AAH #771 - How OEMs Got the EV Thing So Wrong

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AutoLine After Hours is brought to you by Alex Partners when it really matters. Welcome back to AutoLine After Hours. And I have to say hello to Gary. This sounds like this is a penance or something. It's very good. We have to go through certain motions here to get the show started. Gary, how are you doing? I'm doing well in yourself. I'm doing terrific. We gotta let everybody know. We've got Patrick Anderson from the Anderson,

the economic group. He's got some interesting things to say. We're gonna dig it out of him. We got Jackie Charnigan back from the Detroit Free Press. And it's always fun to have Jackie on the show. Even though I think this is only your second time, but you're backed by popular demand. So my demand of you. That's right. So Patrick, you've done a lot of research into EVs. You also drive an EV. In fact, it's plugged in right outside the studio,

as we speak. But you, we really wanted to have on the show because you got some things to say about why the industry has seemingly got the EV thing so wrong. And when I say so wrong, I don't think they got it wrong necessarily from a technical standpoint. We can debate those points. But from a sales standpoint, man, did they miss the mark? So tell us. What are your thoughts on this? Why did the automotive, the legacy automakers?

Get the EV thing so wrong? Well, first year, you're right. And I think it's 2025 here. We're here. But when you and I met, it wasn't clear they got it wrong. And if you might recall, we were on a different set. And I said, oh, no, it's not going to be 50%. It's not going to be 70%. It's not going to be 80. It won't be an all-electric future. Maybe we can get above 20%. And we went out and continued the conversation. No, no, no, we debated that right, right? Right into the parking lot. Right in the parking lot. And what we said at that time again,

we do a lot of work in the auto industry. And I'm also a consumer. I pick cars myself. And one of the things that you always see from our company, from Andersen, economic groups, you always think about the customer.

We always think about the taxpayer when we're looking at something we think about the user. And which we found out. And we got a part of this as direct observation myself. But also we looked at we estimated what the real world costs were.

We looked at the real world, world burdens of fueling and things like that. And we said, like, this is a really nice vehicle for a very narrow segment of the market.

What segment was it nice for? Well, generally affluent people who have a garage and live in metro areas.

Meaning Silicon Valley. And if you want to look in Michigan, you know, Ann Arbor, Birmingham, Trevor City. And you look around the country. And that's exactly what's happened.

Pretty much exactly what we had anticipated is happening. Electric vehicles keep getting better. They're better. There's more places to charge. Still way too few.

A lot of them still don't work, but fewer than used to used to fail before. And what you see is overwhelmingly you have a very narrow portion of the market that likes them generally affluent people in metro areas. Because that's what it's made for.

And so we just looked at that. And we've been saying it now for four years. And now it seems like only in the late 2025 is basically people said, yep, you're right.

Well, listen, why they said, you're right because the Trump administration kicked the legs out of everything. It took away subsidies for buying them. They took away subsidies for making batteries. They took away subsidies or trying to take away subsidies for the chargers.

And so it's easy to say, well, now you're right because all that went away.

So I, of course, have some numbers here. Okay, let's look at these are cox automotive numbers. Okay, so there are 70 EV models available in the United States, 70.

Okay. Through the first three quarters of this year, there were one million 44,576 sold. Okay. So just over a million.

Now remember, 1.4 million, no, no, no, 1.0 million, 1.0 million. Okay. Of that number, and this gets the point of the legacy automakers, of that number, 420,000 are model threes in model wise. Okay.

So basically, this leaves 624,328 without Tesla. Now this means 68 models. Okay. So if we ever said out for three quarters, each of these models sold 9100 vehicles. Now you know, John, economies of scale, and there ain't no economies there. No, no, that's right. But, you know, you've got a lot of.

Uh, those are excellent. Have you thought about becoming. Yeah, we use people with your skills. So yeah, but those, right now, those numbers include companies like Vennfast, they include companies like Fisker, they include, you know, a lot of companies like General Motors companies like Ford. Listen, listen, I would act like smersady's bands, companies like BMW, correct companies like Porsche, companies, and we can go on. Right.

All right. There's a lot of models and what exactly what you're saying. Back when I, when I bought one that would hardly any choices, I mean, you have a Tesla, a handful of other ones. Now there's just a surfeit of choices. And we actually have had, and this is part of the argument that I made in that, that article cars costs and cognitive dissonance, cognitive dissonance. I mean, like, how did you get it so wrong? We actually had automakers publicly announced they would stop making products that people liked. I mean, think about this.

Yeah, but, Pat, why did they say that? They said that because government regulation was forcing them into this.

With the exception of, yeah, no, with the exception of Tesla, Tesla, you know, got into this because it believes electric is the future, which by the way, I still believe is the future. We can get into that.

We need to get another parking lot. But what I'm getting at is the industry was forced to get into this because not only did you have,

EPA emission requirements that dictated going electric, you had, it's a fuel economy regulations that were dictating that.

And you had the California Zev mandate that it does another states signed up for that mandated given percentage of ED sales.

So I don't fault the industry for going into all this. The law said they had to what I do fault the industry force in some areas is coming out with electric vehicles that were dead on arrival.

IE full-size electric pickups full-size electric SUVs. I think they got that. But they, those vehicles came out because the automakers were bullish about those products.

They didn't come out with those products because they said, oh my God, we've got to meet the mandates. They said, no, no, no, people are going to buy these like mad and that didn't happen.

General Motors did a really good job of picking the vehicles that were their most successful for the electrification first because it's less of an adjustment.

They knew it would be a huge adjustment for an individual consumer to make to go EV. But at least it's couched in the vehicle that they're accustomed to.

But they were later to the party because they wanted to start from scratch versus a four motor company that essentially carved a hole where the battery would go and did the conversion there.

But I think you were right to start at the beginning of how when companies like General Motors were saying 0000 and they were making all these bold declarations about how deeply they were going to go.

It was not wholly far-fetched at the time. It was ambitious and we were talking about it a little bit less now. But at the time it seemed to be we were moving in that direction.

It seemed that the regulations were pushing us there in this country but these global companies were seeing what was happening around the world.

And the future seemed very clear at that time and regulations were catching up and everything was culminating for 2025 especially for a brand like Cadillac.

They launched a lot of EVs this year and they had been planning these for about 10 years. And what a welcome to the market.

Well look Cadillac's doing a pretty good job. I want to say right now one out of three Cadillacs being sold is an EV.

So I'm not going to say they've cracked the code but they're doing a pretty damn good job about it.

Where I come in on the full-size truck thing is remember when when Elon announced the cyber truck and it was going to be $40,000 they got what?

Over two million people saying hey I'll put down a fully refundable deposit.

And Ford I want to say got a quarter of a million a 250 because there's was $39,995 or something under 40.

But where I think the industry got Iran going with trucks is if you know the truck buyer and they don't want anything to do with EVs.

They just don't want them. They're the most conservative buyers in in the market and they they just don't want electric.

And so anybody who's buying I shouldn't say anybody that's too broad a brush but the vast majority of people buying full-size electric trucks are still selling some are people who

largely have never been in the pickup segment before.

Let's look at trucks in luxury again.

You can think back about the customer and this is what we were saying four years ago.

Electric cars make sense for a narrow segment of the market affluent, suburban, got a garage and they got probably another car or two other cars.

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Okay, so what's doing well? Big Cadillac once.

I rolled one of me like, yup Cadillac IQ escalate or whatever they call that.

I mean that's like it's big, it's chromed, it's expensive.

Did I mention it's big chromed and expensive and I bet it rides great and I can see the whole case for it right there.

Because that's what that buyer wants and they they're going to pay for it they deserve it.

But pick up trucks not only conservative buyers, but actual work being done.

Now, yeah, there's a lot of ones with the big four by four stickers at the country, western buyers and Wal-Mart and stuff.

But there are also a lot of people that actually work with the truck.

And as we pointed out, you look at the Anderson Economic Group fueling cost studies now which have been regularly done since 2021.

It's way more expensive.

If you actually look at real world and if you're driving around, you're going to have to use commercial charging.

Like, this is just way more expensive than a gas truck, let alone a diesel truck.

And you've just told those people, no, no, come on, you get with the program.

And they're like, no, no, my livelihood depends on me being able to get to the job site and stay there all day and get home with my equipment.

And no, I'm not going to take a risk of this.

Yeah, well, expensive.

Let's come back to that because as you know, what drives that is the cost of the battery.

Battery cost continue to come down.

They're going to continue to go go down.

And at some point, probably before this decade is out, even in the United States, we're going to have that crossover point.

We're electrics going to be cheaper to make than than an ice vehicle.

And I would say we don't, in my opinion, we shouldn't judge what's happening with the EV segment in the US until Ford comes out with the series of modular EVs that it's going to build down in in Tennessee.

And when GM comes out with its next generation of low cost ones.

And then I think we're going to get a much better read of where the EV segment is going.

And I think it's going to continue to grow.

I've been saying it's going to we're back.

We had our parking lot debate.

And you know, I thought, yeah, it's going to grow.

I mean, when I was saying it's going to grow where I said it's going to grow from four to six percent.

Six to eight percent.

Eight percent to ten percent.

Now we are except for that little spike when the subsidies were ending.

We haven't even reached that yet.

And I think we're at eight percent.

Yeah.

You're quoting a million.

I think this is Cox Automotive.

Cox Automotive through when Q three, Q three.

So they did sell 400,000 vehicles in like a month.

Yeah.

No, no.

But I think you're going to see total EV sales in the US this year come in at about 1.2 million.

Okay.

Yeah.

Well, Q four and Q one of next year.

That's going to be a very different.

Oh, it's going to be.

It's going to be a barren landscape.

It's going to be bad.

Look, next year is going to be I'll bet EV sales fell fall at least 40 percent.

At least 40 percent.

I was asked months whether the EV sales would fall off a cliff.

And I said, no, because they never got on a cliff.

They're on a hill and you know, they're going to fall down a small hill.

Again, that's exactly where the market was.

That's where consumers are.

And it's not a failure.

If we would, if we would be sitting around here, if the manufacturers in the government had been honest with consumers.

We would right now be talking about what a success.

The EVs had been from growing from 2 percent to 8 percent of fourfold increase

and having increased number of charges and everything else.

But first, the government was dishonest, wholesale dishonest, the EPA regulations.

If you read those, you go, what are you talking about?

Starting with, and I'm glad you said they were mandated.

Yeah, that's what code of federal regulation means.

It's a mandate.

That's what finding new means.

It's a mandate.

It's not a compliance pair.

No, it's a mandate.

They were dishonest about that.

They were dishonest about those forecasts.

And you're right.

It wasn't just a few.

It was dozens.

Some of those people should be ashamed that they put their company names besides those things.

But the EPA and the federal regulatory agencies that put them in like everybody agrees were going to be at 50 or 60 or 70 or 80 or 90 percent.

I mean, there's some real, I think, some shame out there that should be going on.

There's nothing wrong with being, you know, having an honest forecast and being off.

All of us that are in that business, every single forecast is off one way.

But this is constructing out a whole cloth, a world that never existed, and then trying to mandate it on people.

And I think there's some folks that there should be some accountability for this.

I mean, heads should roll.

Yeah, heads should roll.

Will heads roll?

Well, one head did roll if you want to put it that way.

If you look at what's happening in the market, and we should concentrate on the market because that's what I always said.

Like, you had to look at what customers buy.

Not what politicians want, but we had amazingly only one presidential election, my adult lifetime, had candidates explicitly talking about one kind of car.

Not always, honestly, not always coherently, but it was pretty darn clear that you had the team EV and you had team.

And as a whole, climate crisis is hoax, and then EVs are a scam.

How did the industry ever end up in a situation?

I'm not going to blame the industry just on that.

But the government and particularly the federal government under the Biden administration, and they started with Obama, where you just were pushing this.

And you were not being honest with the public about it.

If you'd been honest with the public, we'd be sitting around here saying, the EV growth is a success.

We've got 8% of the market. It used to be two.

And people are paying extra for something that they actually like.

And you'd be asking me, don't you like it that you're out there in the cold weather trying to fit the charger in?

And I would be saying, yes, John, I like that because I did like driving down. It was a great car.

I still got a check and see if I can get back home, but I do appreciate the extra watts I'm getting while I'm here.

We'll run the show longer, so you charge longer.

You're right about sort of inducing the market, and so on. It's sort of forced this change.

People, nobody, my generation or otherwise, remembers the early days of the gas powered vehicle.

Nobody remembers carrying fuel with them.

Jackie, we don't remember that either. Just want to make that clear.

I know that you're done with it.

From the horse and buggy, right to the gas station.

It was not a targeted glance.

We're used to gas stations in every corner.

And if you're not used to carrying, you can't have this massive battery, a spare battery in the back seat of the truck.

And I think that idea that we didn't give it the time to grow organically,

that there were these sort of forced mandates, or that's how they were perceived.

And it became a political issue. Americans bristle against that.

I mean, I'm working on a story now about in the year 2025, people still don't buckle.

People don't buckle their seatbelt. They feel that they don't have to.

It's about percentage, don't.

Yes, but when you look at the accident, and this is data.

They account for half of all fatalities.

The people who do not buckle up.

Yes, but we all know somebody.

And I think that's an idea.

Because when I consider where EV adoption is at its highest,

I look to the taxi pickup area at La Guardia Airport.

Because that is the only place where I go to get a vehicle to take me into the city.

And I am getting picked up in Rivians, in Fiskers and Teslas.

And I'm thinking like, how strange is this?

That it's like a zoo of all of these EVs that I only hear about in stories that I've never really seen in person.

That's a La Guardia?

Well, because I'm going.

New Yorkers.

Fiskers.

Yeah.

Because they're required to have certain emissions

for the city.

And the vehicles that are licensed, they have a little sticker that lets you know it's zero emission.

And there must be some sort of subsidy for them.

And I think about that compared to not that there's taxis that get you at TTW very often.

But just that notion of when you require something, it does happen.

And they're driving the vehicles that are best available to them,

which almost make us go back into the conversation about cost.

And what is the best available vehicle, and where the EVs ended on that front?

So let me ask you.

Okay.

So, CFOs and others at companies back in the olden days,

not Jackie's real olden days, but closer in time.

They had to pencil what EVs would do.

Okay.

So as an economist, I mean, what do you believe they saw that the market didn't see?

First of all, I can't come to grips with a lot of these prestigious accounting firms.

All these government agencies not seeing it.

If you read, if you endure the hundreds of pages of the EPA greenhouse gas rule,

or some of these mandates, like you try to figure out how you come up with 55 miles per gallon,

you don't end up with 55 divided by like, no, it's just complicated footprint formula, everything.

I don't believe that all of them didn't, you know, we're misguided.

I think there was clearly a huge political agenda,

and a notion that we are just going to force people to do it because we know better.

And just as you said, Jackie, America's don't like that.

Otherwise, we'd all be speaking British and having tea, right?

We don't like that.

We're Americans.

I get home for the rugby game.

Yeah.

We don't like it.

Stuff like that.

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No, they like their freedom in the automobile industry,

which I mean, here we are.

We're right down the street from where they came up with us,

like see the USA and the Chevrolet and like the Mustang and the Bronco

and the Corvette and some of these great, I'll say,

myth making or myth engines.

But there were a part of reality that Americans liked the freedom of a car.

They loved the freedom of having their own personal car.

And here we go along and we had under the Obama administration,

under the Biden administration, this top-down push, which as you said, John,

it wasn't a suggestion.

There were fines, there were mandates, there were reinforcing state things

or other states that said we'll go along with California.

And then there were subsidies also, big ones, tens of billions of dollars

on multiple levels.

Americans said, and I was like, wait a minute, I want to be able to drive

from Detroit to up north without having to stop twice and worry.

That's a pretty fundamental thing.

They're taking some of my freedom away and I got to rely on an app.

And you know how reliable all those apps are, right?

That's what we told Americans and of course they presented that.

And I look back at some of those folks that did that and if you look at my article,

we list a bunch from you and go see, you know, prestigious consulting firms

and all these firms that put these things out, Sam, we're going to be at 60,

70, 80% with numbers, with charts.

And then there were a handful of us in the industry that said, no, and why?

Well, you know, I can answer the why because you mentioned Obama and Biden

and the Democrats believe that global warming is real.

They believe it is an existential threat to the human race.

And they felt that they had to do something about it.

And they had a political mandate to do so.

They got elected into office with that as part of their platform.

And my fear for the industry is, at some point, the Democrats will come back into power.

I'm not predicting one because I don't know, but they will come back into power.

And then the pendulum's going to swing right back again.

So that's my fear for the industry.

It better keep its powder dry, so to speak.

And you know, the Trump administration is saying, you don't have to worry about fuel economy.

We're reducing the standards. We're taking away any of the fines.

My fear for the industry is, whether it's in next year's midterms in the 2028 presidential election,

sometime beyond that, the pendulum swings back.

And now they have a bunch of stranded ice investments and face megafines for missing all the CO2 targets.

And so as an industry, what the hell do you do?

Because this is a reality.

I do like your conversation about sort of the golden age of automotive marketing.

Because you're, again, I'm thinking madmen.

I'm thinking doctors and cigarette ads talking about how this one's pretty safe for you.

And right now, the auto industry still has a pretty bad reputation among the youth.

We've seen that with delays in getting your licenses.

The idea of these are dangerous to bad for the environment.

They're unsafe and cities are better off without the vehicle.

And when it comes to fuel economy, there's this push of not just like the economics of it,

but also like, this isn't that bad.

The vehicles today are a lot cleaner.

They're a lot safer than they've ever been before.

But when it comes to the fuel economy, we've also seen there's been issues with the V8 engines.

There have been so many recalls lately on the engines.

And an excellent former colleague of mine, Richard Truitt, an automotive news.

It's a great article.

Great article on what's going on.

And these better fuel economy engines are a lot more fragile and more delicate than they had been in the past.

So in terms of moving forward with the best fuel economy, what is the lesser of two evils?

And then let's get into the PR of the EV.

I mean like this potentially explosive, expensive, heavy, dangerous propulsion system

that isn't going to last long in the used market.

That has been the sort of messaging that has come to the consumer.

And maybe it used to be correct in earlier forms of battery chemistry, different versions of it.

These were not, the three-year-old EV was a golf cart.

But today, it's very different.

And we're finding out that these batteries can be used for a variety of things.

So the question is, back comes for data sellers.

See, and this is in charge of home.

So SK on the South Korean company that has been working with Ford on making batteries for electric vehicles.

They are separating their agreement as of today.

And then we heard Redwood Materials, which was the company that was founded by JB Strabal,

who used to be a Tesla, who basically said, okay, what we'll do is we'll recycle all of these batteries

and we'll make new EV batteries.

Now he's like, oh, maybe we should do it for backup power rather than for the market.

Because the market's there.

Yeah.

And so this, so you, very confident in the reducing prices of EV batteries.

I'm beginning to look at this and say, you know,

Bloomberg NEF basically said it's going to go down slightly this year.

But I think, well, this year end next year.

So it'll be a slight decrease.

But the thing about this is that we're seeing LG Energy saying, oh, you know, backup power, data storage.

This is where we're going to make money, not on EVs.

And therefore, the amount of investment going into the development of new EV batteries

is going to be decreased.

Therefore prices increased.

It's not going to be pretty.

I'll note on the batteries.

I do think batteries will get better.

I hope they get safer.

Our company is one of the ones that called out and said we need an urgent review,

urgent of shipping, maritime shipping of EVs.

We did this after the first ship sank.

There's now been two more.

I mean, it's with fatalities now.

And these were modern freighters, one in the Pacific, two in the Atlantic,

where you had EVs on board.

Some of them caught fire.

You had toxic smoke.

They had modern fire suppression systems couldn't handle it.

The crews abandoned ship within 24 hours.

It's not.

Those were all European EVs, weren't they?

No, not.

They were European EVs on the Felicity Ace,

and the Fremontal, Fremontal Mason for whatever they wanted.

Good memory, Patrick.

And then the morning Midas in the Pacific was...

That's what I called you about, because there was some GM vehicle on that.

Right.

There were GM vehicles on that from China.

And it sank.

The closest landmass was Alaska.

And I must say I'm not a maritime navigator.

But you know, you're going from China to Long Beach, California,

and it ended up sinking closest to Alaska.

Yeah.

And there's fatalities here.

And there's huge environmental damage.

And there's new chemistries coming.

So, for example, LFB batteries, they don't burn.

And supposedly these manganese rich,

that GM and Ford are coming out with...

Not manganese rich.

What am I saying?

LMR.

Lithium.

Lithium-

Lithium.

Lithium, lithium.

Yeah.

Well I see that.

Lithium.

Lithium, that's okay.

I do get that right.

They don't burn either.

So you know?

I also.

And I manage.

They didn't burn.

I mean do you mean explosively or just in Jume's propulsion?

They won't do the thermal runaway.

Well, not you would run away there is not oxygen within the battery to burn.

Yeah.

That's just that simple.

I'm getting at the industry, and you know,

remember we're talking about minuscule EV sales in the US.

They're still growing very, very strong in Europe.

They're not at the target they had hoped to be.

I don't want to say EV sales in Europe this year are up 26%.

So they will never be at the target.

They were, I've looked at the documents.

They know like, some of these documents,

I'm not kidding.

They said, we're gonna make it 90%, not enough, 100%.

And then actually in the EU document,

it said greater than 100%.

Like, oh gosh, you know, thank you, Brussels.

Okay, so since this is a timely comment

that we had with Ford announced this week,

Ford of Europe announced this week

that they're basically gonna be working with Renault on EVs.

And boy, I think Renault's got something going with it.

You know, it's the Ampere company.

Remember, we had a horse on there.

Horse was here just a week.

These guys are very wise.

But okay, so Ford announces this,

I believe it was yesterday or the day before.

So to the point of EV sales, this is from Ford.

The current share of electric vehicles in Europe is steady

at 16.1% far below the required 25%

of new vehicle registrations required

to meet Europe's strict CO2 targets by 2025.

So 16 per one, 16.1 stable.

Correct.

And yeah, it's actually really good.

Now we're talking about more urbanized environment,

shorter things.

And also you don't have the same notion

that everybody's gotta have a car in the driveway.

And in Europe, with the EU, and they had mandates,

as I said, 100%, or maybe more than 100%.

Depending on your red, their document.

And they're at 16%.

That seems totally reasonable to me

for that population with what technology we have right now.

And I think the US will get there too.

Again, I'm an optimist on consumers buying things

that will benefit them.

And I think we will get more there.

But we are nowhere near where these mandates were.

And you mentioned Bloomberg NEF

as you look in the article.

We're quoting them.

They were the ones that said,

we are past the tipping point.

And now we're two years past the tipping point

to mass adoption.

And this was the kind of rhetoric coming out

from respected, consulting firm.

Just hold it as far off.

Bloomberg NEF, if you go back to what they were saying

five years ago, they completely missed the mark.

So it wasn't just the automakers who missed it.

But I'm interjecting myself

because we have to take a quick commercial, right?

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Back, talking about how the auto industry

missed the mark on EVs.

Actually, we're not talking about.

We're arguing about it.

No, we're discussing this.

I think the argument is over.

Well, I have a data question.

Especially when we talk about politics,

and right, right, right.

You're the one with data.

From your advantage, we're the automakers,

we're the industry specialists who

are making these grand predictions,

talking to real consumers.

Because I feel like that component,

the idea that we're talking about now,

if a vehicle can fit into somebody's lives,

if it can fit into their homes,

if they have the home architecture

to support the electrification.

That is something that I find

is a little too late to be having this conversation.

Because when I've been writing about GM all year,

and it's been the story of EVs,

the story of layoffs and the stories of lost investment,

and pivoting away from the production

that they had planned on for so long.

And people are saying, well, they should be punished

for this, how could they have made these choices?

They can't choose for me these things.

And then also, I have consumers saying

that I'm a fear monger that's steering people away from EVs.

And they love it, and they live in an urban area

and or rural areas.

And they save money, they made the choice,

and they don't regret their choice.

But we have to, I think, break down

what that choice is for that consumer.

Are you willing to change your lifestyle?

Are you willing to change your home?

And perhaps change how electricity moves through it.

If you need to have an expensive upgrade,

in that sense, clear out the garage,

which a lot of people haven't.

And then there's the idea, too, of how do you really

use your vehicle, not just aspirationally,

not your in an emergency, but would this benefit you

in the long run?

And the idea of getting the excitement on the product side,

but forgetting the real lifestyle, the cost consideration,

the hurdle considerations, these are all things

that I think are part of the conversation

that I want to know what the economists were thinking in that sense.

Well, I can tell you what this economist was thinking.

I was thinking like a consumer.

And if you look back at our, literally,

our very first report on cost of fueling EVs

versus cost of fueling gas cars, we had whole sections

talking about the time burden that was required about,

we talked about how a lot of the chargers weren't working,

even then you could see some of the data.

And we said, consumers are going to be affected

like it's then we towed it up the numbers.

We said, you make your choice.

We didn't see, you know, at that time driving an EV,

I wasn't telling anybody they needed to buy this or that,

but I want you to know.

And I think you've got two answers to your question here

about what were they thinking?

The first like, the market is telling you what they were thinking.

They were thinking they did not want

to do this lifestyle experiment except a small fraction

for which like I'm part of it great.

Your early adapter, you tried it,

you were going to have more uncertainty, okay?

Would you buy another EV?

We're coming to that, I know.

And I know, right?

I don't, I don't, I gotta, ooh, yeah.

And but those questions are important.

And then I'll mention Mark Fields was the one I think

is the auto-exec that said it.

Like we should have had a conversation with our customers.

Yep, you should have.

And if you like, what I've heard many times

from people is like, go to a truck stock

and ask somebody, do you want a F-150 light?

Okay, if you can't do that.

And I'll say, but you can't ask consumers that

because the people who I talk to who are anti-EV

have never been in one, never driven one,

never lived with one, but they know they hate them

and don't want them.

And so you drive an EV and that's why I'm asking it.

Why are you driving an EV?

I'll tell you why, it's a better driving experience.

All right, let's go, let's go to the positive side.

And again, going back, it's quieter.

Yes.

And by the way, I did not pay for the extra fake engine noise.

I said, no fake engine noise in my car.

That's BS.

It's the acceleration, of course, just native.

And that's your specialty.

It's finding an open spot on the highway

that you want to merge into so easily.

Right, and really what Americans like is 10 to 40.

It's your acceleration get on the highway

or like 20 to 50.

That's where you feel it.

That's the real acceleration.

You know, I got launch control in my vehicle.

I'm trying to ever even use it.

But yeah, I used the acceleration to get on the freeway,

particular certain intersections

that we are all aware of around Metro Detroit.

It, I would say the, some improvement

in the, I'll say the aesthetics inside.

And terrific opportunities here

to improve how you drive and wet weather.

Because you can individually control each wheel

on a way that is much more expensive for a mechanical car.

You can, you know, I like all wheel drive.

And I know a lot of cars we had all wheel drive.

And but you pay extra for that and quite a bit,

including the fuel economy and the equipment.

With electric cars, you natively can do that much better.

And all those are big advantages.

And then I'll say, you got the lower floor you can do.

Those are just some of the advantages.

But are they advantages for the regular folk?

Yes, absolutely.

Okay, so let's go back to the first point of quieter.

How many people listen to the radio in the car?

And so Jackie, do you sometimes have it cranked up a bit?

I have to crank it up so high

because despite driving a hybrid,

my engine is too loud.

Yeah.

Hybrid, so I would say how easy they are.

I don't like hybrid.

So I'll just, I love the fuel efficiency that they deliver.

I, I shouldn't have too broad a brush.

Some hybrids are actually, I just got out of Subaru Forester

hybrid.

It drove beautifully well.

I also just a couple of weeks before that had Toyota,

Corolla cross, I hated the way the thing drove.

Just hate it, you know, that Ackinson cycle

to get the max fuel economy coupled with a CVT.

You never heard so much moaning and groaning coming out.

What's wrong with silence?

No, no, there's nothing wrong with silence,

but what I'm saying is, okay, so,

you're saying that you're gonna drown it out

with the radio.

No, I'm just saying giving, okay, so,

so when I was, I was this past year,

as a judge for the wards interior,

10 best interiors, drove 40 some cars, okay?

Even if they were not electric, noise was not a problem,

okay, cars, modern cars with internal combustion engines,

already get into almost any hybrid with a CVT,

or so on the judge.

No, you can feel it more than you can hear it.

And the other thing is, is in the many EVs that I've driven,

tire noise is a big problem, because it's heavy.

Yeah, tire, tire, my experience,

and this is born out elsewhere, more tire repairs,

more software repairs, maybe you can do them OTA,

maybe you can't.

And you still have to replace other things,

but yeah, you don't, you don't change spark plugs,

but you still have to, you have to have cooling fluid,

fans, all these things, I see these things posted on,

like LinkedIn, oh, EVs only have 200 moving parts.

Like, count out the moving parts in the brakes

and the seats, and you're already at 200, right?

Well, that's, we're still talking about cars.

At the end of the day, they're gonna have wheels,

they're gonna have these functions,

but the internal combustion engine has

so many more parts that rub together that can break.

And in terms of what we're learning about production,

sometimes the best and most effective way

to assemble a car does not help the mechanic

at the end of the day, when you bring it in.

So there's plenty like my hybrid,

again, not to throw hybrids under the bus,

but when I bring it in for service,

I've heard more frequently, like,

well, this is what's wrong, but it's at the center.

So to get to that one component, we have to rip your car apart.

That's, that's not hybrid.

That's, that's somebody who didn't do design permits.

Yes, correct.

Sandy Monroe would,

no, no, Sandy would have a field day on this

and almost all the automakers are horrible at it.

Yeah, and if we're gonna be talking about maintenance.

Yeah.

I'm with you on that, but it's like,

these are their advantages,

and I'll go back to the quietness because, again,

what did I say?

What's the natural sweet spot for electric vehicles

where they have been, who's with affluent consumers

in metro areas who buy luxury cars that are distinguished

by low noise vibration and harshness.

So the quietness and the underlying limit

to the amount of engine and transmission, et cetera,

is an advantage for their buyers.

And it was an advantage for me.

It's a, it's a native advantage for electric vehicles

that I think's gonna allow electric vehicles

to continue to pick up.

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That's an advantage.

There are advantages to electric vehicles.

There are advantages in 2020.

And there are advantages in 1922.

As I point out in the article,

cars cost and cognitive dissonance.

We are having the same battle we had,

200, 150 years ago.

There were electric cars on Woodward Avenue,

100 years ago and why did those almost disappear?

Because people chose the gas cars.

They, they preferred them.

But talking about preference,

all the data shows, people who buy electric cars

overwhelmingly safe, they'll go out and get another one.

That's why I asked you, Mr. Patrick Anderson.

People buy electric cars, people buy electric cars,

go back and buy more gasoline cars.

Those, those, I mean, again,

our company deals with real data.

And one of the first things you learn

when we do with real data is distrust anything

about a bunch of advocates asking people what they want, right?

And this part of the reason why you had these huge misses,

regulatory and manufacturing-wise,

because people somehow believed these semi-advocacy polls

and they asked people what they wanted.

And if you ask people who are at the,

the Earth Day celebration, and what do they want, right?

They, even if they actually drove there

and that should be they don't say it, right?

No, no, I want to, what was that pre-esprime?

Yep, that's what I want.

But not this weekend, because I'm going to go off-roading, right?

Did that earlier point, if you asked the consumer

what they want, they want what they know?

So like that was something that I talked to,

Michael Simco, the outgoing GM designer,

about what you try to incorporate

from the populace and you saying,

we have to, to some degree, show them

what they should aspire to

and you have to move that needle in some way.

But as going back to the past, again,

I, of course, being the jammer porter,

I think about the EV1 and what could have happened,

what would have happened if rather than abandoning the project

or waiting, putting it on the shelf,

if they had continued the R&D.

But the idea, again, at the end of the day,

the company's goal is to make money.

They do not waste money on purpose.

So if they are going to be building

towards a future that they're helping to build

and helping to carve the legislation,

helping to advocate for this future,

it seemed that we were going in this direction.

But then they didn't.

And GM very publicly advocated against

some of these mandates that they seemed to be

adhering to in the past.

So there's been mixed messaging

from the consumers perspective.

Are they all in?

Are they not?

They were married to the idea of all EVs

and now they seem to be in an open relationship.

And it's the idea of having ice on one side of the line

and an EV on the other.

And it's now about flexibility.

We are listening to the customers now.

We're going where the customers want us to be now.

But that's 1.6 billion that they had to write off

that they lost this year from EV investment.

So again, it's sort of what did they know when

and how did their production seem to get it wrong

because that's what it looks like from the outside.

Patrick, let me ask you this.

This is going back to the Ford thing.

And they were talking about how they're going to make

the successful transition to EVs.

And they said that there are three steps

to have a successful transition.

And I think this applies here.

Their first is aligned targets with reality.

And they're saying basically, talk to the customers.

That's their first point.

Their second point I'll get to momentarily

because I think it's the most important one.

The third point is support the working economy

and they're basically saying they've

got to look at commercial vehicles

in terms of what the regulations call for in Europe

in terms of CO2 emissions.

And they're saying, let's recognize

that that's a big part of transportation.

This is the second one.

And this goes back to something

you were talking about earlier.

And it says incentivize the transition.

See, this was so important.

I made that one red.

Yeah.

He printed it out in red.

OK, so in this quoting, European manufacturers

have invested hundreds of billions in EVs.

Governments must match that commitment

with consistent purchase incentives

in a charging infrastructure that extends

beyond wealthy urban centers into the rural heartland.

OK, so now this hits several things here.

So we've been talking about the Obama Biden administration.

OK, basically, they're saying, hey, we

want government to provide us with clear direction.

OK, we, the auto industry, have spent billions upon billions

of dollars on EVs.

We want this to be matched by governments.

And to your point, we need a more robust infrastructure

that goes outside of affluent areas.

Affluent metro areas.

That's right.

So are they right?

Well, they're definitely right about aligning expectations

with the market.

I mean, if they would have done that,

we'd be having a different conversation.

Again, I think we'd be celebrating a success at this point

of EVs.

If we had mandated, bullied, overly subsidized, penalized,

and then hectored people because there are advantages.

And people like me chose it.

And I know, John, he can ask me if I'm going to choose it again,

but that's not it.

It's not a table.

I've already asked twice.

I'm not asking three times.

The other part, though, is if you, again,

you're reading the document and reading it.

But it's like incentivized means governments come up

with money to pay people to buy cars.

I don't think that's the formula that works.

It did.

No, it didn't.

Well, wait a minute.

Wait a minute.

We saw what happened when the tax credit went away.

Right.

We went from this high to that high, OK?

That's what happened.

For those of you who are listening,

he's basically going down to the floor.

Yeah.

We went from under 10% to a little over 10%

and now we're dropping down back closer to five.

That is not a success.

That's showing you that even with these subsidies,

you can't get to 10% on a sustained basis.

That's not a success of what you said

was we're going to have mass adoption.

It would have been a success if we said

we're going to have organic growth

and improve the infrastructure, improve the product,

and let people benefit from it

and let the people who are naturally going to fit in

try it out and buy it.

And that also would have avoided what you talked about,

John, you know, people now are like, I hate EVs.

It became political, right?

Because those people were hectic

into thinking that, you know, if they didn't do that,

they were, you know, dinosaurs and they were anti-environment.

Well, you just turned off a whole bunch of people.

They're not turned up, by the way.

These aren't people that are mad

because somebody bought a station wagon.

They don't have to buy a station wagon if they don't want to.

But they have strong opinions about EVs.

Well, that is the fault of the people who hectic them.

You should have always said, you're starting with close to zero.

You got like one, two percent.

You want to get to four, then eight.

There's a natural way to do that,

which is to continually improve your product

and sell it to people.

And if there's a modest government subsidy

for those people to choose it,

like there was from the Bush era,

which was a refundable tax credit,

up to a certain amount per manufacturer.

Okay.

And then you get more people and finally,

they buy because they want it.

That was a success route.

We got off that.

Okay.

So what happens to the hundreds of billions of dollars

of investment that the industry has made in EVs

in light of what you just said?

I'm looking around for a candle or something that's burning

because a substantial portion of that was lost.

And the taxpayers also, substantial portion has lost.

We now have, unfortunately,

tax dollars going into retrofit plants

where tax dollars went into phantom previously.

And we're in an industry where there's always

experimentation,

there's always nobody's gonna know for sure.

So I'm not gonna blame all the investments

that didn't pan out as people being dumb

or something like that.

It's a nature business that you invest in things

and some of those investments work, some of them don't.

But when we, a particular under the bipartisan infrastructure

law and under the inflation reduction act,

just huge amounts of federal money going into this.

And with reading those same things past the tipping point,

the Ernst Young says this and Mackenzie says that

and RMI says this and we're all gonna grow,

it's gonna be 60, 70, 80%.

I mean, this was clearly not supported by consumers

and a lot of that money, unfortunately, now has been wasted.

And that's a shame.

We could have done that for improving safety of highways.

We could have done that for,

we'd have just done charging infrastructure with that.

All right, how much better will we be off?

That, I think that's the major point

that the infrastructure being not there for so long.

And the idea is like going back to the gas station

because the automobile was kicking off,

gas stations were a profitable business

and remained to this day.

But the idea that the privatization of the electrification,

the grid, how that's being built out,

we're not getting that.

Tesla took it upon themselves to start doing it themselves.

And GM, again, someone laid to the party

would rather make an adapter to work with the Tesla

and they're now with the EVGO

and they have other partnerships working on the infrastructure now.

But that's after billions spent on the product.

Now I will say, I've got had a Silverado EV

and it was 500 miles on a single charge.

That was pretty fantastic.

I drove it all around Ohio and back.

And when I gave the vehicle back,

I didn't even think about charging it.

It was nowhere near requiring a charge.

But of course, I wasn't shouldering

the upfront cost of that benefit.

So now the product is great.

The battery is definitely something

that is easing some of the burden

that is coming from the lack of infrastructure.

But the price tag makes that cost prohibitive.

And then even so, that was almost a series I wanted to do

where I go from town to town in Michigan

with an electric car and think, how long will this take?

For me to find a publicly available charger

will I be able to figure out how to charge the car?

Do I need an app?

Will it take a credit card?

Like all of this that goes through your mind.

And then, of course, there's the temperature.

Will it hold the charge?

Will it take longer because of what's happening

in the environment?

Should I charge it when it rains?

Or will I be electrocuted?

All of these questions just don't have to be considered

if I have a gas car.

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Right, and that's a huge thing for ordinary people.

And we should have recognized that.

And there are still some people like me, though,

I was willing to take on some extra risk, some adaption,

stuff like that.

But for some people, like, no, that's a non-starter

and you can't force those people.

OK, so what do you do as an auto industry?

You've got an administration now that has almost frozen

fuel economy standards has taken away all the penalties

for missing emissions or fuel economy regulations.

With this thing that I brought up earlier in the show,

what if the Democrats come back in power?

Well, Patrick, what would you do if you're

running a car company?

How would you react to what's going on now

with an eye to the future?

First of all, I would have to absorb

some humility lessons and I have an honest conversation.

How did we get it so wrong?

Read my article.

Don't tell me you read it.

But I mean, some of you already have.

It's in the journal business economics,

cars, costs, and cognitive dissonance.

How did you get it so wrong?

This is how you need to have an honest discussion.

I think what Mark Fields was saying was part of it.

Then you go in and say, where do our customers

what do they want?

And guess what?

Some of them do money v's.

And some of them are interested in that.

And then focus your product on that

and stop wasting money on hectoring people

among other things.

Don't hactor people and tell them they're technological

dinosaurs if they don't jump on this.

A lot of them, well, they want to pick up truck

to go to a job site.

Don't try to tell that person they need

to convert their lifestyle and everything.

You've got a family that needs to get some place

and they're going to school and whatever.

Maybe that extra charging burden is too much risk for them.

Don't try to convert them.

But then you have a whole bunch of other people at what?

And the cars are getting better.

As you're saying, batters are getting better.

Charging's getting better.

They're starting to learn, like, for example,

maybe everything shouldn't be a TV screen or a flat screen.

They're behind on that, all right?

That's, I was too busy to write that,

but come on, you're realizing that not everybody

wants to do this to change the radio station

or make their seats gone.

So there's great opportunity.

And I'll say, our American automakers,

and I'm including Honda, Toyota, BMW, Mercedes,

all-building here, as well as GM, Ford, and Stellantis.

They make some really good products

and they have some really good engineers there.

And I think one of the things you can do

is you can go to them and say, guess what?

We're going to make cars that people want.

And we're going to make use of your talents.

And then we'll start making money on cars

and we'll be able to do more cool things.

Yeah, I think the same here with first infrastructure.

Those partnerships, too few and far between,

were at the chicken-the-egg standpoint

of will people go with the EV if they can charge it?

Who knows, build it?

Start there.

So the option will be even beyond the table

for most consumers.

Next, R&D, like you were saying, to not stop the innovation

because they're still further to go

to make sure this is perfect.

I mean, the prismatic cell types,

that's being discussed as being more energy-efficient,

better materials that maybe we're going synthetic,

not being so dependent on countries like China

and other places to build the batteries.

Do it at home, do it with your own IP

and do it cost-effectively.

And then lastly, the marketing, the problem is,

what makes them better is science.

And people don't respond to science,

not very well when it comes to making consumer decision.

They respond to convenience, cost efficacy,

and pride, well, they'd be happy.

Do they feel good about owning this product?

What will it say about them?

And maybe not negative or forced.

But you want to convince people that this is not the gamble

they've been told it was, and that this is a smart decision

that also happens to be good for the environment.

Gary, what would you do?

Well, so in addition to watching Land Men,

I read to see what Exxon is looking forward to in 2030.

And if you read their plans, they seem to think

they're going to be very, very profitable from oil and gas.

Yeah.

So I would have a four-letter word to answer a question

of what I would do if I were an automaker right now

in that four-letter word is, hemi.

That thing got it, I mean.

Well, one thing I would caution you against asking

an oil company how it thinks it's going to be doing.

Because of course, they're going to tell you,

things are going to be great.

We're going to sell a lot of oil.

I do happen to agree with them.

I do bet they sell a lot of, or make a lot of money

on oil and gas.

But I wouldn't ask them where the future is going.

Well, I would look at it from the point of view

of if you were to go back over the past several years

and look at what Shell, BP, Exxon, Chevron

has been saying about what the future is.

There was a great concentration on,

we're going to be opening charging stations,

we're going to be looking at solar arrays,

we're going to be doing all of these green things.

Now it's like, nope, black oil, Texas T.

And let's know here, we're in Michigan.

We're right now, thank you again for letting me charge.

Well, I'm there.

But where's that energy coming from?

All right, it's probably they're coming from coal

or natural gas, because those are our two main power

energy sources in Michigan.

Oh, it's clear.

Well, asking two or three years.

But historically, for the last several years,

it's meant we're going to have a coal.

Look, we've closed two coal plants in Michigan

in the last decade.

They're on their way out, because natural gas

is so much cheaper than coal.

And if you look nationwide right now,

renewables generate more electricity than coal does.

Nice and wide.

I didn't see solar panels on the roof when I parked.

Well, yeah, no, I don't have solar panels.

I'd love to have them.

But you know, you can't get electricity outside

when you do your series.

Yeah, but remember, renewables include hydro,

not just solar and wind.

And so just here, we're in Michigan

and you can look this up wherever, whatever state you are,

it's not that hard.

Where does your energy come from?

And if you can dig in, not just,

where's it generated, but where's it come from?

Some of the solar.

Downriver nuclear power.

Some of the solar and then goes off.

Yeah, you know, not usable.

But right now, fossil fuels are the biggest source

of energy for electric cars in Michigan.

But Pat, there's the studies that are out there

that show on a full life cycle basis,

i.e. mining the materials all the way

to recycling into a new vehicle.

Evie's put out about half the CO2

as a as a petrol fueled vehicle.

I think those studies should be looked at

because I think that's a question for me.

And you look at the study I'm quoting.

And this is why I'm quoting it was done

by what used to be called, well anyway,

now it's called the Energy Research Institute,

largely funded by big oil.

And that's why I put the credence into this study,

which was done by the way with the Argonne National Laboratory

and Ricardo Engineering.

But oh, it used to be called the National Fuel Institute.

They changed the name to the National Energy Institute.

I hope I got those names.

But it's largely big oil funded.

And when big oil funded research comes out and says,

yeah, it's true, electric's cut the CO2 in half

on a full life cycle basis.

Then your EV, really on a full life cycle basis,

is cleaner than a petrol fueled vehicle.

Even if some of that electricity's coming from coal.

All right, I'm open to this if you actually look

at our report from, like Larry from 2021, 2022,

we actually cite these.

We say, go look at these, right?

But I will say it's very hard to do full life cycle

for electric vehicles since we don't have full life cycles

for very many electric vehicles.

We have a century of data on ice cars.

The average car out there, 10 years old ice cars,

many, many 30, 40 year old ice cars,

we don't have a lot of decade old EVs.

We have some, but not many.

So it's, we really don't have the empirical basis

to be confident, doesn't mean we shouldn't study it, we should.

And I think, I mean, I thought about that when I bought my car.

I just, I was enough to say,

I don't really know on balance.

Yeah, yeah, yeah, yeah.

Just look at that.

Automakers had to look into this

just from a warranty standpoint on the batteries.

They have to do accelerated simulation.

And that's how they get the data of predicting

what the life of these things are going to be.

And you know, when they're going to crap out

and when the automaker is going to have to cough up,

warranty data.

Well, they don't, they don't crap out.

The idea is simply that the battery

can no longer hold the charge to the degree

that consumers accept it.

But that was the whole redwood material situation.

The idea was that there was still a lot of juice left

in the batteries, but rather than dump them,

you know, you can reuse what's left.

But they were no longer ready for an EV

because, you know, you're not going to accept

your mileage decreasing over the ownership, you know,

that would break the warranty.

So, but yeah, so it's not that they're going to explode

or just stop working, but it just diminishing slightly

is enough to get consumers to go.

Okay, this is done.

All right, let me ask all of you a question.

We're really worried because even though PAPs

needs to charge his car more,

we're going to get to the end here.

All right, so here's the question.

Two years were enough.

Just two years for now.

Will we see an increase in the availability of ice

and or hybrid vehicles and a decrease

in the offering of electric vehicles?

Two years now.

Number of models.

Number of models being offered by OEMs to the market.

Okay, I'm going to be really technical with you.

Number of models lower, number of sales higher.

I think EVs will go up.

Same thing I thought when we had our first debate,

I'm still an optimist on EVs

if what you look at is consumer adoption

and the native technology.

I think it will grow, but I think buy it for some market.

Well, you know, go from here to here,

but then I don't, you know,

two years we're not going to be up here, okay?

But we have improvements that we can make

and we stop hectoring people

and they'll actually be a little more open-minded

about coming if they don't think they're going to yell that

and told their dinosaur.

And if they don't drive an EV immediately

and makes it safer for people to experiment and try it out,

maybe run it or borrow a friend's car

just go along with them someplace.

So I think we're going to see fewer models

because you said 70 models for a tiny fraction.

That doesn't make any sense, as you said.

But, you know, you don't need that many models

and Tesla proved that again.

You don't need that many models

and you can dominate your segment.

In fact, it's better to have fewer models

and dominate your segment

because then you've got all the economies of scale

and replacement and everything like that

and identifiable.

So I think number of models lower, number sales higher.

Jackie, more gas cars or more EVs?

Jam has been very cautious about saying

that the availability of the inventory

that consumers have come to expect shouldn't change.

I don't know necessarily,

Cadillac would be very hard-brand

to sort of rewrite at this stage.

They keep saying that EVs remain their North Star.

I do think that with the flexibility,

we could see models go out of production for a while

like we saw with the Bolt, you know,

and it's not that they don't want them to be successful.

But without significant price decreases

and significant uptick in the availability

of charging stations,

I do not see them climbing in two years.

They would have to get a radical change

in two years' time for the consumer

to look out their window and think,

yep, I can definitely make this drive

and not have to worry at all about getting stuck.

So.

Yeah, no, two years, it's easy.

I mean, we're still going to have the Trump administration,

i.e. anti-EV.

So yes, there will be fewer EV models.

It will be growing because I think we're gonna go

into a trough next year.

And then it'll, to Pat's point,

start to slowly grow out of that.

I don't think we're gonna see a lot more ice models,

only because right now the industry is looking its wounds

over all the money that it lost,

the tens of billions of dollars

that each individual company put into this.

And so they will enhance their ice models.

They'll come out with different performance derivatives,

off-road derivatives, whatever kind of derivative they can,

but they're not going to put massive amounts of money

into new ones because they gotta put more money

to the bottom line.

And Gary, you're nodding your head.

You got the answer?

My, yes?

Okay.

All right.

Okay.

And my battery warranty will run out in two and a half years.

And before then, there's a good chance of buying another EV.

All right, we got the answer.

All right, thank you, Pat.

And with that, we're going to wrap it up.

Pat Anderson, thanks so much for coming on the show.

It's been awesome having you here.

Jackie, great to have you back.

We'll do it again.

We promise you and Gary.

And I will keep on doing the show.

Of course, we want to thank all of you for having tuned in.

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AAH #771 - How OEMs Got the EV Thing So Wrong

About this episode

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diesel truck

legacy automakers

electric vehicles

electrification

battery placement

EV

full-size electric trucks

crossover point

modular EVs

Rivians

Teslas

Fiskers

SK On

Redwood Materials

EV batteries

Ampere company

launch control

all wheel drive

CVT

hybrid

moving parts

EVGO

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Honda

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BMW

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