Plain English with Derek Thompson - America's Biggest Car Companies Are in Trouble

Episode Date: March 26, 2024

Today, the media vibes around electric vehicles are all bad. But if you lift up and take in the big picture, electric vehicles and hybrids are taking over the market. Gas-powered cars are as much in structural decline right now as the cable bundle in TV. Today’s guest, Robinson Meyer, the founding executive editor of the climate media company Heatmap, says that while EV sales are much stronger than the media doom-and-gloom narratives, something else is happening that deserves our attention. America’s Big Three automakers—Ford, General Motors, and Stellantis (which owns Dodge, Chrysler, and Jeep)—are in big trouble. China’s electric vehicles are going to hit Detroit "like a wrecking ball," he says. Joe Biden wants America’s green electric future to be made in America. But right now, the future of EVs is being made in China. If you have questions, observations, or ideas for future episodes, email us at [e-mail]. You can find us on TikTok at http://www.tiktok.com/@plainenglish_ Host: Derek Thompson Guest: Robinson Meyer Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hey, can I talk to you? Over 25 years ago, on September 29, 1999, we watched a brainy girl with curly hair drop everything to follow a guy she only kind of knew all the way to college. And so began Felicity. My name is Juliet Litman, and I'm a Felicity Superfan. Join me, Amanda Foreman, who you may know better as Megan, the roommate, and Greg Grunberg, who you may also know as Sean Blunberg,

as the three of us revisit our favorite moments from the show and talk to the people who help shape it. Listen now to Dear Felicity on Spotify or wherever you get your podcasts. Today, the vibes around electric vehicles are all bad. From The Motley Fool, quote, electric vehicles' stocks are crashing. From The Verge, the EV transition trips over its own cord. From Fortune, the electric vehicle math isn't adding up. Demand is sagging and once bullish investors are fleeing.

From Bloomberg, demand is chilling. Even industry reports like Auto Week said, quote, Last year, American consumers discovered the shortcomings of electric vehicles. The New York Times Daily podcast did a full episode on what they called Joe Biden's electric car problem. So where is all this negativity around EVs coming from? I think we have to start with the fact that clearly there is some evidence to hold up this narrative. The growth rate of electric vehicles really has slowed down a bit, and there is widespread evidence that EVs are taking a little bit longer than they used to

to sell out-of-car dealerships. But if you lift up and take in the big picture, the data doesn't entirely comport with the bad vibes. Electric vehicles and hybrids are booming. They are taking over the market. Gas-powered cars are as much in structural decline as, say, the cable bundle in television. But today's guest, Robinson Meyer,

says something else is happening in this EV industry that deserves our attention and are concerned. While electric vehicles overall are selling fast, especially from Tesla, Kia, Hyundai, America's big three automakers, that's Ford, General Motors, and Stalantis, the weirdly named company that owns Chrysler, Jeep, and Dodge,

they're in big trouble. As they struggle to move from the 20th century business model of selling internal combustion engines to the 21st century business model of selling electric vehicles, they're facing a huge, threat from overseas. Chinese automakers, like BYD, which specialize in making cheap electric vehicles by the millions, are on their way. Meyer says China's electric vehicles are going to hit Detroit,

quote, like a wrecking ball. Joe Biden wants America's green electric future to be made right here in America, but for the moment, the future of EVs is being built in China. Robinson Meyer is the founding executive editor of HeatMap, a media company focused on climate change. He is the co-author of the climate podcast ShiftKee. He used to work with me at the Atlantic, and he joins us today to wait through some big questions. What's really going on with EV sales in the U.S.? How accurate is the doom and gloom media narrative? How did China lap us in this space? How much trouble are Ford and GM really in? And what would it take to actually build the green future? here in America.

I'm Derek Thompson. This is Plain English. Rob Meyer, welcome back to plain English. Thank you so much for having me. So there's two questions that I'd like to attempt to answer today. The first question is something like what's really happening with electric vehicles in America. The media vibes are extremely gloomy,

but some of the numbers are not nearly as gloomy. And the second question I want to answer is how screwed are the big three automakers really as they attempt to ford the river between the internal combustion engine paradigm that has dominated the auto market in America for the last hundred plus years, and this new paradigm, the electric vehicle paradigm. I think before we answer those questions, it'd be useful to do a quick reminder about the IRA, the strangely named Inflation Reduction Act, which, as many people know, is not so much

an inflation reduction act, but a subsidy bonanza for climate energy producers and consumers. So, Rob, get us caught up. what did IRA, what were the most important things that IRA did, the policies and the laws that encouraged both carmakers to produce more electric vehicles and consumers to buy more? So there's really three subsidies in the IRA that people should know about, and I'm going to go through them in the order of kind of most popular to least popular, but it's also, I would say, least important to most important. So the first subsidy, the one that you hear about the most, is the subsidy for just buying an electric car, an electric vehicle. And some, it's a,

This applies to some plug-in hybrids too, but generally, anything with a big battery that you're going to use to drive the car around, if you meet certain criteria, if you build the battery here, if you mine or process certain key minerals here, you get $7,500 off the cost of the car. And since Jan 1, you get that directly as a discount at the moment of sale is very easy. The second subsidy, which is more powerful, I would say, is a $7,500 subsidy for leasing an electric car. The third subsidy, which is the most important and which consumers will never see, is entirely on the supply side. And this is a set of, like, bonuses, of tax credits that the government will pay out to manufacturers of electric vehicles. And not only, not really electric vehicles per se, but like all the, components that go into making an electric vehicle. And they're awarded based on, like, directly, like, you make this and you sell it, we give you money. So if you make a kilowatt hour of a battery

cell, you get $35. If you make a battery module in the U.S., you get $10. And what's interesting is that winds of being a lot of money very quickly and extremely salient to carmakers in a way that has really flown under the radar, but it's like the most important part of this, arguably I think the most important part of this whole law? So US Clean Energy Policy is subsidizing the supply side and subsidizing the demand side. I want to talk about both sides of the subsidy policy.

Let's start with demand, because as I talked about in the open, there is just an extremely loud media narrative shouting about how EV sales are slowing, about how there's a catastrophe in the EV market that EV is having, you know, running into a ditch, all the vehicle metaphors are being employed to characterize this slowdown. Looking at the raw numbers, Rob, how would you characterize the growth of American demand for electric

vehicles in the last few years? American demand for electric vehicles is rapidly growing, period. All of what we are fighting over, any of these articles that you may have seen, is actually a slowdown in the growth rate. But many more American bought EVs in 2023 than bought them in 2020. 22, many more Americans bought them than 22 than 21. More Americans will buy EVs this year than last year. Everything that we're kind of fighting over and all the discussion topics are about the

second derivative. Just to give a sense, in 2022, the growth rate for EV sales in the U.S. was like 61%. In 2023, it was 32%. However, like in the background of all of this stuff, I would say two things. The first is that internal combustion engine cars, classic gasoline-powered cars, their sales peaked seven years ago. They're like done. We're just fighting about how fast EVs are taking over.

And number two, last year we saw something really surprising, which is extremely rapid growth. In fact, growth that matches the EV growth rate among plug-in hybrids and normal hybrids. So there seemingly are a lot of Americans who are going out, they want to buy an EV, they look at what's available. They're like, maybe not this year. But then instead of buying a regular gas car, they're going out and buying a plug-in hybrid or a conventional hybrid, like a Prius. And that is actually really helpful, too. That's, like, good in the climate story as well. All right. So demand for all these categories, for plug-in hybrids, normal hybrids, electric vehicles, all seems to be growing. And it's just that these media narratives are fighting over, well,

is it bad if the growth rate falls from 60% year-of-a-year to 30% year-a-year? Before we move on to the producer story, because actually that is, I think, the more interesting part of the story, is there a number we should be rooting for? I mean, obviously, EV growth is still happening? But is 30% too slow in your mind? Is there a level at which we want to keep growth above? The idea that the EV growth rate would be slowing down is not a surprise. Because this is like how technological growth rates work, right? So you have a slow start at the beginning and then a very rapid S curve, a very rapid, like, assent in the middle as this technology starts to cut in and starts to like really break out. And then as it reaches, as it fully penetrates the market, the growth rate starts to slow down. If you think about iPhones or smartphones, for instance, like they cannot grow as fast now as they were 10 years ago because most of the people who are going to buy a smartphone have a smartphone.

The issue with EVs and the question we're still trying to parse out here is are they tailing off too soon? So last year, for instance, the EV growth rate stopped growing exponentially. But we would expect that eventually, but EVs really only represent like 8% of the U.S. auto market right now. And we need them to eventually be more than half. I mean like all of the U.S. auto market. And so it is concerning. Is the growth rate uniform across companies, Tesla, Ford, GM, Kia, or are some companies really killing it in electric vehicles while others are struggling to make this transition? It's very spotty from company to company.

So Hyundai, for instance, posted their EV sales. increased 40% in February of this year. And they were already the number two biggest seller of EVs in the country. So Hyundai is like killing it. Hyundai and Kia together are killing it. But Ford had more modest sales. And if we were to extrapolate Ford's, for instance, sale of its F-150, lightning, a fully electrified pickup truck,

and the Mustang marquee through the end of the year, they would actually sell fewer makis this year than they did last year. So we need EVs to keep growing faster than they are right now. Your podcast co-host and the Princeton professor Jesse Jenkins had an article in HeatMap called Don't Believe the Story about slowing EV sales, where he said the real story isn't that EV sales are selling slowly overall. This really is a story about two companies. It's about Ford and GM in particular having trouble breaking into and sustaining momentum in this market. And that's really where I want to spend the second half of this conversation talking about Ford and GM and some of their struggles in electric vehicles and why we should care about those struggles.

So first, let's characterize the nature of the problem. What are the problems that Ford and GM are having here? So both companies have the same big challenge over the next 10 years. And that challenge is right now they are losing money on every, losing money on every EV that they sell. and they make almost all their profit selling gas burning SUVs, pickups, and crossovers to North Americans. And the numbers here are actually quite crazy once you dig into them. So GM, for instance,

sold about half of its cars in North America last year, but made about 90% of its profit in North America. So almost all of its margins are coming from selling big trucks mostly to Americans. For GM, over the past, few years have stopped selling in other markets, and they have really concentrated on this like cash cow segment, which is big vehicles selling to Americans. The issue going forward is that's

going to come under pressure from a few places. The first is that just within the U.S., Ford and GM face very high costs, partially because of the recent deal they reached with the United Oilworkers, but just they face kind of structurally higher costs than other automakers. And Tesla, Kia Hyundai, Toyota, Volkswagen, these car companies that do manufacture vehicles in the U.S., but tend to do so in less union-friendly states through the Sunbelt,

are seemingly going to have more control, let's put it this way, they're going to have more control of their cost model than Ford and GM will over the next few years. Those cars, those companies, also often operate in global markets. And so the second threat to foreign GM is that the rise of the Chinese auto sector

and the rise of these Chinese automakers, specifically, which are making really cheap vehicles, are forcing every other global auto company to also make cheap vehicles to compete with this high-volume Chinese sector. And that's going to make companies that aren't Chinese but do sell cars here get better at making cheaper,

cheaper electric vehicles and cheaper cars. Right. The way you're telling the story, it reminds me, the way you're telling the story, it reminds me, honestly, of some of the dilemmas that legacy entertainment companies have faced in the last 10 years. You're nodding right now, but I'll finish the metaphor and maybe you can pick it up. Like, if you're Disney, if you're Bob Iger or Bob 2 before him, you were thinking, all right, we are essentially a cable company. We make our money from affiliate fees on television and from movies. But now there's this upstart Netflix.

Maybe we should go into streaming. And then you realize that streaming is unbelievably cost-intensive. It takes a lot of money to build up the infrastructure. It immediately turns out like you can't necessarily compete. You're losing a lot of money of this new sector. And the question is, how do you cross that river from the thing that's made you money for the last 40 years in Disney, you know, which is television and film, into streaming? It's so similar if you're a company like GM.

I mean, I'm really struck by the description of this company is selling half its cars in America, but making 90% of its profits in America. I mean, a fully Americanized company when it comes to their operating income, and they have to learn how to make an entirely different kind of car that competes in international markets. This is a revolution akin to moving from linear TV to streaming,

and it's really, really difficult for legacy companies to change themselves to become competitive an entirely new segment. No, totally. And it's funny because I remember listening to your Hollywood episode and being like, man, this is so much like what the big fear. Like I was having, I was at the gym listening to your episode. I was like, this is so similar to the carmakers.

Because it is not only that they have this, it's like structurally similar in a few ways, because it's not only that they like used to have this one business model that's kind of still working and they have to get to this new one. It's also, GM especially used to sell a lot of cars. in China. And because of the dominance of these Chinese automakers and also because of policies

and cultural changes in China, like its Chinese sales are dropping out in the same way for Hollywood that the Chinese box office has dropped out, frankly. And suddenly it's like even more hyperdependent on the U.S. this certain stratum

of U.S. consumers than it was before. Similarly, both companies have to basically exactly, as you said, get to a point where they are turning a profit on EVs. And that's going to be hard for them in two ways. The first is like building an EV is a totally different supply chain, is a totally different assembly line than a car. There are some strengths, obviously, that carry over from building an internal combustion car

to building an EV, but a lot of things depend on the battery and the battery chemistry. and there U.S. automakers are really behind the rest of the world, behind Chinese companies specifically, which have advanced, which are able to make battery chemistries or are able to make batteries at a certain cost in ways that U.S. automakers just fundamentally don't understand how to do. But then second of all, it seems like the EV market could be structurally different than the,

current U.S. auto market where the EV market is going to be fought on high volume low margin vehicles where companies sell get really good at making certain vehicles cheaply and then can have you know wage a price for over them and can sell a lot of vehicles that's the specialty that these Chinese automakers have developed working in China while here in the U.S. Ford and GM have gotten very used to selling a lot of vehicles, sure, but selling really high margin vehicles. And it's always been the case that like selling a crossover, selling a SUV, selling a pickup truck is a much more profitable. Like the margin is much bigger on those vehicles than on a sedan, let's say, or a small hatchback.

But what the U.S. companies have done over the past few years is like Ford has stopped selling all sedans and hatchbacks in the U.S. altogether except for the Mustang. And so they have also also super focused on this stratum of consumers because it was the highest margin, and now they're finding themselves facing an auto market where not only do they have to change the drive train of the vehicle, but they also have to change the entire way they make their business model work. Which is very difficult to do when you're building a new business that's cost intensive because all those costs are dragging down your operating income and you're not making up that operating income necessarily on cheap EVs.

Exactly. So they can't phase down. that SUV business, right? There's like, how do they phase down that SUV business while transitioning to the EV business, knowing that they've called this wrong in the past, right? Knowing that, like, they bet that people would want to buy a lot of, you know, Ford really bet on the, on the F-150 Lightning, right? And then demand wasn't there for it as much. And that's, we can argue why that is.

We can argue why U.S. consumers, like, aren't quite ready for EVs. I think it's because of charging. We could talk about other things. But, like, if they phase down. their profitable side of the profitable side of the organization before it's ready, and they lower costs from that. And then they start making a product that people aren't ready to buy, then they're really screwed. I have two questions for you that are somewhat the same question. The first is, why aren't consumers ready for electric vehicles, in your opinion? And the second, I think,

very related question is Tesla has the best selling electric vehicles in the U.S. What has Tesla figured out about America's EV anxieties that other companies haven't? I think it's a few things. So the most interesting data point, there's a few interesting data points here. I think the first is Tesla remains the number one seller

electric vehicles in the US. And what do you get with Tesla? You get this charging network where that's very well advertised, that seems to be well maintained, that people know about, they know where Tesla chargers are even before they buy a Tesla.

There's a lot of certainty when you buy a Tesla that you're going to get a charge. experience where you've probably already know which chargers you're going to use even before you purchase the vehicle. Now, over the next few years, Tesla is going to open up that charging network to other manufacturers. So actually last week, the Tesla superchargers opened up to Ford electric vehicles. And starting in the next few years, Ford will begin to sell

vehicles that don't require an adapter to charge in the Tesla system. I think it is, more broadly, I think it is charging is the bottleneck. And I think it is actually less range anxiety and more charging availability. Because range anxiety matters less if you are certain that at every Wawa you go to, every gas station, every rest area, there will be more chargers than anyone could possibly need. But that is like not the experience right now. Usually, I don't know, when I go to a parking lot or when I go stop at a rest stop, sometimes all the chargers are full right now. And so I think it is less the range anxiety

at this particular moment and more, um, are there just enough chargers out there in the world, uh, that people can use and see around them and know that if they went to Target or went to a restaurant or went to the mall or went and parked on the street, that there would be chargers for them to use.

Let's hold on Tesla for a beat. It's the U.S. leader in EVs. and cunning prices on their sedans and SUVs, but it's also moving forward with this hulking, weird-looking giant called cyber truck, which is a very expensive, futuristic, very angle-y car. So that's a strange strategic move of what you're telling me is that EVs are racing down the cost curve. At the same time, Elon is doing all this stuff on X-Twitter. He's building Neurrelink, you've got SpaceX. It seems to me like Elon is distracted both outside of Tesla and strategically within Tesla.

And when you hear Elon talk about Tesla too, he sounds depressed. On an investor call in October, Elon said, we dug our own grave with the cyber truck. And he was like, you need to temper expectations going forward. These are not things that like a confident CEO, especially like Elon say about their newest vehicle line that is like their most important thing that's absorbing all their institutional attention. He seems quite daunted by the prospect of

making the cyber truck profitable. And it's a really bizarre distraction to the company when their industry is being totally changed at this point by these Chinese upstards. On the one hand, the company is in deep crisis because

Elon is clearly distracted. There's the Wall Street Journal reporting about how he is using recreational drugs more and more. They're spending a ton of institutional time and money and cash, ramping up cyber truck production for no apparent reason over the next year. They are threatened. Previously, Teslas have sold very well in China, and they're increasingly threatened

by the rise of these Chinese automakers. Even if it weren't for China, Hyundai Ionic, Volkswagen, Pujo, globally, automakers are surging into the electric vehicle space, which they previously have controlled. There's lots of threats to the Tesla business. To review where we are, on the demand side, the slowdown in electric vehicle sales has clearly been overrated by a lot of the business media. On the producer side, however, it's a little bit chaotic because Tesla is still selling

well, even though its CEO is multiplicatively distracted. Kia Hyundai are selling very well with their cheaper EVs, but the two big Detroit automakers are not doing as well as they thought. And in the New York Times, you had an op-ed that made a lot of waves, and I thought was really interesting, which is headline, quote, China's electric vehicles are going to hit Detroit like a wrecking ball. In particular, you point out that the number one Chinese electric vehicle producer, BYD, makes this extraordinarily cheap EVV. and it has had astounding growth in the last few years. Tell us a little bit about who BYD is, what BYD is, and how it succeeded in driving EV prices so low. So BYD is a long-standing Chinese automaker.

They have been around for decades. They began, like, a lot of Hyundai actually began, like a lot of global automakers have began as a manufacturer of parts for other auto companies, and then they began making cars themselves. And they made gas cars for a long time. That was their focus. They have a seemingly a husband and wife leadership.

They're kind of obsessed with cutting costs. Warren Buffett invested in them in 2009. So they've long been like an icon of like a cheap Chinese automaker, but they were not making desirable vehicles. They were not seen as a global threat. outside of the Chinese market. Over the past several years, they have executed a number of difficult things successfully,

and it has taken them from being a kind of interesting Chinese company that made cars, made very cheap vehicles, mostly for the Chinese market, to being a totally new kind of global automaker that poses a threat to other automakers around the world. The first one is that they realized relatively, early that they you know that there was going to be

it could develop a competitive advantage making electrified vehicles and this isn't only electric vehicles like purely electric vehicles per se like a Tesla it's also plug-in hybrids that have both you know a gas drive train and a battery you can drive a little ways on

um people I really realize that it could use its uh that could develop an advantage in the battery space and if you think about it like that fits really well into the rest of the Chinese industrial ecosystem, because what else does China do really well? It makes batteries for smartphones. It makes batteries for watches. All that expertise that exists

in the Chinese economy ports really well over to electric vehicles and represents like the accumulation of complexity in the Chinese economy that is confounding Biden administration policymakers and is also extremely interesting to behold. That's one thing. The second thing is that they are unusually vertically integrated for an automaker. So unlike Ford and GM, for instance, so a few days ago, a BYD tanker delivered the first vehicles to the port of Rotterdam in the European Union, in Europe. That BYD tanker is, like, it was a BYD branded tanker.

They did not ship their vehicle, like the whole supply chain for EVs, B.YD has a finger in it, and because of that is able to cut costs ruthlessly. We often think about Chinese manufacturing as being very cheap because Chinese labor costs are cheap, but one thing that BYD demonstrates is that the labor cost issue is far less of a factor now. It's that they have, it's economies of scale and a mastery of robotic manufacturing that have really allowed BYD to slash its cost so much. And the final thing is that in 2021, BYD basically had like a burn the ships moment with gas cars. They realized that they were making these gas cars and they were fine but not competitive,

but that plug-in hybrids and EVs were going to be globally competitive. And we're the future and we're the future of the Chinese market and were the future of the European market. And they could compete there. And so they just said, we're done making gas cars. we're going to make plug-in hybrids and electric vehicles, but we're done making gas cars. We're all in on electric vehicles. That's where we're going to focus all our attention.

And that extreme focus on this segment has allowed them to develop a mastery of the space and an ability to cut costs and making these vehicles that is like totally unrivaled. So for instance, BYD recently announced a plug-in hybrid that gets about 30 miles of range and retails in China for $11,000. This is not a big car, but it is a little Honda Civic-like sedan, but it costs $11,000 and it's low emissions. And the way that they framed it,

this is like the first car, the first electric vehicle or plug-in that is completely cost-competitive, completely cheaper to own than a gas car at every stage. It's cheaper to buy, it's cheaper to run. it's cheaper to maintain. So the drama here is you've made the point that Ford and GM are struggling to make this transition toward the electric vehicle future.

And here you have BYD, which is not struggling. It's succeeding beyond Detroit's wildest dreams. It's making a car that is three times cheaper than a similar electric vehicle coming out of Detroit. And this is because of everything that you mentioned. It's not just about lower labor costs in China. it's also about focus. It's also because of vertical integration. I'm sure it's also because of the, you know,

Chinese government having its own subsidy program for electric vehicles. Yes, it's also because of aggressive. It's this, I mean, yes, I should. And we should talk about, I mean, the hard thing here is how do you talk about all the strengths of BYD? BYD has also, like Neo, like Gili, like other Chinese automakers, has benefited from China's aggressive support of electric vehicles. And China's aggressive industrial policy to support manufacturing. And the fact.

that China, because of how it runs its trade balance, often has a cost edge among countries that produce, you know, goods for export, especially compared to the United States. And what's interesting, I think, about the Chinese vehicle market at this moment is that a lot of those things can be explained, not by reference to climate. So, for instance, why does China have such an aggressive industrial policy focusing on EVs? It's because a weak point in China's economy, that Chinese policy makes, I've known about forever, is that if there was ever a conflict between the U.S. and China,

the U.S. would blockade China and stop oil imports into China. And China has an extremely oil-dependent economy. And so China has done absolutely everything it can to diversify away from seaborne oil imports. And one of those things means electrifying your vehicle fleet. So China has like non-climate reasons to invest in EVs. And then on top of that, you know, the Chinese government, through local and national level policy, like runs a lot of supports for big exporters

or big producers like BYD. You get cheaper land, you get cheaper credit, you get permitting reform, basically. There's just a lot of benefits these companies get by operating in China that are basically, in a bad way, extracted on the backs of the Chinese people, but like they just make these companies

into very competitive behemones. All right. So you've got this, B.D revolution happening, this Chinese EV revolution that's happening. And I can imagine two competing arguments about how to think about this. One argument is, what matters above all is not who makes the electrical vehicles of the future. It's that the EVs get made, period. And if China is going to build the future, well, fine. If you care about the climate, you want more EVs in the road, rather than fewer EVs in the road. Just let them sell into any market. A very, very different

attitude is an attitude that I think has a lot of sympathy in the Biden administration and would have a lot of sympathy in a Trump administration. And that is, we don't want the Chinese auto industry to bankrupt Detroit. We certainly don't want this to happen during an election year where Michigan is a swing state. And so there is already a tariff on Chinese-made automobiles, if I understand it. There's conversations about raising that tariff. There's conversations about further help for Detroit automakers to help them compete against these Chinese carmakers. But again, that kind of protectionism is, it can be a little bit screwy because sometimes you're not only raising prices on American consumers with the tariff, but also by shielding American car makers in the U.S., you're in the long run making them less competitive. So as you balance

all these competing interests, climate change is really important. Thriving domestic industry is is important. Detroit going bankrupt is also important. Where do you land in terms of the Goldilocks policy here? It's extremely difficult because not only is there this explicitly political question around, you know, the big three employ four times more people in Michigan than they employ in any other state. Michigan is, as you said, an essential state to, you know, there's no path, there's very few paths where Biden gets reelected without winning Michigan, right? It is essential. The last thing he wants is a China shock or the really the specter of a China shock in Michigan because BYD, as fast as it's growing, is not going to change the American auto industry this year.

It could change the American auto industry in 26 or 27, but it's not going to change it this year. But even the specter of a China shock would be politically extremely damaging, especially when, and here's where I think it gets difficult for people who, like me, are very interested to see, are aggressively on the side of decarbonization, the knock, the Republican knock against the IRA is that it's a giveaway to China. And so if Republicans criticize the IRA... How does that make sense?

Because Chinese companies do actually control huge swaths of the EV supply chain and do actually dominate huge swaths of the EV supply chain. And so if you're subsidizing EVs, Republican lawmakers argue, What you're doing is essentially subsidizing Chinese industrial activities. Now, I think of the context of the IRA that isn't true because the IRA has so many

protectionist supports in it because there are so many policies that you only, you know, you only get that $35 subsidy for building a battery here, for instance, if you actually build the battery here, right? Not if you build it in China. So if you support making decarbonization politically popular in the U.S., it would seem bad to bankrupt the big three in the name of that. I would add one more concern here, which is that I don't think we want a globally concentrated... I don't think we want to globally concentrate the car industry in China. I think that would be bad. And not because China

is uniquely threatening, but because I think we simply... It is not in the interest of decarbonization globally to have the entire EV industry that we need concentrated in one country. We shouldn't put all our eggs in one basket just as like a matter of good policymaking. And also like it would make, uh, let's say we support, let's say you and I support like rapidly electrifying the US vehicle fleet. That shouldn't be dependent on the whims of Chinese policy makers, right? We do want some ability to affect the supply of electric vehicles. if that is not, if not in the U.S. is in our allied countries, right, in friendly countries. So that being said, like helping, protecting Ford and GM, period, just like cordoning off the U.S.

auto market and being like, well, Ford and GM, for political reasons, basically have to stay as growing concerns forever, and we're going to do what we can to keep them as going concerns, is also not a good option. That's a terrible idea. That will turn the U.S. auto market into, like, this backwall. of bloated gas guzzling vehicles and will mean that Americans increasingly spend more and more of their money on cars. It just would be a bad deal for everyone except, I guess, Ford and GM management. I don't know. So what I argue in the New York Times piece is twofold. The first is that in the short term, to blunt the initial impact of the China shock, it seems politically necessary. It seems

essential to provide some kind of protection to the U.S. auto market, to buttress the U.S. auto market in some way so that this flood of Chinese vehicles does not just come in and completely destroy the industry has existed right now. Among many other things, we want to just and we want to transition out of the fossil fuel economy that makes sense and is just that does not. seem like a very good way of doing it. However, protecting Detroit is like politically possible, is politically essential and also highly problematic. And so at the same time that you protect Detroit, in the long term, you also want to suggest to these automakers that they will not be protected

forever. And you want to encourage them however they can to learn everything they can from Chinese companies. And to go borrow these production methods, borrow what they can, learn what they can, and compete in places that aren't just the U.S. so that they can, in the long term, not just be like these gnarled creatures of the U.S. market, but actually competitive global auto makers, you know, in the same way that B.YD and Neo are. That's question.

Is it possible that 20 years from now, we're going to look back and see that one of the most important drivers of the decarbonization of global transportation, and the shift from the internal combustion engine to electric vehicles is the geopolitical animosity between the U.S. and China? Because putting together a few things that you're saying. Yes. No question.

And I think it actually is very tricky for climate people because I don't know, as a climate warrior, as someone who wants to decarbonize a global economy, that's what I spend my career on. I'm also a fan of, I don't know, like a much friend, a much friendlier and more peaceful global environment than we have right now. I'm a nice guy. Like countries to be at peace with each other.

I would like a lower risk of World War III than I would say exists at this particular geopolitical moment. At the same time, the IRA exists because a number of U.S. policymakers, including Joe Manchin, looked at what was happening in China and they said the U.S. needs to compete with that. The U.S. needs to keep up with that. We need to do what we can to not lose our edge in lots of crucial industries and to maintain our edge. You know, we need to maintain an edge or maintain competitiveness and solar and wind and EVs

and we need to, you know, stay ahead and carbon capture and hydrogen and geothermal. The IRA wouldn't have happened if it wasn't for this aggressive Chinese support of decarbonization. Likewise, I think some of what we're seeing now in the electric vehicle space wouldn't be happening if it weren't for the fact that China

and especially Europe, but especially China are electrifying faster than we are. And I think that's tricky because so often, like, climate activist groups demand that we make friends with China, for lack of better term, that we have a very peaceful environment,

like a peaceful relationship with them at the cops or in these global spaces. But I think what we've actually seen is that what gets results is when the U.S. and China are, like, competing to outdo each other in climate. And that's kind of good, too, because what we, like,

maybe the best outcome here is that climate sublimate some of the U.S.-China competition into a space of a peaceful win-win scenario, right? We want countries competing to, like, help the world. And that's what we would want from a kind of global rivalry. And the best-case scenario for a U.S.-China competition that last decades is that they compete to make the entire world better. They compete to decarbonize the economy. And so on the one, hand, it feels very strange because climate is, like, coated as this crunchy granola

chippy dipi. Exactly, like, hippie issue. Like, imagine world peace, join hands, kumbaya style issue. But actually, we've made the most progress on it by, like, trying to outcompete our greatest geopolitical rival. I feel like if there's a PhD student

or want to be PhD student listening here, I would highly encourage someone to write a dissertation on And Rob, you gave me the idea for this, geopolitical sublimation. Why was the telecommunications revolution where it was, the 1980s, 1990s? Because the U.S. heavily invested in transistors, bought a lot of them up with the Apollo project, accelerated the communications revolution because we were so afraid of the Soviet Union getting into space and dominating space before us.

So in many ways, the communications revolution was accelerated by the Cold War. Maybe the exact same thing, or it seems very likely the exact same thing is happening now. Chinese fears of an embargo accelerate their decarbonization or electric vehicle subsidy. And then in response, we pass our own fleet of subsidies to match that decarbonization speed. We might be replaying a kind of, it's not a peace dividend. It's a cold war dividend. It's a geopolitical insecurity dividend of rival powers. Maybe this is obvious lots of people that studied the history of rival powers, but it's interesting to think if it is a kind of technological sublimation.

Final thoughts on this. That's a really fun way to think about it. Not fun, but interesting. So I went to COP. There's two things. I went to COP last year. I went to the big UN climate conference last year in Dubai. And the place they had the conference was on this very, like, Epcot-like campus that Dubai had just built for its World Fair.

There are still World's Fairs. The most recent one was in Dubai. the next one's in Japan, I learned while I was there. What's funny is that it's kind of all the autocratic countries that have the greatest, like, incentives to go to the World's Fair. So, like, Saudi Arabia, Kazakhstan. These are the countries are, like, the biggest pavilions on this ex-worlds fair campus. Uzbekistan.

And so what was striking to me as I walked around the part of the campus that had been most clearly part of the World Fair, like, apparatus and still had all the buildings up, was how many of them focused on climate and how many of them talked up, even like the Saudi Arabian climate initiative, right? Which is an oxymoron, but like, there it was. There was a big building talking about all the things Saudi Arabia was doing for climate.

And then even smaller countries, they had the Phillians up talking about, like Ghana, you know, talking about all the things that was doing for climate. I think, as we think about, like, international relations going forward for the next decades, making the climate better is like the one thing any country can do that helps every other country and that residents of every other country are like happy to hear. And it's kind of unique that way as an issue. And so climate being a space of like friendly competition between countries and

also of countries trying to outdo each other, I do think is like a theme of the 21st century because it doesn't matter where someone is from. They could be Ghanaian, they could be Nigerian, They could be Vietnamese. They could be Taiwanese. They could be American. If they go to a place, a country, they don't live in a foreign country. And that country says, look at all the good things we're doing for climate. Look at all the things we're doing for the world.

They'll be, like, in some very small way, like, that's good for me, right? Like, that's good for the planet that I live on. And I think that dynamic is a real one and one that we're going to keep seeing. It's not quite the U.S.-China dynamic, right? But that does, right, that U.S. China, our rival was with each other and McPypile policy decisions for like geosecurity reasons, but then the climate care, you know, the extra climate benefits, like they're aware of them too, right? And they like talking them up too. Well, this entire conversation is going to look terrible from the vantage point of two years

from now if China invades Taiwan and starts World War III in a way that's directly related to competing decarbonization efforts. But I do agree that in the current timeline that we are on, in the grooves that we are on where there is no war between China and Taiwan, where there is no war between the U.S. and China, it seems absolutely inarguable that geopolitical competition is motivating the decarbonization race in the U.S., in Europe, in China, and beyond. Totally. And that's, yes, exactly. And what's so hard is exactly that it ties into these questions of military technology and then, and also these questions of like, if this were ever to get out of hand, it would be an environmental catastrophe such as the world has never seen. We should be

clear about that. On that note. Rob Meyer, thank you very much. Thank you for listening. Plain English is produced by Devin Baroldi. One quick programming note, we in the month of March are going to move just temporarily to a once-a-week publishing schedule. We'll be coming at you every Tuesday.

No Friday episodes for the month of March. We've got a little bit of extra work. We got a little bit of travel. This is just the best way to smooth out the time that we have to bring you consistent. consistent weekly entertainment. So one show a week in March, and we will be back to our regular two episode per week schedule in April.