduce the variables, makes it much easier to go through and validate and put something out safe on the roads. So that's where
known roads speed. You'll see a lot of different companies
make claims about you know, either it's on highway or it's off highway. That's because those types of decisions drive
the complexity that they have to validate for two things.
Speaker 2: We had a guy on the show just goes back pre COVID, Brian Reemer from MIT, and he made the pretty then that the automakers were going to lose the robo taxi and av war because he said they just don't have pockets deep enough. He says, it's going to
take a lot of money to get this done and the tech companies are going to win. And that seems
to be happening now at least in the US. China
different situation for what you mentioned. And then you know,
you had like a Mary bara On putting her strategy together, which he announced three or four years ago. She expected Cruz, Yeah,
Cruz Automation to generate fifty billion dollars in revenue by the year twenty thirty with the robo taxi service. What
is your sense was that just over optimism or or could that be achieved by maybe a Waimo that that kind of revenue generation.
Speaker 4: I think it was over optimism to execute that by twenty thirty. I think Waimo could be on the path
there in the next five years, but it is an over optimism in the next ten. You have to be
able to do key money making routes. They've got to
be able to get to and from the airport, they've got to be able to tackle business travel. You've got
to be able to tackle yeah, you've got to be able to go into metro tackle those routes in a way that's economical. And I think that's where these announcements
from Weimo, you're starting to see them turn the corner for robotaxi as a direct almost replacement of ride share.
You've got to be everywhere to everybody, all at once, and that's billions of dollars in R and D because the tax cast work for everybody everywhere, all at once, and it's also lots of money into the fleet and the business and all of that where when we go back to where we started the conversation, if it's a main mobility, if it's a GADIC that's doing the middle mile transportation, you don't it does not have to be tons of billions of dollars to get it done. And
that's I think what's frustrating to me of just like the lack of imagination of like, no, let's just focus on what the business model needs to be and go solve that and let that unfold and in time it can be fifty billion dollars. But if you're spending fifty
billion to make fifty billion, it's probably like the numbers don't number. But if you're spending ten billion to make
fifty billion, like it starts to make sense. But having
a bit more sense on that endgame is really critical to make sure you're focused on how much you spend to get there.
Speaker 3: So you were mentioned earlier about in certain cases in the GM example, there's contraction because you know you just can't be doing everything and there's only so much money to spend, and you know, it get to the point of WEAIMO. I mean, is it possibly possible that there
would be a situation whereby WAIMO would do the engineering, WEAIMO would figure out the technology, and then WEAIMO could sell the OEM's a autonomous system.
Speaker 2: For their vehicles that.
Speaker 3: The OEM would not have to develop.
Speaker 4: I think as long as the OEM agreed not to compete with way most transportation service model, I could definitely see that type of future playing out because they've been very clear and have set up their business around transportation service provision, So licensing tech is just more revenue in as long as they're not creating competitors.
Speaker 2: AV skeptics are, especially ROBOTAXI skeptics, say, you're not going to save any money of this. You're going to take
the driver on, You're going to have to have somebody remote watching. You're going to have to be able to
service these vehicles, get them cleaned every night, and that's sort of so you're not going to save any money.
What do you think?
Speaker 4: Generally? So, I am an advisor to a remote monitoring
company that is coming out with some big news. I
don't know if I'm or behind it, so I'm not going to say much more, but I've been looking at that space and usually with remote monitoring you can get four to five vehicles to a monitors. Yeah, once you're
in a good efficiency mode, so you still do get efficiency there. It opens up the workforce to who can participate,
so that actually is a benefit. And then when you
think about.
Speaker 2: Eat, anybody with any kind of physical desybody.
Speaker 4: With mobility mobility challenges can still do this. Anybody that
maybe needs to stay in a place and doesn't have that time to commute, but they have the access to the data connectivity things like that not having to be you know, oops, I picked up a ride that's making me go two hours in one direction and now I've got to get back. Like those are challenges that drivers
face like cool, I you know, got the crappy luck of the draw, and now I got to picking up somebody at Detroit Airport and they need to get to Grand Rapids like they're not gonna get They're unlikely to get a ride back. So now that's cost on them,
where now as a monitor, you don't have to pick up all of that risk in terms of just revenue.
So so that part of it, I do think that there is opportunity for efficiency. Yes, the vehicles should be
cleaned every night, but they should be cleaned every night anyway, And how many of us have gotten into a taxi or an uber or a lyft or a bus and it's like, ooh, that didn't happen. So I would actually
say that's a good future. Uh, it's not. It's not
going to be software. Margins. I don't think hot take
it's not going to be software. Margins. I don't think
that robotax is never going to be thirty to forty percent Margins. I don't think because you still have a
physical thing that that is necessarily expensive is the wrong word.
But there's a lot of steel, there's a lot of silicons.
It's expensive, and it appreciates that it breaks.
Speaker 5: And there are all these other things that need to be comedy.
Speaker 2: But the basic question is you think the robotax taking the driver out can make this a whole lot more attractive from a business standpoint.
Speaker 4: It can create, it can make it can really unlock business models. And even the thing I was really excited
about with like May and some of the stuff that Wayne was looking at is giving transportation to people that don't currently have access to it. Like, yes, for those
of us who can have a car all to ourselves, this seems silly, or if we don't want a car we live in a dense city, or if we can't afford a car, or we can't drive a car. Again,
back to mobility impairments. The amount of unlock that this create,
that this can create is really exciting and one of the things that people often forget. We're like, oh, yes,
my car and driving. Some people sometimes drive for the
joy of driving. Sunday drives are there for some people.
Most people don't. Most of us are driving to get
somewhere to do something. And so when we realize, like
the job to be done isn't driving, it's moving, it really starts to unlock all of the different way you can think about it. So I said, you know, I
work with a lot of startups. I started talking with
the professor at the University of Michigan who's saying, you don't need to go to the doctor's office to get basic routine checkups done. Let's develop fully outfitted mobile health
fans that can come to your neighborhood. Think about how
many underserved neighborhoods could all of a sudden have access to much better preventative medicine. And the unlock on the
economy on that way, and that's where I think autonomy gets me the most excited, is like, yes, the business of transportation can become more economical, but the unlock that it can actually do for access to other things is where I think we're really going to see higher margins and revenue growth. Is figuring that out.
Speaker 2: And that's what I saw at CES. Autonomy is starting
to spread to all kinds of other things. So for example,
Oshkosh the truck maker is looking at automating airport equipment.
So you know the little trolleys that you know they throw your bags on and haul it out to the plane or back. You don't need a person to do that.
It's a known route. They go to known places every
single time. The one that I liked was the jetway,
you know that lines up with the plane so you can get on and off it. How many times have
all of us pulled into the airport where maybe a little bit early and there's nobody to bring the jetway down?
Automate it, have it autonomous and it's simple, right. All
it's doing is finding exactly where the door is and you know, moving up towards it. What else did I see?
Boats Brunswick, which is now totally into boats, has an autonomous system that will take your boat into the marina and dock it or take it back out again. Because
for a lot of first time boaters, especially if you got at it's scary. And you've got this, you know,
I'm talking bigger boats, you know that are even more complicated.
You got this million dollar boat. You don't want to
crunch it or crunch somebody else's or run down the dock or something. So I was very impressed at CEES
to start seeing autonomous technology. Another one a robot. You
plug it in in your garage. It's it's like this
three or four foot tall stanchion. You come in with
your electric car and then robot moves over, finds your charge port, opens the door, plugs it in. Because I
can't believe this, but I mean I have had more than a few people tell me they don't want an electric car because what a hassle having to plug it in every day. So again here's this a little bit
of autonomy attached to a robot.
Speaker 4: Yep, it's finding the job to be done, the pain point that somebody will pay for. And that's where yeah,
I think those are great examples of maybe, you know, we'll see how robotaxi unfolds, but it's happening around us in other ways, and it's becoming more pervasive, and that unlocks other people thinking to create new, more new ideas, which I think is for over the next five years, robotaxi will roll out at its pace, but I think we're going to see a lot more in other aspects of our lives.
Speaker 5: So, Allison, as you're working with startups that are.
Speaker 3: In the mobility space, what are some of the types of things that they're working on.
Speaker 4: I'm covering a lot of ground right now, everything from startups working in heat capture to be able to create more electricity to charge electric vehicles, through trying to help companies that are looking at new form factors two wheelers, four wheelers, rural charging. Just got off the phone with
a company that's working on vehicle display for high end vehicles that's also mobile. So covering a lot of ground,
but I think what's exciting to me to see is that there are more people curious to enter this space of mobility that maybe I grew up in Michigan, so I grew up under the glow of the auto industry, but you've got a lot of other people that have different experiences, different passions coming and starting to see real opportunit unity in either directly in auto or places and spaces around it. That's bringing a lot of excitement here
to Michigan that I've been having a lot of fun with.
Speaker 3: So are the are these companies working on hardware or software or somewhere in between the middle third as it were.
Speaker 4: I end up because there are not many people who have experience with automotive hardware startups, I end up connected more to those because it's like, oh, I found you.
But there's also there's plenty of companies working on software as well. There's a lot of really interesting work going
on right now in terms leveraging predictive capabilities to bring more granular information to people that are operating fleets. Honestly, like,
the most interesting stuff I've been seeing happen right now is targeting fleets of vehicles. Because you are not trying
to sell to a consumer. Consumers make emotional decisions do
I like it, do I think I need it? Fleet's
a little bit easier where it's a slightly more rational decision making process. We saved you money, we improved your
quality something of that nature. A little bit easier to sell,
an easier sales process in my opinion when it comes to mobility, so everything from how to manage energy across the fleet as you think about charging, how to get data about weather so trucks don't like whole truck fleets don't have to get grounded just because the next county over has frozen roads. If you're in the county that doesn't,
you can still drive right now. It's done regionally and
they can take it down to like the deeper than a zip code, like down to a couple of meters.
And that was when I just talked with yesterday. But
it's funny once you pop your head up and you're in the ecosystem, all sorts of things come to you.
Just talk with a mobile vet company today to come take care of your path, bring the vet to your house. Wow,
so you don't have to go to the vet.
Speaker 2: Another thing that I ran across at CES predictive maintenance for fleets, both hardware and software. I talked to ETAs,
which is able to monitor fault codes and predict what the next defect on the vehicle is going to be before it happens, and their vision is it catches this for the fleet, arranges for the spare parts or whatever needed to be shipped to either the fleet or wherever they get their vehicle serviced. So it just pulls in.
Everybody's ready, but the moment gets done.
Speaker 4: There's that is a great example, and there are a lot of different efforts going on from both hardware and software and how do we stop downtime. But I think
what's exciting there too is a lot of it comes down to safety. If you have a major issue in
your vehicle and your fleet and something breaks, it stops working.
The ability to prevent that from happening and keep pleats operating safely on the roads that we're all on is really really exciting. And the ability to then also track
back through the supply chain things down quickly. Lots of
good work going on and there and that ends up.
There's some hardware plays, but a lot of it with UH with what's going on in terms of AI focusing in on data sets specific to vehicles, specific to different technologies.
There's a lot of great application work going on to be able to help identify and surface those things more quickly.
Speaker 3: Well, I think I think Ford Pro much of what it is doing and much of the revenue it is getting is from things like that, you know, keeping up time for its vehicles by doing predictive maintenance or alerting people that they need to have their trucks taken care of.
Speaker 5: And that's that's yeah.
Speaker 2: No, I mean, you know, Ford Pro is grown by leaps and bounds, and their margins are really good, largely because I mean they're selling a high margin vehicle, whether it's a van or a truck. But but yeah, once
you get into fleet maintenance, the margins can be terrific.
Speaker 4: Yeah, And that I think that's what's exciting to me is we think about sort of the future of the industry is how everybody is going to chart their own course toward being able to find better margin opportunities because making cars is low margin, and if the companies need to be able to compete, opportunities like Ford Pro, where you're really focusing on the whole end to end business are really exciting opportunities that I hope to see more
automakers take advantage of.
Speaker 3: But is this, you know, fleeked thinking versus individual consumer thinking.
Speaker 5: Things like predictive maintenance.
Speaker 4: Individual consumers can benefit. Typically you're not seeing a ton
of direct activity there because consumers don't always pay attention, and it also requires a different kind of relationship. The
OEMs have their relationships with the dealers. If the OEM
was to tell you, you know, they already kind of tell you need an oil change or your tires are low.
If to send you to the local place versus to send you to the dealer, there's aspects of the historic business model that start to get a little drinking. And
I think if they're for the dealers that have more collaborative relationships with the OEMs, there's absolutely opportunity to take what Ford Pro's doing and do that with their fleet.
And for forward thinking dealers, I think they're already figuring that out. That is not the whole set of dealers,
and that's not the whole set of oil change tire change places. There's another company that I've talked with that
is just helping local mechanics show up at your house to be able to do basic maintenance work. So you're
seeing people trying to stitch that together. But the business
model of car sales in the US, there's a lot of policy in the way of how people can innovate, specifically with OEMs and dealer franchises.
Speaker 2: Hey, let's take a quick commercial break right now. Shout
out to our good friends at Bridgestone.
Speaker 6: Performance that shines even in the rain. That's what really matters.
Rich don't pretends to tires, improved grip and wet conditions.
Speaker 3: You mentioned you early on were working in electrification for vehicles.
How do you see that today?
Speaker 4: So I started at GM in two thousand and eight working on ev charging. At that time there were about
thirty five people in GM working on battery packs and charging power electronics, and now there's like thousands. It's fascinating.
So I think it's a really exciting time but also very nerve wracking. And that plays in part because not
just due to the technology, but how different automakers are looking at what their global market footprint is. If you
would have asked me that question eighteen months ago, I would have told you it's happening. China is electric, Europe
is going that way. The US will have to follow
because our automakers are global automakers. We see GM kind
of retreating from China. We see a lot of struggles
in Europe now, so I think it's it's going to be an interesting It's going to be an interesting time to watch because the domestic auto industry could choose to continue to create combustion engine vehicles for the US market and just do that improve it, you know, doing all extended range electric vehicles or the peebs and figuring out how to meet fuel economy requirements with that if they
if they want to be able to participate in the global industry, they have to electrify. But then it comes
down to price point. A lot of the cars coming
out of China have a lot of cool technology in them in terms of connectivity, and the price points are just a lot lower. And that's what I think is
going to be tough to figure out how to how an if to compete.
Speaker 3: I'm just wondering. When you say, you know global competition,
I mean you mentioned GM pulling back from China. Ford's
business in China is not all that great. It's term
General Motors has pulled back pretty much almost all from Europe, with exception of some they're going back in with some of the boutique sales let's call them that. You know,
Ford's business in Europe is really declining their their retail side, their commercial side of so. So I mean given that
if you're a domestic maker, I mean, wouldn't ICE strategies make more sense at least in the medium term going.
Speaker 4: Forward in the medium term given the cards as they sit on the table today. Yes, I think that's it
was very funny. I want to say it was like
four or five months ago. I saw an article come
up that used the acronym ERA of extended range electric vehicle, and as an early Bolt engineer, I was like, oh man, we are back. We're back. We're back to eight. I
think the best path forward, and one that I hope that they choose to take is to do the combined powertrains, because what you don't want to have happen is a full focus on only ice and then all of a sudden something changes and an ice is not available, Your suppliers are no longer really focused on it, so you're not getting innovations there or policy shifts, and you get caught flat footed. And that's where I think we'll probably
see some hedging, so more focus on ERA, more focused on blended trains than just like straight ice, or at least I would hope, because history is long.
Speaker 2: Yeah, but there's a danger in that too. And look,
there's no question this industry is going crazy over e revs right now, because this is you know, the great hope of the industry that you know, they know they've got to get beyond pure ice, but they know that at least in the US, half the car buying buying public wants nothing to do with evs. So maybe E revs,
which seem to offer a better solution than P haves, are going to go. But you know, the way I
see it, batteries are the big hang up batteries in public charging. The public charging thing is getting taken care of.
It's improving literally by the day, even though it's got a ways to go. But if you get the cost
of the batteries down, boom, this war is over. EV
is going to win very very quickly. And I see
a danger for the industry saying, oh, let's go e rev right now. You know, we went all headed headfirst
into two BEVs. You know we were going to abandon ice.
Now we're going to pivot quickly to hybrids or maybe e revs. And I could see we're in two three
years the cost of batteries comes down where it's cheaper to make a BEV than an ice vehicle. Public chargers
are there, and you've just put billions into this, this hybrid technology.
Speaker 4: Yeah, the hybrid. You make a good point. Hybrid technology
requires its own development, It is its own set of controls and powertrain. At least it keeps their skin in
the game on battery.
Speaker 3: No.
Speaker 2: I agree.
Speaker 4: I agree with the skin in the game in terms of power electronics that transmission where they would end up spending a lot of money. That is sort of money
ill spent if you were only doing e rev is in that transmission and being able to have the combined energy system. I think keeping of suite on the table
makes sense because to your point, as battery costs continue to come down, or if Chinese vehicles are able to enter the market through other joint ventures or other investment strategies, they are cheaper than they are less expensive. Cheap is
the wrong word to use. They're less expensive and of
quite good quality than a lot of entry level ice vehicles in the US market today. So for everybody at
the top end of the market, that's like, no, I want, you know, my internal combustion engine, very nice vehicle. Great
for everybody else that cannot afford a new vehicle today and is looking at terrible fuel economy on a used vehicle.
An inexpensive EV doesn't look as scary, Okay.
Speaker 3: But Elson, when in our lifetime are we going to see Chinese evs in the US?
Speaker 4: I do not know. I do not have a crystal
ball over the next ninety days.
Speaker 3: But I mean, I mean free Trump administration. I mean
we still have the tariffs.
Speaker 5: On the Chinese evs. I mean they're well.
Speaker 2: Look, Trump has said if you want to, if byd wants to build electric cars in the United States, he would welcome that. Well, we'll see what happens because the
Chinese supply chain has got to be part of that for them to maintain their low prices, and that might be a problem. You know. Trump might say, Yo, you
can build cars in the US, but it's got to all be US sourced or North American source content in it. Right.
Speaker 3: So, I mean, so there's some reporting that Bloomberg did today that JP Morgan visited Detroit, talked to people in the industry and said, you know, what is he going on with the next administration? And three points this sky
makes is that if they curtail the seventy five hundred dollars consumer text credit, revoke the California emissions waiver, and relax federal standards for tailpipe pollution and fuel efficiency, suddenly ice makes.
Speaker 2: ICE makes a whole up more sense. And I believe
that's exactly what's going to happen.
Speaker 3: And this whole idea, I mean, the five years from now when we have that great battery well we said that five years ago.
Speaker 2: We're still waiting.
Speaker 5: It's just like, yeah, it's gonna come.
Speaker 4: It's gonna be interesting though, because those those things all impact the vehicle sales, but they don't actually look at the reality of how much money has gone into battery plants in red states. Just to be perfectly want, if
the sales start to go down, you start to lose jobs, and states who have representative in Washington, DC that are currently maybe considering take rolling some of those things back all of the sudden asking for more ev so they can have their jobs back. Okay, And that is a
wrinkle that I'm just curious to see. Okay comes around.
Speaker 3: What if they continue to give the tax incentives to the producers of batteries as they do. Now, what is
it like thirty five dollars per right? I mean that's
that's why you have these big battery plants, not because anybody thought that they're going to sell that many evs.
Speaker 5: It's like, wow, we make money.
Speaker 3: You know, you don't make money off of baking hemis right, nobody.
The government's not given you, Hey, here's some money. So
those continue because they need batteries for defense purposes, right, So you don't lose those jobs.
Speaker 4: But defense still needs GM to be producing V volume.
You still need the rest of the technology to wrap around it, and the defense case in particular needs domestic capability.
So that means a GM, even if it's not a consumer EV, still has to make an EV with their GM.
They have a GM defense arm. That's what brought them
up as an example.
Speaker 3: Right, which has been selling internal combustion engine vehicles.
Speaker 4: Yes, too, But if the case is that the battery plants will be kept alive through defense sales.
Speaker 2: Yeah, there's not enough volume. That's why I argue yes,
for national defense, the US has got to be able to have its own secure battery supply chain, but it's going to need the auto industry to get the volume the economies of scale to make that viable. Otherwise you're
going to be paying, you know, two thousand dollars for a double a battery.
Speaker 3: I just look at from the point of view of Okay, last year in Germany, EV sales dropped by twenty seven point four percent. Okay, So here is a highly technical
economy that is very much focused on environmental issues.
Speaker 5: And that is what happened.
Speaker 3: Yeah, in that, you know, And it's just like, so how long can domestic OEMs afford.
Speaker 5: To keep hoping?
Speaker 3: At some point people are going to start buying these in volumes that will make this a business versus.
Speaker 5: You know what, take a hell a lot of money, and that's coerato.
Speaker 2: You do, you solve the battery price problem and uh c ATL claims it has already done that. It claims
that you can do EV's in China, build them at lower cost than ice vehicles. They claim they're there, So
I believe them, I actually do. And and to me,
that's the whole thing. Once you you cross that price
point where an EV power train is cheaper than an ICE power train, I mean, then I think you're going to see a lot more people come into the market, especially once they start to see, oh, there's a charging station there, there's a charging station there, or I've got an app that will tell me exactly where I got to go if I'm on the road, otherwise I'm charging at home. I think you're going to see the market
for EV's pickup considerably five years. No. Look, I've been
saying all along, but it's kind of.
Speaker 4: Like if you will get solar, the support or lack of support for solar in the US, we've been kind of all over the map. But the investments that were
made in China in solar capacity and innovations drove the cost down such that now like solar's taking off here regardless, there are some domestic manufacturers not as many. And I
think that that we're going to see, to your point, something similar happen where there will be continued innovation elsewhere that eventually it will be something that cannot be ignored because right now, like we're talking about vehicles that generally the starting price is forty to fifty thousand dollars, The used car market right now is awful. The repot market
right now is awful. Like the economics of car ownership
are not working for people. And so if you can
have a twenty five thousand dollars car or cheaper that you can charge at home for a third of what you're paying in gas right now, that changes things dramatically.
Like I feel like people are kind of talking about how many people are upside out in their car payments right now. But it's a big problem. And is you
think about the economics of car ownership doesn't make any sense.
It truly does not make any sense. And if we
can get closer to something that makes sense because it's that cheap, people will pull. People are figuring out how
to go sideways to get TikTok and keep TikTok with the pending potential inability to use it. We'll see what
the Supreme Court decides and how things shake out in the next ninety days. But people will figure it out
once they have access, once they see that it's a thing and that it's at a price point that they can afford, Like, we're not gonna be able to stop it.
And I think that's what we have to remember, is the consumer will find out at some point that they're being hoodwinked into a more expensive product that they don't have to have Maybe it's not five years, maybe it's ten years. But if that's what happens, the domestic automakers
will be come defense contractors maybe, but they won't have a bigger business.
Speaker 3: But you said earlier that consumers buy from the heart more than from the brain, right, So when you talk about a cheaper vehicle, I don't think most people want to buy cheaper or less expensive products. I mean, there
are less expensive products, and they would opt for buying something that is.
Speaker 1: More deluxe, whether they can afford it or not.
Speaker 4: It's not rational, that's very true. But if you look
at some of the vehicles that are coming out of the Chinese automate market right now, they have hot more capability built into the vehicle at a lower price point than you can get in a forty thousand dollars car in the US.
Speaker 2: And that's what causes that to happen.
Speaker 3: I mean, it's just like I don't see how we can translate that here into into this market like suddenly.
Speaker 4: It's not going to be sudden. I think you're going
to have a lot of people getting exposure in other places and start like the Internet is a problem in this case, seeing more of it. Learning about more of
it is going to create a pull and a question of like, why can't I have that too? Why do
I have to pay fifty thousand dollars to get a car that has all the connectivity that I want, the active safety that I want, the powertrain that I want, when when I could get it for cheaper, like in another place, that is a different design. To your point,
it's a fundamentally different cost structure. I don't think that
some of that will probably come from the high end where people are traveling to those places and experiencing those things.
It may start there, but you can't hold that back from people forever.
Speaker 2: But here's the other thing. There's a lot that the
West can learn from China. And everybody says, oh, they're
all subsidized, and you know, we'll never be able to compete with that. They are subsidized, no question about it.
But you know, there's some really good case studies that we should be looking at. I was talking to one
supplier that did business with the Chinese automaker, and they said, we got this thing done in eighteen months. It was
like it went bang bang bom and from scratch to full delivery. And they said, as we look back on
what was going on, you know, a typical traditional automaker gives us four thousand specifications that we have to meet.
The Chinese company gave us four hundred. What the Chinese
are far better at doing working with their suppliers as saying, here's what we want it to do. You go figure
out how to make it happen at this price point.
Another thing the Chinese used far more right off the shelf componentry, simple componentry, not the high tech stuff. You know.
It can be anything from door hinges to tire pressure monitoring systems to windshield wiper actuators. Just buy what's already there,
No need to redesign it, no need to have to validate it, source it, none of that stuff. You just
buy it, put it on your car. Now you're shrinking
your product development time. And as we go to more
software defined vehicles, as we go to them, I shouldn't say go more to everyone's going in that direction. Now
all of a sudden, you can do a whole lot more of the stuff that the Chinese offer on their cars, because they're getting there a whole lot faster than Western companies are. With the exception of Tesla, which kind of
invented all this stuff, by the way, So yeah, we don't need to just blame subsidies to try to explain why the Chinese are doing so well. They're just operating
the good ones. There's crappy Chinese companies, right, and there's
traditional Chinese or state owned ones that don't move nearly as fast. But the good ones, the byds, the NEOs,
the Lee Autos, the Great Walls, these guys are moving really fast and they're doing things differently. They're running their
operations differently, and if we start doing those things, we're going to see our costs go down.
Speaker 3: So okay, So all of the companies that you mentioned, including Tesla, is basically a child in the age, right, Yes, okay, So you know we've got over one hundred years of people doing it a certain way. So, Alison, you worked
at one of these companies, what likelihood is there that there would be a sufficient number of people within an existing organization that has been doing things for this very long would suddenly say, yeah, you know what, we can buy the door hinges off the shelf. Can we can
you know, we can go to home depot and get those fasteners I mean, it's just I mean, you.
Speaker 4: Let I laugh out loud, because I've been a part of those conversations of like, nope, we got to re engineer it ourselves. But that was also fifteen years ago.
And I think to the point that you made earlier, or like the emphasis that you were making earlier, this is a moment of existential decision making. This isn't a
moment in the industry of do we add fins to our vehicle or not? This is how do we continue
to exist. And for those leaders who acknowledge we are
in existential decision making, it can become much clearer and much more quickly what needs to fall away and what needs to be, what good needs to be carried forward, and what needs to fall away. I think where I
struggle is that having a domestic protected industry could create the sense that it's not a moment of existential decision making.
And that's where I'm not sure it's than how many leaders.
Speaker 2: And that's the danger of tariffs is that you put up the wall and it's like, hey, we got it, easy, breezy here, We're going.
Speaker 4: To have great trebonts. It's going to be awesome. You're
gonna love your three sills.
Speaker 2: That's why I would love Trump or whomever to announce. Look,
starting in twenty thirty, we're going to start to phase out the tariffs ten percentage points a year. By twenty forty,
they're gone. So you got from now to twenty forty
to figure out how to get your your operations in order.
Speaker 3: Okay, But to go back to your point about people finding out about these expensive loaded capable vehicles that are costing a fraction of what they can get the same sort of capabilities in the vehicle here, ten years will be too damn long. People are going to sit around
and say, oh, and twenty forty will get that, just like yeah.
Speaker 2: But here's the reality. So, I mean, there was a
number of us in the very early eighties that really got to know the Toyota production system, start talking about it.
There was all kinds of consultants, harbor and associates, especially preaching it. It took over a decade before the industry
really absorbed those lessons and started to apply them. Now,
once it did, they were off to the races. All
of a sudden, the US auto industry pretty much matched the Japanese auto industry and efficiency and quality. I just
think the reality is it's going to take a decade.
Did they have a decade? Maybe not.
Speaker 4: Don't have a crystal ball. I'm not going to make
those clears, but let's just.
Speaker 2: Say the possibility is they do not have a decade.
That's a very real possibility.
Speaker 3: So, Alison, you talk to all kinds of people in the industry, startup people, people in academia. I mean, is
there the capacity in terms of knowledge, capability, people, everything to make this change happen.
Speaker 4: The technology and innovation are here, we have the wrong culture to unlock it. And so one of the projects
that I'm working on is, actually, I'm not even going to try to fix the automakers, but in the state of Michigan, how do we get more of that talent and capability to stay here and innovate here and let them know that startups are even an option. Because so
I started as an automotive engineer and I did go co found a startup. Figuring out that path in Michigan
was really hard. It was really hard. There's nobody that's like, oh,
here's how you do it, here's what you need to know about. And even within the automotive industry information is
very silent. Like interiors people don't talk to powertrain people.
We work on two totally different things. It's all auto,
where if you go to other innovation ecosystems, you could be an auto person talking to a medical device person, startup corporation, it doesn't matter. I want to get more
of that happening here, so that way, when the industry is ready, we've got more of that talent that has learned how to move quickly, how to deal with the ambiguity that comes from not knowing. I know, I have
to hit this goal. I'm not sure what comes after that,
but we'll figure that out when we get there. That's
what you learn when you're in a startup. You learn
to get comfortable with that, but also to get excited about it. And so that's what I'm really excited about
right now with the Changing Lanes program, is to try to help keep grow more of that culture here. I'm
going to try to do it on the inside, and then you know, they can go pick people off and we can continue the great rotation of tell that happens here, but I don't it does not happen as it is status quo.
Speaker 2: So I would rephrase what you're doing. Let me tell
you what you're doing now.
Speaker 4: I love it. I love it. No, I got to
know how to pitch it better.
Speaker 2: So you are not getting a new generation of entrepreneurs and an entrepreneurial spirit revived in Michigan. Because remember, if
you go back one hundred hundred twenty years ago, this was Silicon Valley of the United States. This was all
the innovation was happening. We've let that further away through consolidation.
We had these big behemoths called the you know, the Big Three. What you are really doing is creating a
new culture and group of people so that the state of Michigan has something when the traditionals fall and collapse, because I don't think they're going to be around to very optimistic.
Speaker 4: I mean, he's saying what I think in my head, and I don't see how loud much right that I hired I was one of the last people to hire end a GM full time before they went bankrupt. I
watched the tech center roads lined with SUVs to take people home. That was extremely impactful. That was like my
first six months of being a professional in the world, watching that and seeing what happened to all the communities, not even just my coworkers, but the communities was really formative.
And so as I look at what happened in eight and I'm like, we had over six thousand layoffs and the auto across the OEMs and the suppliers in the state.
Just last year normal course of business boomer like just booming year for GM six thousand lamps. Where are those
people going to go when the whole industry is collapsing?
And that's good talent, it's good talent, great experience. And
so the aim really is, how do we create a place to land for those that think they want you know, startups for everybody I'll admit that, but think they might want it. How do we create a welcome mat How
do we make it really easy to find learn about a lot of even the young people that I talked to are like, oh, I have to go to California to do that, Like no, no, no, you can do it here. Stay here, please stay here, let me help.
I'll introduce you to people. You can do it here.
You can found your own company, or you can join a company. How do we just make it easier to
learn about those opportunities? So that way has this great talent.
These people aren't getting let go because they're poor performers.
They're getting let go because of changing business conditions. So
how do we redeploy them, keep them here and grow other opportunities is really, as you can tell, what I'm very excited about.
Speaker 2: No, look, what you're doing is awesome and it's absolutely what's needed. And I would say, look at what's going
on in Germany right now, because to me, I keep saying, Germany and Europe in general is the canary in the coal mine. You know, Volkswagens you talk about six thousand
getting laid off at GM. Volkswagen's talking about thirty five thousand,
and that's going to ripple through the supplier community. That's
just Volkswagon alone, thirty five thousand, you know, Bosh is talking ten thousand, counties talking ten thousand, you know, and so on down the line, and that's going to happen here.
So I love what you're doing. This is getting us
ready for the existential you know, paradigm shift that I see coming to this industry. Not coming, it's here now,
it's just in the early phases.
Speaker 4: And it's how do we take that talent and redeploy it because I think what's different than two thousand and eight as of very which is great, is the rest of everything is in recession, so there is the ability.
There's tons of investment going on right now in manufacturing technology.
You've got tons of startups starting in California and manufacturing.
We know how to do that here, and we know how to innovate it on it here. We just need
to talk about it better. And so these are the
things where it's as much as it's the existential issues for the industry that we saw in eight, it's not the broader economy. So I think this is really a
unique time to be able to capitalize and inspire more of that innovation good.
Speaker 2: And that's probably the perfect point to do one.
Speaker 4: Shout out though for those of you who think you can't do it here or don't know of a story, We're doing fireside chat. So I'd like to welcome you
January fifteenth at tech down in Detroit, January twenty second at oh You Inc. Up in Auburn Hills at Oakland University.
We want to get the word out and just help make it seem less foreign and less uninviting. So if
this sounded interesting. You are. You're welcome. Please come. I
will make sure you guys get the links for your show notes.
Speaker 2: And just let me add on to what you're saying.
We're here in Michigan. We're talking about stuff in Michigan.
These lessons can be applied all Yeah. I mean, we've
got audience in Germany, We've got audience all around the world.
So don't just take this as a Michigan thing. Listen
to the lessons being discussed here. Take it to your community,
because I'll bet a bunch of people are sitting in places listening to the show right now or watching it thinking, jeez, they're doing that in Michigan. You can start doing it
in your community too.
Speaker 4: Exactly real.
Speaker 2: Great Allison, thanks so much for coming on the show.
Speaker 4: Thank you guys so much for having me. This was awesome.
Speaker 2: Great and Gary, I'll see you again next week indeed, and hopefully we'll see all of you.
Speaker 1: I'll online. After Hours is brought to you by bridge
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