Odd Lots - The Chinese EV Maker That's Selling More Cars Than Tesla

Episode Date: August 3, 2023

In the US, Tesla remains far and away the dominant maker of electric vehicles. But on a global scale, the situation is much more competitive. Over the last few years, Chinese EV makers have massively ramped up their export capacity and one in particular — BYD — sells more total vehicles (both pure EV and hybrid) than Tesla does. On this episode, we speak with Corey Cantor, an EV analyst at BloombergNEF about the competition between these two companies, China's EV strategy more broadly, the worldwide battle over batteries, the impact of the Inflation Reduction Act and the big shifts underway in the global automotive landscape.See omnystudio.com/listener for privacy information.

Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthal. And I'm Tracy Alaway. Tracy, Chinese EV exports I feel like is a topic that we've danced around maybe as the way to put it in numerous episodes related to trade batteries, trade policy, tech, things like that. But we've never really like hit it square on, I don't think. No, it's true. It's one of these things that's kind of, as you put it, hovering in the background. And every time it pops up, there's usually some amazing statistic attached to it.

One of the things that's come up a few times now, I think, is this idea that China has surpassed Germany as the biggest exporter of cars. I think that happened last year or in a fairly recent quarter. And it seems to be on track to surpass Japan as well. So that's a pretty amazing development. It's a really extraordinary development. And I think it's like, you know, we talked about this with Brad Setser, for example, it came up. And like it really seems to have caught a lot of people by surprise. And even as recently as like 2018 or 2019, the ability of China to become a auto export powerhouse was not on a lot of people's radars.

Absolutely. And I think the other reason it keeps coming up in conversations and is a particular interest to us is because it relates. a lot to this idea of the new industrial policy and the idea of nurturing domestic manufacturers and tech sectors of one sort or another. And it also lands squarely into some of the tensions we've seen between Europe and the U.S. over the Inflation Reduction Act. Yeah, I'm thinking about the episode that we recorded in Pennsylvania, this spring with Dan Wong, where we really talked about the Inflation Reduction Act. And, you know, the U.S. has this incredible EV company called Tesla. But what we don't really have nearly as much to the degree is battery tech,

which there's the Inflation Reduction Act is trying to foster and so forth. And so there really is a lot here with like this sort of like global sort of like remaking of the entire like auto landscape potentially. Right. And I think the domestic supply chain is probably where the U.S. differs quite a bit to China. And I think it would be really interesting to dive into how the Chinese EV landscape is developing and how it compares and contrasts with the rest of the world. And how competitive are these? How good are these cars? Could they one day be on the roads across the United States? Is the European industry going to be totally decimated by lower cost competitive? All these, so many interesting topics. Labor angles, labor costs with cost,

so much here. I probably do several episodes over time on this topic. But this is the first. But this is the first where we're just sort of like looking at it directly. So I'm very excited about our guest. We have the perfect guest to sort of welcome us to this topic. We're going to be speaking with Corey Cantor. He is a senior associate for electric vehicles right here at Bloomberg NEF. Done a lot of research. Recently put out a big report on the state of the global EV market. Corey, thank you so much for coming on the podcast. Thanks, Joe, Tracy. It's great to be here. And great, always a great time to talk about electric vehicles. Always are great. Always news about electric vehicles. Oh, you've sold us.

We're sold. We're sold. We're so. So I want to actually start with, you know, again, there's a million different angles. But like we mentioned Tesla in the intro. It's like, okay, one thing the U.S. definitely has is an extremely successful domestic EV company. But there's also like this Chinese EV company that's like, is it bigger than Tesla? Like, or is it close to it? Or like, what is it? It's bigger than Tesla.

And folks at Bloomberg are probably really familiar with B.D. Given that Warren Buffett invested back in 2008, And since then, folks at Bloomberg and in general have been tracking BID's progress. BID last year had more electric vehicle sales than Tesla. And it's been impressive how much they've grown in a short period of time. So if we go back to before the pandemic in 2019, BYD had about 220,000 electric vehicle sales. And in about three years, it grew by nine times. So last year was about 1.9 million electric vehicle sales.

Compare that to Tesla last year was 1.3 million. One kind of key takeaway, when we talk about EVs on the BNEF team, it's really a two horse race at the top between Tesla and BYD. And there's some differences that we can get into between the two companies. But BYD is winning right now in terms of total sales. Just before we get into more of the BYD versus Tesla idea, can we talk a little bit about the Chinese EV landscape to set the stage? Because my impression was, and again, I guess it's been over a year. year, a year and a half since I left Hong Kong. But my impression was there is a lot of sometimes irrational capital flowing into the space. There was talk of a Chinese EV bubble. No one was

quite sure whether or not these companies were going to be viable on a standalone basis. But fast forward to today, it seems like we are starting to see some differentiation between winners like BYD and maybe some losers who aren't going to be able to compete. Yeah. And, and To give listeners a kind of sense of how big that Chinese global EV market is, last year, globally, there was about 10.5 million electric vehicle sales. China was about 60% of that, so around 6 million or so. And it's a much more competitive market. When I talk to folks here in the U.S., Tesla really is far and away the leader. In China, you have everyone, and not just new automakers like Neo who are out there selling EVs, but even GM has this really small mini joint venture car.

that sells hundreds of thousands of units. So whether it's traditional or older OEMs or new entrants, it is a competitive market and growing. But BYD has really started to affirm itself in the last three years as the market leader there, so much so that they begin to look into expanding into other markets. And we'll touch on that when it gets to Europe. But it is a more competitive space in China. And we do a lot of research on the market in particular.

But you don't just have BID dominating. You have now more consolidation than maybe a couple years ago. in 2019, just because you have more of those winners. Again, BYD for a long time was consistent at about 200,000 EV sales a year. It was really only after the pandemic when they really accelerated. Well, what did they do? What catalyzed, so to speak, that sales acceleration? Decades, I think, of battery knowledge.

So BYD, before being an EV company, is a battery manufacturing company, and they did a lot of work in the electric bus space. So people may be familiar with BID in the U.S. because they do have electric buses here that they're building outside of L.A. and California. So globally, they've been building a lot of those electric buses in places like the U.S., but also

Latin America. They've been building that kind of global brand and dominance. And then they switch over the passenger vehicles. And one big decision that BID made in 2021, and then they actually followed through with it in 2022, is that they said, we're no longer going to sell gasoline cars. We're going to end internal combustion

engine vehicle sales. They announced that in the back half of 2021. And then they actually followed through in 2022. So you have a lot of automakers throwing out ice phase-out targets, internal combustion engine phase-out targets, but they set a target, and then they said, you know what, we're just going to go solely in on electric. Now, to be clear, there are some of those hybrid vehicles. Yeah. But they're no longer selling purely gas cars. They're either both ice and EV or fully electric. So you touched on it just there, but can you talk a little bit more about how important the domestic supply chain is to the China EV success story, I guess,

because this is one thing that I hear consistently, this idea that part of the reason why China's strategy of building up this industry seems to be working so far is because it has done so in a very conscious manner where it's basically built out, you know, from batteries to other types of components to go along with this. Yeah, so China, if you go back to 2015, they weren't making up, you know, close to 60% of the global passenger EV market. They were subsidizing, putting in policies in place, restricting gasoline car registration to make it more appealing for consumers to actually switch to electric. And then on top of that, they were going directly to the various auto companies and giving subsidies for each EV that was sold. So as opposed to here in the U.S., for example,

where those consumers are getting the credit to purchase EVs, they're going more so to the companies themselves and encouraging those sales. It's, you know, policy wonkery, but in addition, you know, you do that five, six, seven years, and it begins to build up that demand for electric vehicles. This doesn't just happen overnight, which is a useful lesson, I think, to take away for the automakers here struggling that you're not going to just flip a switch with the IRA passing, and next year, suddenly EVs are sold everywhere. You need a long time to invest in that kind of battery manufacturing side, which, you know, to the point I made earlier, BYD had the battery manufacturing expertise. Tesla has been in the game for a while now with partnering with Panasonic on the

battery manufacturing side. I think for too long, many automakers have sheared away from the battery portion, just like they have from charging. And so I think that's the big lesson to take away. China invested on the battery side, and the auto companies are understanding that that's key to the core EV product. God, a billion questions already. This is so good. But, you know, just going back to like this sort of like BYD versus Tesla framework. A, can you just reiterate the unit numbers, but more importantly, like how apples to apples are we talking about? Because Tesla is all EV. Right. YD does have hybrid. And in terms of whether the quality of the cars, the building quality, like, and maybe you could speak a little bit like in markets where

they both exist and compete. Can you just talk a little bit more about how apples to apples we should be thinking about these two companies in comparison? Yeah, and I think it's important to be fair to Tesla, right? So let's go back to the top line numbers for last year. Sure. Was 1.9, 1.85, 1.9 million in globally, for BYD. And Tesla was about 1.3. Okay.

But BYD split between hybrid and BV, battery electric vehicle, is about 50-50. Okay. So from that standpoint, if you say throughout the hybrids, and we just want to look at fully electric, Tesla is still in the lead, you know, 1.3 million versus around 900,000. or so of the kind of fully electric BYD models. Another big difference is Tesla has your four currently, your X, your Y, your three, and your Model S. With Cybertruck, we will see when that comes.

I've been waiting for that for a long time. BYD has many different models. Close to 30, you know, we've tracked last year. Whoa. And so they have different segments, different sizes, both battery electric and hybrid versions of the same vehicle type. So again, their strategy has been kind of flood the zone for the different segments,

And, you know, there are some advantages to that. You can reach more consumers, different price points. So some of BIDs, there was this really cool announcement that they're aiming at an $11,000 car in Brazil in a couple of years. So reaching that lower, Teslas are not, $11,000 currently. Different ranges, too, right? In the U.S., we expect our vehicles more like 300-mile range. In China, you know, you could have shorter-range EVs about 100-mile, 150-mile, depending,

that mini, mini-car segment, which is really cool to follow that you would never really catch on in other markets. So you can slice it and dice it many different ways to say whether Tesla or BYD, who's actually winning. I think the important thing is that they're far and ahead of other automakers that we think about, Volkswagen, GM, Ford over here, in terms of just thinking about how diverse of an EV lineup

you can have and then actually executing it. Anytime an automaker is going to go nine times as high in sales from a couple years ago, you're going to take notice. Even if you doubled, right, if BYD had gone from the 200,000, 500,000, we would make a note of that at BNAF. But to grow at that rate in such a short period of time, you know, maybe it's unsustainable to say that they're going to grow by another nine times in the next three years. They're already seeing a little bit of pushback in Europe

in India this week, actually. They were rejected from having a new battery plant for national policy reasons. But BYD is going for it. They're going for it in different markets. They're going for it in markets that haven't seen EVs like Latin America, which is exciting. You know, you mentioned BYD's Brazilian 10,000 EV, and I think they have some sort of partnership with Toyota as well to build something. And I wanted to ask just more generally, it seems like there are quite a few partnerships between Chinese EV manufacturers and foreign car makers of one form or another. How important is that dynamic to, I guess, how quickly the Chinese EV industry has been able to ramp up? Yeah, that's a really good question. And one that I can frame and not necessarily have the best comment on in the sense that you look at, for example, Ford NCATL over here, right? You're having the Chinese manufacturer knowledge and really able to help a U.S. or Western automaker kind of advanced their EV development, maybe where they have been lagging, or even moving into new battery chemistry technologies like LFP, new in the sense of new for the West. In terms of entering China as a Western automaker, you have to often create.

where they're called joint ventures. So these partnerships with a Chinese automaker to be able to access that market. Now, Tesla, for example, didn't have to do that. They were just, you know, after jumping through the necessary hurdles, able to sell on their own. But other automakers, China has used that kind of joint venture partnership

in a weird twist, kind of like the U.S. has set these barriers in the Post-Inflation Reduction Act world to say you have to build here to be here. It's almost copying what China did because it wasn't easy for auto to get into the Chinese EV market specifically. Hope that answers your question a little bit. I know there's more nuanced.

No, I was going to say you started off, say, I might not be able to answer this question and then went into, you know, great detail. So that was perfect. You know, you mentioned the breadth of offerings that BYD has. And maybe, like, in the U.S., like, there probably just is not much of a market anywhere for a car that only has 100 miles or 50 miles or something like that. But, you know, I know, like, in terms of exports, like the big. anxiety currently, like maybe in a few years, all the U.S. companies should freak out, but I know

like there's more anxiety in Europe and stuff. Is that in part, like, are the markets, or the domestic markets in China? And, like, I'm picturing just like a tiny little car in Paris as being something that you'd never see here in the U.S., but maybe you see it in China. Like, is there enough, like, similarity in the sort of, like, domestic markets of China and some places in Europe such that there's an advantage where the car that they sell domestically also have, like, an audio. in Europe the way they might not in the U.S. There's definitely been concern from the European automakers around BYD entering or just even a more competitive kind of EV offerings.

Again, because BYD has the expertise on the EV side, they're coming in with attractive models. And I believe it was an article earlier this year, looking at Norway, for example, and consumers being interested just because the cars are solid quality. And compared to automakers that may be struggling with software, BYD is working through or has worked through some of those, issues. I don't have the stat right at hand, but it has been attractive enough where the European

folks have said, on the one hand, we have IRA, you know, in the U.S. squeezing us out of the U.S. market. On the other hand, we have these Chinese new entrants here that are making us nervous about our ability to kind of maintain home court advantage in Europe. So they've taken notice of it. Have the European automakers been able to respond in the way that they need to? Not necessarily. And if, you know, China is seen, or these, you know, B.D, for example, as a, this is a cool, positive of new automaker coming in and not the kind of geopolitical concerns, you know, European automakers could be squeezed out or squeezed down. You know, you're not going to see people lose all the market share, but even having that kind of trimmed off the top by an entrance.

One thing I like to think about in general for the global EV space is with Tesla MBYD growing at the rate that they are, the overall passenger car sales pie doesn't grow that much year of the year. You know, it does fluctuate in previous years. It was higher, closer to 100 million annual sales units, last year more in the 70 to 75 million range. But the point is, is that if you're having EVs making up more of that, it has to come from somewhere. It's not kind of this endlessly growing pie of car sales. And so if you're a traditional, if you're a Toyota, if you're a Volkswagen, you know, you're going to start to see that margin come down if you're not releasing EVs that are competitive and exciting for consumers. Wait, you mentioned geopolitical concerns. And I'm trying to think

how to phrase this question. But, you know, if we saw a big boom, in China EVs in sort of 2019, 2020, around that time frame. That was also peak sort of de-globalization fear time, right? Like lots of talk about, well, maybe we need to reorient supply lines. Trump's trade war with China was still ongoing in 2019. Why hasn't that played more of a role in this dynamic? Like, shouldn't there be automakers who are looking at China and going, well, wait a second, and maybe we don't want to partner too much,

at least according to the de-globalization argument. It's a complicated story because I think there is, in the way I would kind of phrase it and think about it, is the partnership that GM and Ford and other automakers have here with Tesla around DV charging. There's an element of you have the knowledge, you have the expertise, you want to kind of gain from that experience, and there's been reports, I believe it was,

and I want to name the wrong automaker, of continued partnerships this week, with SAIC kind of reports on a potential platform partnership. But to the broader point, you know, it's co-opetition a little bit. You're going to gain some of that knowledge and then try and leapfrog it. From our purview, we've seen automakers in Japan, for example, looking to go to new battery technologies like solid state. So you can kind of leapfrog where China is and it's kind of LFP battery chemistry,

which is a kind of cheaper, shorter range beneficial chemistry for those who aren't familiar. So learning from Chinese automakers, but I would say even the auto industry in general, there's always this kind of domestic sense of pride, whether you're talking about BMW and Volkswagen in Germany or GM Ford and now Stalant is here, the big three in the U.S. So some of it is new, and we could talk about IRA related and how that policy was constructed. But some of it is very old. And I think the new thing here is that China has been so successful, or some of these Chinese companies have been successful in passing Germany. in competing with Japan. And it's because they've embraced this EV opportunity, both through kind of smart subsidy planning,

but also the companies doing the work. Let's get to the Inflation Reduction Act, because as you pointed out, one of the advantages that it sounds like the Chinese companies have is like deep battery expertise. And it makes sense. I mean, that's the core of an electric vehicle, right? They don't even have that many parts, right?

It's basically like the battery is what the whole game in town. We know that thanks to the inflation, inflation reduction act, it's like every day there's a new press release about a new battery factory. Just talk a little bit, like walk us through the economics of how the IRA changes the game for U.S. battery manufacturing. Yeah, so a good way to think about it is at BNEF, we put out one of my colleagues does great work on what we call the lithium ion battery price survey. So just how much does a battery cost on a kind of volume weighted average?

And last year, that number was about $151 per kilowatt hour. So why that's important is battery costs need to come down, given that they make up such a large portion of the EV in order for electric vehicles to be one more affordable for consumers, but more profitable for automakers. So the IRA has two EV-related tax credits. The first is what everyone seems to know about, the $7,500 for manufactured in North America for the final assembly, all the critical mineral requirements as well as the battery component requirements. that's, you know, the consumer this year getting that $7,500. Then there's the battery production tax credit, and I don't know if as many people are as familiar with it for Policy Wong's, that's the 45X credit that is about $45 per kilowatt hour production tax credit. So what that means is if GM and LG, they have Ultium, they set up a battery manufacturing

plant here. For every kilowatt hour that they produce of batteries, they're going to get a $45 tax credit that goes towards the joint venture, and they could do all the tax magic work with what they will. But really what that means is about 30% of that $151 per kilowatt hour number is going to be subsidized or paid back in some way by the U.S. government over time. And so what that means, and the way the credit is designed that's really smart is it starts at about 100% of that value. And then later in the decade it declines to, you know, 75%, 50% and then phases out. So if you are an EV maker or a battery manufacturer, you want to establish that battery production plant yesterday.

And then the next best thing to yesterday is in a couple years. So when you see those announcements, typically it's about two years from when you break ground to that kind of fully ramped up production. So none of the kind of impact of the IRA is necessarily seen today through the battery production tax credit. We look at the back half of next year into 2025 as when you actually see the kind of announcements made

since the law passed coming into fruition. And then hopefully that's passed on to consumers. Again, it depends on what automakers will do. But it's a powerful tool to kind of level the playing field with China or Europe. And we've even seen automakers move battery manufacturing to the U.S. instead of Europe. Tesla was a good example. They were building up in Germany. And then, you know, they're putting more of a focus on here because of how potent that tax credit is.

So this is why Germany is mad, clear. But just to hit this point home, because, I mean, it seems like domestic policy was very important for China's EV industry. and it could become very, very important for America's EV industry. What are the key differences and similarities between how these two countries are pursuing that type of policy? Like, I guess there's tax credits on either side, but comparing contrast for us. Yeah, I'd say the similarity is the subsidization and the tax credits. Now both focus smartly on the battery side and the EV side.

China did have more of the restrictions in terms of making it more difficult to register gasoline cars, which over time encourages consumers to move towards electric when you have so many cars being sold. You want to be able to get them registered. In the U.S., the version of that would be through stronger fuel economy standards, which the Biden administration has talked about, or California having an internal combustion engine phase out. One thing that Europe has done that we haven't seen in China is having a 2035 internal combustion engine new sales target. So fully electric or hydrogen fuel cell for those vehicles as well. You see U.S. states doing that as well, but outside of California, the rest of the U.S. isn't necessarily on that kind of growth

trajectory. So compared to if we had this conversation maybe like two years ago, you would say the U.S. from a policymaking standpoint is far behind China and Europe. Now, because of the Inflation Reduction Act, the U.S. is pulled within, you know, where they need to be. It's now just keeping those policies in place and automakers seeing the advantage and the opportunity here. So many questions still. There's two questions, and I want to forget. I want to make sure I don't forget them. But you know, you mentioned charging.

And I'm curious, there was that deal a few weeks ago that was announced where, like, GM and Ford, they're like, we're going to adopt Tesla's charging standard. Yeah. Can you just sort of real quickly explain, like, what the significance of that agreement is, how it benefits Tesla? Do they get, like, a penny every time there's a charge? And how it benefits Tesla? works in China? Like, is there just a nationwide standard there?

Yeah, there's a different standard than China, and there's a different standard than Europe, and now there will be a different standard in the U.S. Not a huge deal in terms of ultimately all these EVs are charging on, you know, similar-ish batteries, but it's more so what the plug looks like. And the U.S. charging network compared to China, China beyond lapse, the U.S. in terms of annual public charging installation, and I have for some time now. why they deal with Tesla GM for it and then it seems like a new automaker every week. Nissan jumped on, Volvo jumped on, Rivian jumped on, is really handing me not the keys to the car necessarily,

but a lot of your potential success over to Tesla. What Tesla gets out of it is they become the premier charging network. And they've already been outdoing their competitors. You know, it's not a slam-dunk case that this is going to be as successful yet. I think the hesitation is maybe Tesla hasn't had to manage. It's one thing when you have four models, for example, to kind of balance on your charging network. Now you're having dozens, right? GM has a bunch of models. Ford has a bunch of models. But like we were saying before about batteries, batteries and charging are core to the EV experience. And I think for a long time, GM and Ford and

others said, we're going to trust these other charging companies to handle something that's core to our product, and Ford eventually got fed up, and these other automakers have followed. In terms of Tesla getting a licensing fee, we haven't seen the terms of the agreement. So we don't fully know what they were promised. But even without knowing those details, consumers now see Tesla as the premium charging network, and that will benefit them by having more uptake on their charging network. And they've been building it out fairly quickly. Wait, I have an even simpler question, which is, what does charging infrastructure look like in China because this was always thought to be one of the impediments in the U.S., this idea that

you can buy an EV, but if you're going to do some long road trip, it might be challenging to find the requisite charging stations. Is it different in China? Yeah, so Tracy, again, I guess on that one, I would definitely posit to our China-specific expert on the nitty-gritty details. What I can say, like we discussed before, is that the actual vehicle needs are different. So when you have various different ranges and in general, you know, in general, you know, generally, a lot of charging is done at home. So when you have smaller batteries in smaller cars,

it's a different pull on the grid there than it is here in the U.S. But just from a pure kind of addition standpoint, China's been far more focused and able to scale up the total number of EV chargers. I wish I had the numbers in front of me. But I think it's, I'm not even going to throw it out there. But again, to kind of restate, China has been a lot more on top of building out that EV charging network. I think in the U.S., you haven't had the federal money up until really the last year or so. And you guys can correct me if I'm wrong. But as far as I know, a lot of that, you know, Nevy funding, National EV charging infrastructure as a part of the infrastructure law passed a couple years ago, hasn't actually rolled out yet. It's been through the RFP process and the

states kind of building out their plans for what charging looks like. But the actual chargers haven't been deployed. And maybe it's a good thing because I think a lot of states don't know if they should be going, you know, with Tesla standard or still the CCS combined charging standard that the other automakers had agreed to almost 10 years ago before, you know, switching over and switching sides to Tesla. I like how you said you could correct me if I'm wrong, is if I would have, is if we would have any, like, actually, Corey, I don't think you got that quite right. One of the big themes, and this is something that comes up all the time, and we've already talked about lots on this episode just now, is just like, you know, building up knowledge within

a company, whether it's building up how to put a car together, how to put a charging network together, how to make a battery, et cetera. And so something I'm curious, when you talk about, like, some of these BYD exports are really cheap, just on the dollar basis. Like, as you've mentioned, $11,000 car is? Very cheap. How much of that is they've just gotten really good at bending the cost curve because they've been doing it a lot versus something like their labor costs are cheaper because it's in China. Yeah. It's probably a mix of both. I think, you know, having the, it was interesting. I was looking at a little bit of BYD history just before coming on. They were founded as a whole company in 1995. And then they bought, acquired an auto business and built it up starting

in 2003. And again, they've had the battery expertise and obviously they were selling gasoline cars for a long time. But having that battery knowledge 15 years before you start to see that exponential strong growth from 2019 onwards. You're seeing other automakers who are in Tesla struggling with the growth curve of how do you build, you know, bend that cost curve, how do you begin to make a profit on electric vehicles? And even taking Rivian as a shorter term example, you could see how a newer EV company that started producing a couple years ago is maybe only starting to hit a stride at a low volume, maybe in the last quarter or so. So these things take time. And that's without, you know, switching over from a gasoline product. One thing that

BYD did do, and I'm interested to see which automakers follow. suit is there is an element of let's just go for it. Let's just put the gas car behind us fully and commit to being an electric vehicle company. I think other car companies want to balance kind of shareholder interests and say we want to keep making money while we're figuring in this EV thing out. BYD, maybe it's because of the knowledge and expertise, but to take the leap from we're making gas cars and EVs to going fully electric, it came fairly quickly, but they've reap some of those benefits. And now, moving forward, the questions we get often is, you know, who will be in second place or who will surpass Tesla in the U.S. And now the two horses in terms

of Tesla and BYD are so far out of the barn, it's only going to, they're only going to gain more expertise in knowledge. I mean, Tesla announced earlier this year, their next generation vehicle that will compete with BYD in that kind of $25,000 range. For other automakers, if Tesla and BYD are in those kind of cheaper categories, where you're going to see a lot of volume sales in the future, you know, you're already behind or you're going to be further and further behind as these automakers are investing. It's a tricky thing for other automakers to figure out.

But if they don't, there's a bigger problem if B.D and Tesla keep on taking more and more of that market share. So just to press on this point, because it's something that's come up, I think, in multiple conversations we've had with, like, Brian Dees and Jared Bernstein and certainly Dan Wong and Adam Ozamek, but there's this idea that, okay, you know, U.S. policymakers can say that we want to build up a certain industry within the U.S. But if we're not able to do so in an efficient way that can compete with, you know, other efficient industries in places like China, then it could still be problematic.

So I guess my question is, like, how much does price point and branding and origin actually matter for the EV market? Could we, for instance, have an American electric vehicle market where, you know, there are these cheaper Chinese imports available, but Americans still have a preference for Tesla and other domestic manufacturers. Yeah, and you even see the potential kind of Tesla brand premium. You know, Tesla does very well in the Chinese market, even despite BID and these other kind of more competitive offerings. One thing on the kind of China point, Volvo, which is manufacturing many of its vehicles in China, you know, is in the U.S. market. And there is a kind of brand premium there. They unveiled

earlier this week and in the past couple months, the EX30, which is going to be at a $35,000 price point without any subsidy because, of course, Chinese produced TVs won't receive any inflation reduction act credits. That's coming out next summer and his plan to come out. So, you know, whether or not it's BID, there are going to be other Chinese built automakers that are already here. Polestar, you know, as a part of the Volvo, Gilles family is also already here. So, you know, you have those cars that may be seen as more premium because of the kind of Volvo badge. Tesla is going to continue.

Volvo is a Chinese company. Yeah, Volvo is basically Swedish that was acquired by Aisili. So they're a subsidiary of a subsidiary. I want to go back to the tension that the U.S. legacy automakers face right now. And you described it well, it's like they want to make money right now. And one way to make money is just selling ICE vehicles. They also want to be there for the future. And they are investing in EVs.

But it's clearly a tension because it's going to be a while before they ramp up and their money-making. a lot of capital expenditures. But then there's this other dynamic, and actually we're recording this July 25th, and just this morning GM came out with earnings and the like things are looking good, provided. We don't have a strike. Can you talk a little bit about how this shift to EVs at places like GM and Ford, the labor tensions that are involved in this pretty big switchover of the workforce? Yeah, and I think it's an interesting conundrum in the sense that you have basically

the need to get electric vehicles out there at a lower price point. We talked before about the battery pack and how you need to improve those efficiencies. And so GM and Ford and all the other automakers are now building those battery plants here. And what does that look like for the workers? You know, you've got these negotiations coming up in the fall.

And, you know, for your contract, typically, we at BNEF, to give a broader context, last year, the electric share of new passenger car sales in the U.S. was just under 8%. Okay. By mid-decade, by 20, 2025, we see that going to about 23%, so nearly one in five new vehicles as electric.

And so from a kind of negotiation standpoint, whatever GM, Ford, Stalantis, and UAW come to, it's going to be setting the rules of the road, whether or not, you know, EVs are in the kind of core negotiations. As these, you know, Tesla says this a lot, EVs are part of an auto company. Tesla is an automotive company, even though people try and put EV companies into a different bucket. So GM Ford and the others, they have to kind of balance. How do we make EV's cost less while keeping workers happy while still making a profit?

It's a lot of balls to juggle. So you can see why UAW wants to kind of make a stand and take the issue there. That being said, there is the countertension that if there is a kind of prolonged issue or worker problem, that Tesla is still here. They don't unionize their workers, and they're still trying to get market share. So I think you'll have those two kind of issues in tension, and we'll see where it lands. Now, just on the sort of challenge that GM and Ford are going to have. have in Stalantis, I guess, in these negotiations.

Like, part of it is like, EVs don't have as many parts, right? And we sort of hit on this earlier, and they're less complex. And I remember reading about this a couple years ago. There was this great Business Week story about Germany and, like, the conversion. They're like, they're just simpler machines. And, right? Like, can you talk a little bit about the sort of manufacturing aspect? And, like, you know, they just seem, it's like, you know, the battery and a couple other things, right?

Yeah, exactly. They're simpler machines and especially, you know, we do a lot of price parity research at BNEF. And it changes depending on the battery size and, you know, how long range your electric vehicle will go. But we see by mid-decade 2025 in European markets through the late 2020s in the U.S., depending on your segment, of reaching that upfront price parity. It's a lot of it is just figuring out the battery component aspect of it and building up those battery plants. But yes, there's less maintenance costs, which a lot of dealers have been concerned about. The battery portion, you know, figuring out how to recycle that is going to be a key question. We don't do it, BNEF, any, like, labor-specific research.

But what I can say is that, you know, the other industry is going to look different. It's not going to be as much focused on, you know, those smaller aspects of an internal combustion engine. It might be more jobs or more focused on the charging network, on balancing out the charging network through utilities, kind of shifting people around. But, yes, the core kind of automotive worker, it's going to look a bit different in terms of what offerings, you know, you know, what they're going to actually be producing. But it has to be different if EVs are going to take off and if you're going to meet those climate targets, you know, and EVs are a part of that story as well.

We've talked about the, it's interesting because EVs are both kind of fun in terms of analyzing the car market. Cars are always a good time. But there is a climate benefit here too, which is why, you know, you're switching over from gas cars that lose a lot of that energy to the atmosphere versus EVs that are much more efficient. I have a related question, but more from the China side. You know, we're talking about BYD.

stunning rise in recent years and basically like a lot of the success story of Chinese EV manufacturing. But what are the risk factors here? Like what could slow that industry down in the foreseeable future? What would make Warren Buffett worry about his B.D position? I don't know if I'm in position to tell Warren Buffett what to or not to worry. One more stat I want to give you just on the EV dominance of BYD and Tesla. And then I'll get to your question, Tracy. But But basically, if you look at BID and Tesla combined last year, they were about 30% of all global electric vehicle sales. And, you know, BYD in the first quarter of this year was about 21% of global EV sales, and then

Tesla was about 16.5. So they went up from full year 2022, about 30% of the market. And in the first quarter this year, about 38%. In terms of risk, and I think the India story gets it, you know, BYD has been moving really fast and operating under the radar. Now people are paying attention, and I think one thing maybe to take away from our conversation today is that if you haven't heard of BID before, maybe go Google them and look them up and see their eyes.

What it means is, you know, there might be more of that brand value and upside, but, you know, companies or countries could be more wary in taking them seriously as a competitor. In terms of the overall issues with the EV market in China and elsewhere, I think it's the same challenges of getting consumers to buy, you know, a newer product. The charging concerns, even outside of the U.S. remain paramount. How do you reach consumers who may want to go further? In newer markets, how do you trust a new brand that you may not have seen before, like in Europe? But again, China has and Chinese companies have done quite well by getting out and getting that early mover advantage.

We haven't talked too much about CATL today, but they are an important part of this. Tell us, we've talked, CATL has come up on some of our battery episodes, but in the context of this specific conference, What should listeners know about CATL? CATL has a lot of battery know-how and wherewithal. They're the leading battery manufacturer globally. They have partnerships with Ford. That's going to allow Ford to be able to, assuming that the factory is built and all goes well, to sell vehicles with lithium ion phosphate LFP, that may go a shorter range than the traditional

batteries you see here, but offers, you know, more variety in terms of what consumers can expect. I think it's going to be kind of interesting in a couple years, you know, maybe. savvy consumers will say, hey, I bought a Ford Mackey with LFP, or, oh, I have a long-range Mackey that, you know, has a traditional NMC, which is, you know, wonky battery talk, that acts differently. But ultimately, because of Ford's partnership and licensing that technology, they have access to it. And there's a great Bloomberg piece by BN, a great reporter who looked at the kind of history of LFP, which has moved between U.S. and China, who actually kind of has been investing in it. But CITL has been a kind of pioneering.

that's based and Tesla wants to partner with them. Everyone's trying to figure out, and this is maybe a good time to drop an IRA provision around foreign entities of concern, which is the kind of last-shooter drop around the EV tax credit, the 7500. Basically within the Inflation Reduction Act, Senator Manchin was adamant that cars basically from these foreign entities of concern shouldn't be subsidized. So Ford CATL's arrangement is a way of maybe getting around that provision. It hasn't been defined by the Treasury Department yet, but I know when we,

speak to clients, there's a lot of anxiety around. If we have a small portion of our EV battery that comes from China or really China, Russia and Iran are thrown in the kind of foreign entities concern kind of thought process, but really this is about China. Folks are concerned about, does that mean we won't have an EV subsidy anymore? You know, how low of a threshold does it take to trigger that provision? It's something for folks to keep an eye on. Automakers, Joe, to your earlier point, are really beginning to look at their supply chain. And we've seen many announcements by GM and Ford to say, oh, we're going to be sourcing, you know, these metals from here. And so this is one outstanding part. As a big picture, almost returning to our earlier point,

how close do automakers want to work with China or how close can they work with China? And on the flip side, you know, will China, because of that kind of built up early advantage, really need subsidies to compete here? It's an ongoing story. It's going to be a lot of, honestly, a lot of fun to watch it unfold here. I just have one last question. And, you know, Tracy asked about risks. And so that was sort of where my head went to. You know, like, battery tech is not settled, right? Like, you even just described it just now, there's, like, multiple different kinds, maybe solid-state batteries.

There'll be some great breakthrough, even though supposedly, like, they've been working on that for, like, 100 years or something like that. And then you have other entities that are not even 100% sold on EVs. I think, like, Toyota, for example, is not actually, like, completely convinced that EVs are the future. I think they're still having a toe in hydrogen-powered vehicles, and there's some optimism there. I think Joe Manchin likes hydrogen powered vehicles. Can you just talk a little bit about, like, when you think about risks, the possibility that, like, we don't actually know yet, or maybe we do, but the possibility that the future is sort of uncertain about what we'll be driving.

Yeah, I think that's what makes the EV space really exciting. One analogy I like to use a lot when speaking with subscribers to BNIF is when you look at the current automotive market, you're really relying on a few different gasoline types. In Europe, they have more diesel. I was just in Europe. We filled up on diesel when taking a nice little drive through Portugal. In the U.S., you have ethanol. You know, a different mix is of gasoline.

But that's it. The EV industry, if done correctly, can have many different battery types. You know, a common criticism of EVEs is that you're using cobalt in an MC batteries. With LFP, there's no cobalt and no nickel. Lithium is the kind of key mineral in many of these EV batteries

and will continue to be important moving forward. But what's exciting about it is we don't know what the future looks like. If automakers can kind of leapfrog into solid state or other type of battery chemistries, you know, you can create new supply chains and a potential new competitive advantage, even if you're behind, you know, like a Toyota or other, you know, Japanese automakers have been. That being said, I think the big takeaway from our conversation and watching both Tesla and BYD is that you can't completely make up ground because Tesla and BYD are also looking into the same next-gen battery technologies.

You know, certain automakers may say, oh, we're looking into this, we're going to leapfrog, it's easier said than done. And ultimately, producing EVs at scale is a challenge. Making cars is not easy. But if you kind of work through the process and you really focus on it, these two companies show that there is success waiting and improvements to be made. So to sum up on the question, there is a lot uncertain. And really, you know, there's recessions, there's other black swan events.

Even Russia's invasion of Ukraine had an impact on the commodity costs of the materials that went into batteries, increasing the overall battery cost in our survey for the first time in the 10 years that we had been doing it between 21 and 22. But there's also potential upside moving forward. And that's something that we on the EV team at BNEF track every quarter, every week, every day. Corey Cantor, Bloomberg, NEF, thank you so much for coming on Odd Lots. We really needed to do that episode. I learned a lot.

Thanks, Corey. That was super interesting. Yeah, that was great. Tracy, I really enjoyed that conversation. learned a lot. You know, I want to, just in terms of my thoughts, I kind of, like, want to start, like, at the very last point that Corey made that, like, you know, this is such a key theme for us, the sort of, like, learning by experience, learning by doing, et cetera. And this idea that, like, even if the future of, like, battery tech is still TBD, and it's probably going to keep evolving

for the rest of our lives, that, like, it's really hard to just leapfrog anyone. Like, if you have the experience already building high-performance EV batteries, you're probably, you're probably going to be better at it than some other entity that's starting today who, like, imagines they're going to leapfrog you. Well, I learned a new word, which is co-opetition. And maybe that speaks to some of the idiosyncrasies around battery making as an industry. But this idea that, you know, if you can't leapfrog your way into this technology, then maybe it makes sense to partner with a company that has some expertise in it,

even if they are ostensibly in a country with which you might have. some sort of trade or geopolitical tensions at the moment. Well, and also to Corey's point, like, you know, a big story for the rest of the world and China in particular over the last several decades was the sort of their importation of American know-how of like various tech, right? And like companies setting up domestic JVs and that tech transfer process, et cetera, historically that hasn't gone in the other direction so much. But the U.S. is behind on battery tech.

There are these subsidies. And so to the extent that like the U.S. is sort of like our shot is like sort of partnering with foreign non-U.S. battery makers like importing that know-how learning from them. That seems like part of how the U.S. could at least, in theory, be a major player. Yeah, but it is going to be interesting to see whether or not it continues in the current landscape. So yes, it kind of makes sense for the past few years. But with the IRA underway with some of the tensions arising, in Europe, I do wonder whether or not those types of partnerships that have really helped sort of springload or jumpstart China's EV industry, whether or not they're going to continue at the same pace that they have previously. Yeah, there's so much money in it. Like, it's just like, no, that's like every time I hear about how they design the IRA,

it's like they're just like absolutely spray hosing cash at all this. And so I feel like when you see all these announcements, it's like no one wants to avoid that money. Everyone wants to get in front of it. Like, I'm imagining those, like, boxes where the dollars fly around and everyone just sort of like grabbing it. That's sort of how I think of like IRA. That's Joe's mental framework of industrial policy in America. It's like a telephone booth of swirling dollars and all these companies trying to catch it. All right. Shall we leave it there? Let's leave it there. Okay. This has been another episode of the Athoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthal. You can follow me on

Twitter at the stalwart. Follow our guest, Corey Cantor. He's at Corey B. Cantor. Check out all of his work, great stuff by him and his team over at Bloomberg and EF, really tracking this data well. Follow our producers, Carmen Rodriguez at Carmen Armin and Dashel Bennett at Dashbot, and check out all of our podcasts under the handle at Podcasts. And for more Odd Lots content, go to Bloomberg.com slash Odd Lots, where we post transcripts, we have a blog and a newsletter, and check out the Discord, we have a whole room. We talk about transport, we talk about energy, all of these topics actively discussed 24-7, Discord.g.g.com. Yeah. And if you enjoy Oddlots, if you like conversations about Chinese EV and competition

with the rest of the world, then please leave us a positive review on your favorite podcast platform. Thanks for listening.