July 23, 2026 • 54 mins
After spending decades as marginal players in the global auto industry, Chinese carmakers have become the world’s biggest exporters of cars. Chinese cars are some of the best cars on the planet, and they’re available almost everywhere – except in the US.
Michael Dunne is the CEO of Dunne Insights, a company that consults on the future of cars. Michael has been working with the Chinese auto industry since 1990. I talked with Michael about how China did it. The problem we discussed was: How can the United States catch up with the Chinese auto industry?
In this episode, Michael explains:
- How China went from making terrible cars in 1990 to dominating global exports today
- Why China bet big on electric vehicles when nobody wanted them
- How Tesla's arrival in China revolutionized their EV industry
- Why losing the car industry would be a national security problem for the US
- Why the future of a successful American auto industry is on the West Coast
Connect with us:
- Follow Jacob Goldstein on LinkedIn, X and Instagram
- Email us at problem@pushkin.fm
- Follow Pushkin on Instagram, LinkedIn or X
- Listen to Jacob’s other show, Business History
- To listen to the show early and ad free, sign up for Pushkin+
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:15):
Pushkin. Over the past few years, there's been this just
incredible transformation in the Chinese car industry, and this transformation
has been basically invisible to those of us in the
United States because the US has essentially banned Chinese cars.
What's happened is this, Chinese car makers spent decades as
(00:38):
sort of marginal players in the global car industry, but
now kind of all of a sudden, Chinese car makers
are the biggest car exporters in the world by far,
and they're not just selling cheap cars. They're selling some
of the best cars on the planet to buyers in
countries around the world. I'm Jacob Goldstein, and this is
(01:08):
what's your problem. My guest today is Michael Dunn. He's
the CEO of Done Insights, a company that consults on
the future of cars. Michael grew up in Detroit. He
studied Chinese at the University of Michigan, and he's been
consulting to the Chinese car industry since nineteen ninety. If
I were doing our usual problem framing for this episode,
I'd say something like, Michael's problem is this, how can
(01:31):
the United States catch up with the Chinese auto industry?
And we do talk about that later in the show,
and we talk about why, in Michael's view, having a
robust auto industry is just essential for the United States.
But to be honest, largely I wanted to talk to
Michael because I'm really curious about how this happened, about
how China suddenly emerged with this world beating auto industry.
(01:54):
And Michael was a great person to tell the story
because he was there to see it. But honestly, to
a large extent, I was just curious about how all
this happened, about how China suddenly emerged with this world
beating auto industry. Michael was a great person to tell
the story because he was there to see this transformation.
To start, I wanted to get a sense of where
(02:16):
things stand today, where we are now, So I asked
Michael to tell me about a few of the leading
Chinese car makers.
Speaker 2 (02:23):
First one to know is a company called shall me,
shall Me? And Chinese, of course means millet, as in
rice millet.
Speaker 3 (02:35):
Not a name. Is that how you're showing up in
your millet?
Speaker 1 (02:37):
What?
Speaker 2 (02:39):
So there's a history there. Malzatong famously said, rifles and
rice millets, that's the people's liberation Army and so as
a tribute this founder, late June who's the CEO and
founder of Shaw me one of the biggest handset makers
in the world.
Speaker 1 (02:54):
Phonemakers.
Speaker 2 (02:54):
Yeah, phone makers five years ago said we're going in
the cars. And today they manufactured two models, the XU seven,
the Yu seven that look like a hybrid of a Porsche,
and a Model three, beautifully designed. He recruited the best
designers out of Germany. It's got a battery powered vehicle,
(03:17):
really good looking, and it starts at like thirty two
thousand dollars. It's a total unbelievable shocker. Jim Farley at
Ford drives one.
Speaker 1 (03:26):
Wait, Jim Farley, the CEO of Ford, drives a Chinese car,
a Chinese car that, by the way, you basically can't
get in America.
Speaker 2 (03:32):
Right, that's just sacrilegious. As a native of Detroit, he's
crossed the line.
Speaker 3 (03:37):
What is he doing?
Speaker 1 (03:38):
What is he doing?
Speaker 2 (03:40):
Yeah, he went to China. He saw one, and he said,
I need to drive that thing to figure out just
how good they are and why they're better than we are.
And so he drove one at least for six months.
He may still have it, said he didn't want to
give it up.
Speaker 1 (03:54):
Is it right that there's a high end Chinese car
that can rotate three hundred and sixty degrees in place
and operate in the water like a boat for short distances?
Is that true?
Speaker 2 (04:07):
This is not science fiction? That's absolutely right. BYD, which
is China's leading ev maker, recently launched a high end
brand to compete against Range Drover, and it's called the
Yang Wang or Look Up or Aspire the Young Lung.
You wait, I've bin in one here in California. Drove
into a parking lot, got to a dead end, you know,
(04:29):
the kind where you have cars parked on the right,
right and left. How do I back out here? No,
no backing out. Just hit a button and the car
rotated one hundred age agrees.
Speaker 1 (04:39):
It turns on its axis.
Speaker 2 (04:41):
Yeah, right, like in place. It's spin spinned around and
then I'm facing outward. Unbelievable. I haven't had the courage
to go in the water with one yet.
Speaker 1 (04:50):
And just drive into the Pacific Ocean and see what happens.
Speaker 3 (04:53):
Someone else do that. Touch.
Speaker 2 (04:56):
But the point is that Chinese automakers have really come
up in terms of their capabilities, their R and D,
their innovation. They're not just delivering affordable vehicles, they're delivering
world class products that have all the latest features. So
this is what keeps the boardrooms in Stuttgart, in Nagoya,
(05:19):
and Detroit up at night. This is real, This is existential,
as Jim Farley's said, So.
Speaker 1 (05:26):
I want to talk a lot more about what's happening
now and how carmakers in the US and elsewhere, and
for that matter, policymakers in the US and elsewhere are
responding and should respond. But I want to spend some
time talking about how China got here. And I'm particularly
interested to talk with you because, as I understand it,
you first went was it in nineteen ninety? You first
(05:47):
went to China and worked with the car industry in
nineteen ninety? Is that true?
Speaker 3 (05:52):
That's right.
Speaker 2 (05:53):
Days after graduating from Michigan with a degree in Chinese,
I got a three thousand dollars grant to start a
company in China, three thousand bucks. So I bought an
airline ticket and Apple computer and I was gone.
Speaker 1 (06:06):
What a little farther in nineteen ninety that it goes today?
And so what tell me about the car industry as
you encountered it there in nineteen ninety. What was going
on with Chinese cars at the time.
Speaker 3 (06:22):
Pitiful, just pitiful.
Speaker 2 (06:24):
You wouldn't have like, Okay, First of all, I got
there and I announced I'm here to help. You know,
American companies sell cars to the Chinese, and my Chinese
friends on the ground said, well, that's ridiculous because nobody
here owns a private car there. We don't manufacture our
own cars, we don't have the incomes. What are you
doing here?
Speaker 1 (06:44):
Yeah, I mean China was a profoundly poorer country at
that time. Right, the economic rise of China over those
thirty five years has been maybe unprecedented in the history
of the world, certainly like the unails over that time.
Speaker 3 (06:57):
Yeah, give a little color to it.
Speaker 2 (06:59):
So the very first car I did ride in was
called the Shanghai seven sixty. There's powder blue bench, seats,
no seat belts, big steering wheel, and I thought, wow,
this reminds me of something from my earliest childhood in
the nineteen sixties. Well, it turns out the Shanghai seven
sixty is a replica of a Russian car that was
(07:20):
a copy of a German car from nineteen fifty five.
Speaker 1 (07:23):
Wow, and that's what they were still making in China
in nineteen ninety.
Speaker 2 (07:27):
That's right, only a few thousand of them, and only
for senior party officials or in my case, the president
of the university where I was studying in China got
one to be driven around in. That was it one
car in the whole basically.
Speaker 1 (07:41):
So it was an extremely high status thing to have
a car that was built on a forty year old
car at that time extraordinary.
Speaker 2 (07:49):
You drive in a car, you ride in a car
more often, you are elite, and the common person in
China has no hope of riding in a car, let
alone owning one. Now China looked around. Dunshell Ping was
a leader and he's very pragmatic guy. He famously said,
(08:11):
I don't care if the cat is black or white.
If it catches a mouse, it's a good cat.
Speaker 1 (08:15):
This is him pivoting from socialism to capitalism in some.
Speaker 2 (08:18):
Way without saying it, without saying the word capitalism. Yeah,
let's just be let's just be smarter as a nation.
So how did what did he set out to do?
He said, the way we're going to get richer. He
traveled to Japan and the United States, and he saw
these two economies are booming, very wealthy, and they both
have powerful auto industries. We want that too, So how
do we get one? We have nothing. We have no capital,
(08:40):
no no how, no management expertise, no technology, no market.
How do we get going? So he said, we'll devise
a strategy called the joint venture strategy. We'll invite automakers
from around the world to come into China and they'll
have access to potentially the biggest market in the world.
But there's a caveat we will we China will always
(09:04):
hold fifty percent or more of those companies that are
investing in So they have to joint venture and they
have to give fifty percent ownership to a Chinese partner.
Speaker 1 (09:14):
How does that fit with this country where essentially nobody
could afford a car? Like, what is the incentive for
automakers to come in if nobody could afford a car?
Speaker 2 (09:23):
Anyway, it was all about this enticing picture of the future.
We're not there yet, but look what happened with Japan,
Look what happened with Korea. China is opening up and
reforming and we're going to allow some profit making. You
guys come in and the first one is going to
have access to the biggest potential market and was all
(09:44):
a promise of the future.
Speaker 1 (09:47):
I've heard you talk about what it was like at
Chinese car factories at that time when you went in.
Speaker 3 (09:53):
What was it like, wow, early days.
Speaker 2 (09:57):
I was at a company called Cherry, which today is
China's leading exporter, ships of more than a million cars
around the world, including to Europe, UK, Australia. But at
that time, the manager said, I want you to walk
the line with us. We have real quality issues. And
I said what kind of quality issues? He goes, well,
so people here are so unfamiliar with cars that, for example,
(10:19):
you see that rear view mirror on that car, tell
me what's wrong with it? And I looked closely, and
I looked, oh, okay. The rear view mirror was assembled
facing outward.
Speaker 1 (10:31):
So you looked at it. If you were driving, you
wouldn't see the mirror.
Speaker 2 (10:35):
No, you don't see the mirror. The mirror is in
the correct location, but it's facing.
Speaker 1 (10:39):
Outward because the person making it has never driven, probably
has never been in a car.
Speaker 3 (10:45):
No clue, no clue.
Speaker 2 (10:47):
So that's one small example of the kinds of quality
issues they had. How to assemble a car when we've
never driven one. We don't know what that looks like.
Speaker 1 (10:58):
So okay, So danksaw Ping sets up these rules. We're
gonna we're gonna build a car industry using four and
know how by having foreign companies come in and do
joint ventures exact and that, in fact happens. Lots of
companies do it right, Volkswagen does it. Audi becomes the
high status car in China. What's the big inflection point
(11:22):
after that? Like, obviously China's economy grows, people get cars.
People are in China are driving Oudis and there's a
GM brand, right, is it Buick that's big in China.
Speaker 2 (11:31):
Yeah, sensationally popular. Just everyone wants a Buick.
Speaker 1 (11:36):
And we're talking like turn of the century. Now two
thousand is where we are.
Speaker 2 (11:39):
In our starting in the two thousand, So think about it.
Two thousand and twenty ten, you go from a may
less than a million cars a year sold in China
to becoming it by twenty ten, the largest car market
in the world, far surpassing the United States. Buick selling
eighty percent of the worldwide sales are now in China,
(12:00):
making lots of money. The president of GM China at
the time is said, how is business? He said, We're
making more money than God. So you got Chinese consumers
loving buicks, are building a ton of them, selling them
faster they can build them, and making big profits on it.
So all is good for Western audio as you mentioned
Audi with super BMW Mercedes come in. It's a party
(12:21):
for Western automakers.
Speaker 3 (12:23):
Yeah.
Speaker 2 (12:24):
And then but for the people in Beijing who you
know Dung's successors. Yeah, they're looking around saying, wait a second,
We're the largest market in the world. We produce more
cars than anyone else. But where are the Chinese cars?
Speaker 3 (12:38):
What?
Speaker 2 (12:39):
This is not acceptable? All this money going to the
foreigners and the joint ventures. And oh, by the way,
we now import one hundred billion dollars worth of oil
a year. This is a problem. What are we going
to do about it?
Speaker 1 (12:54):
Just to be clear, why is it a problem to
import one hundred billion dollars worth of oil every year?
I mean certainly they have a lot of exports. They
have plenty of capital to buy the oil.
Speaker 3 (13:03):
Yeah.
Speaker 2 (13:03):
They don't like the idea of being vulnerable to outsiders.
This goes back hundreds of years in Chinese history. We
don't want to be vulnerable in any way. And also
Chinese whenever possible, they don't like to spend money outside
their own country.
Speaker 3 (13:20):
So they look around and they go, we're vulnerable on
the oil front.
Speaker 2 (13:24):
We don't want to get into Mid East quagmires like
the United States has done.
Speaker 3 (13:28):
Let's avoid that mistake.
Speaker 2 (13:30):
And then, as a point of national pride, why is
it that we can put you know, rockets into orbit,
but we have a nuclear bomb, but we don't have
our own cars. This has got a little bit of
a national embarrassment. And so the brightest mind of Beijing
looked around and said, look, we've been playing a game
of catch up with the West on internal combustion engines.
(13:52):
Every time we learn to make a better engine, out
or BMW or Toyota makes an even better engine, and
Chinese consumers don't like Chinese bread. What can we do
to change the game.
Speaker 3 (14:05):
So you know the.
Speaker 1 (14:05):
Answer evs electric vehicles.
Speaker 2 (14:10):
Yes, And it didn't just suddenly come to them in
twenty ten. Earlier on in the year two thousand. This
is only known later on. It's a very important guy
named Wan Gong Onan Gong born in northeast humble beginnings,
Northeast China, and the rust belt, goes to Germany, gets
(14:31):
a PhD, goes to work for Audi in the nineteen nineties,
works there for eight years. In two thousand, he comes
back secretly and delivers a white paper to the State Council,
the highest governing body in China, and he said, I've
seen it. We're never going to catch up with the
Germans or the other westerners. In Gasinba in two thousand
wrote a white paper and said the future for China
(14:52):
is electric and here's how to get there now. At
the time, everybody, kind of the leaders in China said,
that's very a brilliant take, but we have nothing. We
have zero capability and a small market and we're just
starting out. We'll tuck it, we'll put it in side.
Speaker 1 (15:09):
But good idea and eves aren't a thing, right, I
mean at that point, GM had tried an electric car
that failed, right, Tesla is not a company yet maybe
in two thousand, Yeah.
Speaker 2 (15:18):
Two thousand and three. Was only in two thousand and
three that they're founded. And you're right, GM tried that
ev one didn't work out. They ended up, you know,
collecting them and smashing them, so it didn't wasn't a
thing It wasn't a moment in time two thousand, but
in twenty ten, who's the Minister of Science and Technology
in China in twenty ten one Gum he left Audi.
Speaker 3 (15:40):
He's the guy, He's the guy in charge.
Speaker 2 (15:42):
He goes, hey, by the way, I have an idea
how he can make this pivot, dusts off his old paper.
Shijing Ping takes power. China's new leader. He looks around
and he's a definitely they call him redder than red.
He wants China to win, he wants the Communist Party
to win, and he loves anything they will give him
(16:03):
leverage on that front. So he throws his weight behind
this big new policy called Maiden China twenty twenty five.
This is this isn't a period from like twenty eleven
to twenty fourteen.
Speaker 1 (16:15):
So this is their forward looking It's like a it's
like instead of a five year plan, it's a ten
or fifteen year plan kind.
Speaker 2 (16:20):
Of yes, like with muscle, like, we're not fooling around.
We're going this is a pivot, but there's an opportunity
to change the game. We are going to throw all
kinds of funding behind the cultivation of our own independent
auto industry built on batteries and electric vehicles.
Speaker 1 (16:41):
Okay, So, I mean interestingly, there's a long history of
governments trying to sort of steer their economies and it
going quite badly, not least in China in the middle
of the twentieth century. Right, Like, the reason at some
level that China got rich was they stopped doing that.
Speaker 2 (17:02):
You could argue absolutely one hundred percent agree and so
and guess what in the early years of this effort
to throw tens of billions, even hundreds of billions of
dollars behind electric vehicles, it falls completely flat. The Chinese
consumer doesn't want two things. No electric it's short range,
(17:23):
it's unreliable. We heard about fires, and they're not good looking.
And two they're not foreign. There's no prestige. Like Chinese
electric car is a double loser. I don't want to
go there. So for most of the twenty tens, that
policy really struggles.
Speaker 1 (17:41):
So what changed? So in fact it wasn't working. It's
a classic example of like government policy not working, wasting money.
Like it could have ended that way, right, I mean,
it could have just been a thing they tried that
didn't work.
Speaker 2 (17:54):
It was very nearly that because by the end of
the decade, they were spending as much on subsidies as
they were on oil imports.
Speaker 1 (18:05):
Wow, on subsidies for cars and batteries.
Speaker 3 (18:09):
Right, it's like, please consumer, and.
Speaker 1 (18:11):
This is twenty twenty, this is the decades, this.
Speaker 2 (18:14):
Is twenty nineteen. I remember being with the CEO of
a major Chinese automaker and I asked him, I said,
what's the future of EVS. I know you guys been
trying now for almost a decade. He said, never more
than an issue here, huh, five to ten percent. Chinese
consumer doesn't want it. They're too complicated. What about charging
(18:35):
the batteries or shorter range? The government wants us to
go in that direction. But he had joined ventures with
Toyota and Honda. He said, we're making great products, we're
making great profits, consumers love the brand. We'll carve out
part of our business for EVS. But it's more like
compliance than enthusiastic.
Speaker 1 (18:55):
Keep the government happy, basically.
Speaker 2 (18:57):
Keep the government. Yep, we're trying our hardest. Yeah, we're
really going for it. So what changes? And this is
where China's probably China's secret superpower is where are most
Where are Apple iPhones built in the.
Speaker 3 (19:11):
World changin in China, in China, right. So they look
around and they go, we have the very.
Speaker 2 (19:17):
Best smartphone maker in the world manufacturing their products here.
Speaker 3 (19:23):
How do we get the best, very best e who
is Oh wait.
Speaker 2 (19:27):
A second, there's this company out of California that's ripping
it in the US and in Europe, wildly popular, defying
all expectations. And they seem to have changed consumers' minds
about what an electric vehicle can be. They can be sexy,
they can be attractive, they can be fast.
Speaker 1 (19:47):
You haven't said Tesla yet. I keep waiting for you
to say Tesla. So they see Tesla, Yes.
Speaker 2 (19:52):
You see Tesla, and they go, you ever hear of
China red carpet? Yeah, Like they laid out their red
carpet for Tesla for the first time. They said, Tesla,
we'd love to have you come here to China to
sell your cars. By the way, we want you to
make manufacture them here, just like we want everyone else
to manufacture them here. But we're going to sweeten the deal.
(20:14):
You can have one hundred percent ownership, no joint venture.
You're in charge. You bring their manufacturing capabilities in, your
suppliers in and you run the show and Elon Musk
looks around and goes, that looks pretty sweet.
Speaker 1 (20:29):
What's the catch, Ah.
Speaker 3 (20:31):
What's the catch?
Speaker 2 (20:35):
Well, it's never spoken, but it's understood that as soon
as Tesla sets up operations in China, everything it knows
will one way or another leak to Chinese automakers, and
they are very quickly. We see five, six, seven companies
(20:59):
sprout up Like Selmy, we talked about, going, Wow, that's
a super incredible car. I wonder if we can do
that ourselves here. Oh, by the way, test suppliers are
just up the road and I know them because they're
you know, they know so and so and so and
so there's Yeah. I talked to one supply chain executive
at the time and I said how long does that
(21:20):
take though, like, how quickly? And he said overnight?
Speaker 1 (21:24):
Overnight, So overnight everybody knows everything. Overnight. Everybody China could
make a Tesla if they wanted. Yeah, So when does
Tesla set up in China.
Speaker 2 (21:38):
It sets up in China, It goes into production at
the very end of twenty nineteen, first weeks of twenty twenty,
exactly when COVID's happening. So it was not an auspicious start,
but against all odds, demand for Tesla in China explodes.
(21:58):
And it wasn't because it was electric necessarily. It was
because it had all these over there update features, new
and cool features, and so it changed the Chinese consumer's
mindset about, oh, what an electric vehicle could be.
Speaker 1 (22:12):
Like it did in the US. Tesla had the same
effect in the US on exactly.
Speaker 2 (22:16):
And this is the Chinese government saw that said we
can duplicate the Tesla effect here in China. They bet
on it and it.
Speaker 1 (22:26):
Worked amazingly fast. Right, Like when I have read about this,
it seems like there's this key moment just what three
years after Tesla sets up in China or so the
is it? The Shanghai Auto Show in twenty twenty three?
Like tell me, why why do we able to talk
about that? Why is that such a big moment? And
(22:48):
were you there?
Speaker 2 (22:49):
I was, I was telling you what happened. I was
set to meet my good friend Kausmeier, former managing director
of Mercedes Benz in China. So we agreed we're going
to meet at the Changhai Auto Show. Being German, he
wants to be there on day one, early in the morning,
I'm arriving the next day. So I'm back in the
(23:09):
United States getting my passport together. I get a call
from Klaus and he and I said, Klaus, what's going on?
Speaker 3 (23:16):
Are you in China? And he said, it is a shock?
Speaker 1 (23:20):
Wow?
Speaker 2 (23:21):
Yeah, I said, what are you Okay, I'm telling you
it is a total shock. I cannot believe my eyes.
So what's going on, Klaus?
Speaker 3 (23:30):
You okay?
Speaker 2 (23:30):
Yes, I'm That's just a Shanghai auto show and the
Chinese have taken over. So taken over, it would be
inconceivable in my mind. What do you mean taking over? No,
I'm telling you it's the end of the foreign automakers
in China. So what was he looking at? If you
can imagine, if you've been to the Chinese auto show,
they're massive, biggest auto shows in the world. Think football
(23:54):
fields upon football As far as I can see, just
cars and people and more cars. And in the old
for twenty thirty years, it would be Mercedes, BMW, Audi, Buick, Toyota, Honda,
Hyundai taking center stage. And then if you had time,
you might want under down a side hall and there's
this pretty lame looking stand with a Chinese brandy and
(24:16):
all of a sudden the twenty twenty three, it's the opposite.
The Chinese are center stage and the foreigners have been
shunted the side. It's almost like through COVID we went
through some kind of crazy time machine. Chinese on the ascendancy,
Foreigners on their way out the door.
Speaker 1 (24:35):
Did you fly in the next day? Did you go yeah? What?
What was that like? What'd you say?
Speaker 3 (24:41):
Mostly?
Speaker 2 (24:42):
I saw a confidence that I had never seen before
out of the Chinese. One executive from BYD said to me,
this is not the company that you've known for twenty years.
Speaker 3 (24:54):
We're a new thing now.
Speaker 2 (24:56):
And ever since that moment, I felt like the Chinese
really really getting comfortable and confident in their own capabilities.
Speaker 1 (25:08):
We'll be back in just a minute. This segment is
brought to you by Walmart. Behind every small brand is
someone with a dream. Today, we're sitting down with one
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(25:30):
His name is Ben Moore, and he's the CEO of
the Ugly Company, based in the Central Valley in California.
The company sells dried fruit that comes largely from produce
that is too ugly to be sold fresh. Ben told
me that he got the idea to start the company
when he was driving a truck and he often wound
up transporting fruit that packing houses couldn't sell because it
was blemished, perfectly good fruit that just looked a little
(25:52):
ugly and it was getting thrown out.
Speaker 4 (25:54):
And so I just was sat there thinking about what
can we do with this fruit other and dump it
out right? And I thought that there could be a
brand solution there, which is where the name the Ugly
Company came from, was going to get people excited about
the sustainable nature of the fruit.
Speaker 1 (26:06):
So I understand that at some point you went to
this something called a Walmart Open Call event. Tell me
what that is and why it mattered for your business. Yeah.
Speaker 4 (26:15):
So Walmart Open Call is Walmart's initiative to source from
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When you walk into the event, you're like, oh, my goodness,
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(26:36):
space for you in our slot. Here's a golden ticket
and it's like a straight up Willy Waka style golden ticket.
Speaker 1 (26:42):
Literally a physical piece of paper that says you made it.
Speaker 4 (26:46):
Yeah you know, you've been selected. So there's like the
full day of just craziness. It's like, oh my god,
I'm now going to be a Walmart supplier, which is amazing.
So yeah, we, you know, six months later, launched one
hundred ninety Walmarts and now we've grown into nearly a
thousand Walmarts since then last year and a half.
Speaker 1 (27:01):
So how did getting onto the shelves at Walmart affect
your business?
Speaker 4 (27:05):
We hired an additional twenty people to work in our
manufacturing facility just specifically for the Walmart demand that was created.
So that's been great because our product sells really well
in Walmart, whereas as a small brand, it can be
really tricky working with larger distributors and you know, trying
to get your product even on the shelves and things
like that. They have all their different applications where it's
(27:25):
actually really efficient to market to Walmart customers through the
Walmart apps of things, and so well, Walmart's helping us
create demand via their platforms, right, and so it's a
huge deal for us.
Speaker 1 (27:36):
Congratulations and all your success and I wish you more
of it.
Speaker 3 (27:40):
I appreciate it.
Speaker 4 (27:41):
Thank you very much.
Speaker 1 (27:43):
This segment was brought to you by Walmart. Explore thousands
of small brands online at Walmart dot com or at
your local Walmart store. So let's talk about the role
of Chinese automakers in the world today.
Speaker 2 (27:59):
So, China's rolling in Chinese cars. I know, numbers are
often hard, to give me some numbers.
Speaker 3 (28:09):
It was some numbers.
Speaker 2 (28:10):
So five years ago, China exported a total of one
million cars, which is about less than five percent of
their total production. They're all geared up for selling in
the China market. Okay, that was one million five years ago.
This year that'll be twelve million. Twelve million. That's unprecedented
(28:30):
in the history of the automobile. Japan at his peak
was six million. China's already doubled that to twelve million.
Speaker 1 (28:37):
How many cars does the US export every year?
Speaker 3 (28:40):
US exports about it one one million?
Speaker 1 (28:43):
Yeah, and how many does Japan export every year? Now?
Speaker 3 (28:46):
Now about three three million?
Speaker 1 (28:49):
And how many cars is China exporting this year?
Speaker 2 (28:51):
Twelve million cars. It's their exporting is more than the
United States makes. Now, oh, we manufacturer about ten million cars.
They're exporting twelve million in addition to their own market,
which is like twenty five million cars. So China now
accounts for almost forty percent of global automotive production, almost half,
(29:13):
getting close to.
Speaker 1 (29:14):
Half of all the cars made in the world are
made in China, and a big chunk of those are exported.
They're exporting more than everybody else combined, certainly anybody else combined.
Speaker 2 (29:23):
Yep, exporting more than And here we are in America,
and where I'm I go to see executive I make
keynote talks around the country and everybody's like, yeah, okay,
you are the boy who cried wolf because we don't
see where where is the Chinese car?
Speaker 3 (29:37):
Here?
Speaker 2 (29:37):
When I give you these presentations, I put a map
of the world up and I go the map represents
all countries. You see a globe, Yeah, and I have
color coded and there's one country in white and everything
else is red.
Speaker 1 (29:51):
Huh.
Speaker 2 (29:52):
And that gets people in the audience to go, wait
a second, hold on, we are on an island. If
you go to Mexico, UK Australia. I was recently in Indonesia,
South Africa. I visited Chinese cars, Chinese cars, Chinese cars
pouring in and so we're surrounded and it seems like
it's inevitable that they also enter the US market.
Speaker 1 (30:15):
And so just to be clear, what's keeping them out?
Is it just tariffs?
Speaker 2 (30:21):
We have big tariffs in place, more than one hundred
percent on terraffs. That alone, Even though one hundred percent
sounds like a lot, Chinese autom manufacturers said, one hundred
percent won't stop us.
Speaker 1 (30:32):
One hundred percent doubles the price. You're paying a dollar
in tax for every dollar of car you're buying.
Speaker 2 (30:39):
Yes, and in an industry where the margins are already
pretty thin, yeah, they're like, yeah, one hundred percent tariff,
that's not really going to stop us. So the Department
of Commerce put in place a very strategic extra layer.
And without going into a lot of detail, it essentially says,
if a vehicle features any Chinese hardware or software related
(31:01):
to over there updates or self driving, it cannot legally
be registered here in the US.
Speaker 1 (31:09):
And is there a security rationale for that?
Speaker 3 (31:15):
There is? There is.
Speaker 2 (31:16):
There's two components. One is to buy time for domestic
industry because if the Chinese come in, they.
Speaker 1 (31:22):
Just, yeah, it's clearly protectionist at some level, right, Like
it's plainly protectionist. Yes, is there a valid security rationale
alongside the protectionism.
Speaker 2 (31:33):
Well, China has all kinds of mechanisms already in place
in the United States for a surveillance and a mobile
car that's vacuuming up massive amounts of data about people
and locations and buildings definitely could be weaponized and we
shouldn't be naive about that possibility. So I personally feel
(31:55):
like the Department of Commerce rules are appropriate given the
tensions between the two countries today.
Speaker 1 (32:02):
Let's talk about evs in the US, right, because substantially
all of what China is exporting to everyone in the
world is electric vehicles, create electric vehicles. But it seems
like US companies made a genuine effort to build electric vehicles.
And you have pointed out that the big US automakers
combined GM Ford Stilantis, which owns Chrysler, have written down
(32:27):
something like fifty billion dollars of investments they made into
EV's because they just weren't that popular with American buyers.
And so I don't know. One could make different inferences
from that, like maybe people in this country wouldn't want
Chinese EV's because we don't want EV's. I don't know,
Like what do you make of that fact?
Speaker 2 (32:48):
Okay, so China's ex sports. I wanted to mention this
important point. Of that twelve million that will go overseas
this year, half of those are not EV's. Oh interesting, okay.
So what we're facing is not only a challenge on
the EV front, which most people say, oh, China EV's, Okay,
(33:08):
we'll give them that because we own gasoline. The trouble
is they're competitive across the board, now, okay, okay, So
that's one second thing. Just like China struggled to get
his consumers to fall in love with EV's, so do
we here in the United States. You know, last year
less than ten percent of car sales in the United
(33:31):
States were evs. People just we tend to drive long distances,
big vehicles at high speeds, which is the antithesis of
what an EV is ideal for. You want city commuting,
short range and lower speeds. So that's a genuine sort
of American exceptionalism problem. And I'm not an advocate of
I don't think EV's will take over the United States.
Speaker 3 (33:50):
I don't think they should, but there is a role
to play.
Speaker 2 (33:54):
I think twenty twenty five percent of the market in
a normal market here in the nice it makes sense
for America.
Speaker 1 (34:01):
I mean, we haven't talked about subsidies and the persistence
of subsidies. Right there were subsidies for evs a few
years ago. Now there are not. I mean in terms
of China in particular and the rise of their automakers
and their persistence. Like, what is the story of subsidies?
Speaker 2 (34:17):
There huge still huge still and it's not in people
when you we need to invent a new word for
subsidies when it comes to China. Because here in the
United States we had a seventy five hundred dollars tax credit.
That's a subsidy in ev We had that for you
for evs right until the end of last year.
Speaker 3 (34:39):
Think of China.
Speaker 2 (34:41):
Imagine China as this massive manufacturing machine, and it says,
we want to dominate a given industry. How do we
dominate that. We invest in enormous amounts of capacity. We
throw all kinds of zero interest loans. You need free land.
How about training for your employees, energy, it discounted, whatever
(35:06):
the tools necessary for us to dominate an industry, We
the government of China, are ready to do that. We're
going to win the auto industry, just like we want
solar panels, just like we want shipbuilding, just like we
want steel and so on and so on. Today it's autos.
So when Americans go, well, China has some substance, do
they have some subsidy doesn't begin to describe the ferocity
(35:30):
with which the Chinese government will say, that's a national objective.
We're going to win.
Speaker 1 (35:36):
So do you even compete with that? Like there is
the question of should we just let them have it?
They're basically giving us cars at a discount, like they
want to spend their own money to give us cars
cheaper than they would sell in a market without their intervention.
Is there a universe where that's just like good for us?
Like great, we will take that and we'll make other things.
Speaker 3 (35:59):
In no universe that I know of, is it good
for us?
Speaker 1 (36:02):
Okay?
Speaker 3 (36:03):
Okay?
Speaker 1 (36:04):
Why?
Speaker 3 (36:05):
I because it's a short term gain for.
Speaker 2 (36:09):
The United States at the expense of our long term
viability as a competitive economy.
Speaker 1 (36:15):
Why is a car industry essential? There's another way of
asking the same question, why.
Speaker 2 (36:19):
Is the car industry essential? So the United States today has,
in my view, two car industries that are operating in parallel.
One is the old car industry out of Detroit that
brings capabilities in manufacturing that are really crucial to national
defense and security and weapons systems. You need to have
a basis of capabilities of manufacturing. So that's that brings.
(36:43):
West Coast is the second auto industry. That's your Tesla's,
your way Mos, your ubers, your tech companies. They're bringing
software AI chips to build the cars of the future.
And if we forfeit the capabilities of having our own
auto industry, we suddenly become very vulnerable to China in
(37:06):
terms of our own national defense.
Speaker 1 (37:08):
So you may to have a kind of frontier military,
you basically need to have a car industry. Is that
the core argument you're making.
Speaker 2 (37:15):
Yes, Yes, the volume. That's where the volume comes from.
That's where the ecosystems come from. Many of the components
that define the future technologies in military applications are the
same ones that go into cars. If we don't have
those at home, we're extremely vulnerable to Chinese whims.
Speaker 1 (37:36):
We haven't talked explicitly about batteries. But there is this
interesting idea, right that like, batteries are sort of analogous
to oil, right in evs, but they also are essential
for drones, which of course we've heard a ton about,
say in the Iran war. And so this notion that
batteries are an essential frontier technology, that there's this kind
of electric stack, right that includes batteries, that includes permanent
(37:59):
magnets made with a rare Earth's right, that the EV
is sort of the the representative thing you make with
this stack. But you also make drones, you also make missiles.
Speaker 3 (38:10):
Right, Batteries are the future engines.
Speaker 1 (38:15):
And China is winning batteries by a lot, right.
Speaker 3 (38:18):
They're just killing it. They're killing it.
Speaker 2 (38:21):
They own not only the ability to manufacture seventy percent
of batteries worldwide, but they also control the supply chain
into those batteries, most importantly the refining of the materials
that go into the cells that make the batteries. So
ninety percent of graphite today is processed in China. That's
(38:42):
another choke point. We don't have those capabilities at home.
So not only do we have to have the batteries,
but we also have to develop our own and how
do we get here? It was just negligence I think
on the part of American leadership at the government level
and the corporate level. It was cheaper to manufacturer regulatory
point of view, it's easier to do it in China.
(39:02):
We just blindly shipped so much to China. And now
we look and go, well, how did that happen?
Speaker 1 (39:09):
Okay, guys, I mean there was a lot of upside
right Like, there was a notion if you go back
twenty five years, there was a notion like, oh, China
will join the WTO, they'll get richer, they'll they'll democratize.
We've never had a big, rich, market based country that
had an authoritarian regime right like it. I don't think
that people were necessarily dumb at the time. It just
(39:31):
didn't work out the way reasonable people thought it would
work out. One might say, did you know all along?
Was it obvious to you.
Speaker 2 (39:41):
There's a tendency in the West to underestimate China and
its ambitions. Yeah, so what we hoped to see was
not what was real. Yeah, And in the short term
China said we'll take care of this for you, will
manufacture it half the cost and ship it back to
your margins.
Speaker 3 (39:59):
Go up, look at this.
Speaker 2 (40:00):
Beautiful Yeah, and we're all getting along until the point
at which China said, we might not need these guys anyway.
Speaker 1 (40:10):
What should the US do about cars?
Speaker 2 (40:17):
I would the starting point would be I'd have a
national campaign and say, first of all, have everybody understand
that cars and the car manufacturing industry and technology around
future of cars is crucial to our independence and our
way of life. So put that message out there. It
may not resonate today but over time.
Speaker 1 (40:37):
But I feel like people love the domestic car industry, right.
I mean when you think of like mid twentieth century
meat and potatoes America, like GM was maybe the biggest
company in the world, it was certainly the biggest manufacturer,
the biggest car maker. Like that's like Glory Day's America heartland, right, Yes,
except that geographies as time have to change.
Speaker 2 (40:58):
Yeah, I'm I'd love to be enthusiastic and optimistic about
Detroit's ability to pivot to this new era of chip
and software and.
Speaker 1 (41:11):
AI software as they talk about the software defined vehicle. Right,
This idea that new cars are like software with a
car wrapped around it is the way to think of
a car.
Speaker 2 (41:20):
Now, yeah, yes, start with software and then wrap the
metal in the glass and the rubber around it. It's
the heart of the car is software in the computer.
This is where the West Coast thrives. So the new
American auto industry must rise from the West. That's my Yeah,
that's where if I were in charge of the US government,
in charge of that, I'd say throw all of our
(41:43):
support behind your Tesla's and Waymos and ubers like logistics.
Think of it as mobility less about the old business
of hammering out a vehicle from a production line like
Ford and GM.
Speaker 1 (41:56):
First thing is get everybody to believe that we need
a car industry and a new kind of car industry,
probably in a new place. The new place is going
to be hard politically, but keep going.
Speaker 2 (42:06):
But both of them, both of them have roles to play.
I would say Detroit won't play the leading role. If
we hope to compete against China, we need the brains
and the innovation and then and the risk taking a
West Coast companies.
Speaker 3 (42:19):
That's number one. Geography.
Speaker 2 (42:21):
Second, autonomy autonomous cars, self driving cars. You've heard of
the Tesla, cyber cabs. Weimo's running in about a dozen
cities around the United States. I was just in San Francisco.
So autonomy. Whoever wins autonomy wins the new global auto industry.
Speaker 1 (42:40):
How we haven't talked about autonomy in China, Like, how
how is China doing on autonomous vehicles?
Speaker 2 (42:47):
Comparable in a few cities you'll see autonomous cars running around.
Not they're not as advanced as weimo, but they're getting
closer and closer.
Speaker 1 (42:57):
Yeah, okay, so we're all so not to be reductive
or jinguistic, but we're a little bit ahead on autonomous cars.
Speaker 3 (43:04):
Yes, we have some leadership still in autonomous cars.
Speaker 1 (43:09):
Why is it so important? Why is autonomy so important
in this particular context of this kind of great powers
competition between the US and China? Is the notion that
if the US gets to autonomous cars at scale everywhere
in a way that we can sell around the world,
et cetera. That's that's a way we could beat China. Because,
(43:31):
of course, someone would rather have a truly autonomous car
than not. I mean, is that the core reason autonomy.
Speaker 3 (43:36):
Is that's the core reason.
Speaker 2 (43:37):
Yeah that people was recently in Indonesia, sales of new
cars in Indonesia and Thailand are down in the last
five years, like forty fifty percent, and the economies aren't
doing great. But even if they're holding even you think
they're going to sustain people are opting for ride share.
(43:58):
Like those interesting venients of not owning a car and
just having vehicles show up in this case with drivers.
Speaker 1 (44:04):
Huh. Well, and it's rather like a lot of people
clustered in urban places where ridesha is particularly convenient and economical,
and having a car is less convenient and less economical.
Speaker 3 (44:15):
That's it.
Speaker 2 (44:16):
Jakarta thirty million people who owning a car is a paint.
So you're seeing this trend. Okay, younger people don't need,
don't value, don't want. There's inconvenience is expensive.
Speaker 1 (44:27):
Huh So if it's autonomous, you could have fewer cars
by far, it would be profoundly cheaper to do ride sharing.
That's that's the old dream of autonomous cars. We just
sort of stopped talking about it because it's taken so
long to get here.
Speaker 2 (44:39):
Taken so long, and today when I talk to people
in the industry, they feel they feel as though they've
gone through that drought that and then they're back up
and they're.
Speaker 1 (44:48):
Five years away for the last twenty years problem. Yeah,
So okay, So one is get everybody excited about EVS.
Two is we are autonomy. Is that the whole.
Speaker 2 (44:57):
List jobs jobs, tens of thousands, hundreds of thousands of jobs.
Speaker 3 (45:04):
So where do those go if we're not manufacturing.
Speaker 2 (45:08):
And related to jobs, there's this thing like when there's
concentrations of manufacturing, you're learning as you go, you're innovating
if you outsource that. That's one of the reasons why
Elon Musk loves to vertically integrate. I mean his whole company.
He's trying to do everything in the oar, he's doing
the superstargar station, he's doing the batteries, he's doing everything,
trying to do the AI, doing everything. Why, he says,
(45:31):
because when I outsource, that innovation in my company stops.
Now I'm dependent on someone else to innovate. I love
that insight. And so when if America just outsources in
order to have a cheaper end product for us, it's
like it's a little bit like the farmer who sells
his land to buy stuff for his family. Eventually we're
(45:53):
out of We're not doing anything anymore, we're not learning
we're not innovating, We're just burning.
Speaker 1 (46:00):
Is there some broader lesson the US can learn from China.
Speaker 2 (46:08):
One of the lessons is, for years, the United States
has been hopeful that China would change, come around, be
more like us. So one of the lessons is we
better put that aside. China doesn't change for anybody. So
if our hope is China's going to collapse or come
around and be a democracy in a short term, or
(46:30):
be a good trading partner, ally, let's dismiss that fantasy.
Speaker 3 (46:35):
It's not happening. Okay.
Speaker 2 (46:37):
Number two, we have to maybe have to get comfortable
with the idea that another country is bigger than we are.
Their industries are bigger than ours. We're not necessarily the
world leader in stuff. Okay, So what we have to
be smarter, we have to work harder, we have to
be more innovative. And Third, probably the most important one
(46:58):
I should have made it first is at a certain point,
if we look at the Manhattan Project or the United
States after Pearl Harbor or the Spotnick moment, there has
to be a mission that brings us all together and saying,
you know what, our future is genuinely at risk. Our
(47:18):
future is genuinely in jeopardy if we don't act together
to pursue a national mission. This is what China does
really well. The government set out the mission Made in
China twenty twenty five. We will lead in next generation technologies,
will dominate. We'll use it as leverage against other countries.
The US should learn from that.
Speaker 5 (47:44):
We'll be back in a minute with the lightning round.
Speaker 1 (47:57):
Let's finish with the lightning round. Okay, it's going to
be a little silly, just so you know. I understand
that Chinese cars typically have karaoke app installed, and so
I'm curious, do you have a go to car karaoke song?
Speaker 2 (48:18):
It would be a famous song by Dunley June and
China is probably China's most famous singer, a woman actually
she's Taiwanese, but the Chinese love her too, and it
would be Uh, well, I don't want to break.
Speaker 1 (48:36):
Give me a line. You have to sing a line. Sorry,
w e yo doors shun, fantastic, thank you? What what
did you? What does that mean?
Speaker 3 (48:48):
By the way, uh you asked? You asked me how
deeply do I love you?
Speaker 1 (48:56):
What's the answer?
Speaker 3 (48:57):
As deep as the fullest moon?
Speaker 1 (49:00):
Lovely ah what's one thing that's different about driving in
China compared to driving in the US.
Speaker 2 (49:07):
Chaos chaos, So think of it as like a road
rally and cars coming wrong direction, lanes not respected, cars
coming into your lane, you going into their lanes.
Speaker 3 (49:20):
In fact, when I.
Speaker 1 (49:21):
From New York, Baby come to New York, New York.
Speaker 2 (49:24):
Looks like a kindergarten compared to chiy Like whoa. So
when I first came back to the United States, I'm
driving around here and I would in Asia. When you
pass a car, as soon as you get your nose
ahead of it, you just start easing into that lane.
You just start like nosing into that lane and they
go yeah, okay, and they they kind of allow you
to and or not, and it's it's it's it's sort
(49:48):
of to bemin full contact, full contact. So in here
in California, I did that a couple of times. People
are on the horn, like you what are you doing?
Speaker 1 (49:58):
Not cool? Bro?
Speaker 2 (49:59):
Everything is so tight and chaotic, there so many cars,
so much congestion that you've got you got to bring
your game. So when people would visit me in China,
they're like, oh my God, get me out of this car.
As soon as you get this is terrifying.
Speaker 1 (50:17):
So you mentioned that you studied Chinese in college. I'm curious,
do you have a favorite Chinese author? You know, I
don't know, fiction, poetry, whatever.
Speaker 3 (50:27):
It would probably be.
Speaker 2 (50:29):
So favorites would be the Tong dynasty poets, and the
most famous one is le Bi.
Speaker 3 (50:36):
So, in fact, that's the thing that drew me.
Speaker 2 (50:39):
To China initially, as I studied ancient Chinese poetry from
that era, which was around eleven hundred eleven thirteen hundred.
Phenomenal poets, just phenomenal, and I'm not into poetry per se,
but the way they put characters together made you feel,
it made you feel something exceptional. So Lebi would be
(51:00):
at the top of that list. And then more recently
in the twentieth century, it was a guy named Lushun
whose every Chinese nos he was lived in the early
part of the century, and you had really perceptive takes
on where China was historically and what's what made China
different and maybe what China needed to do to really
(51:22):
join the world. So one of his most famous lines
was Chinese people see foreigners as either gods or barbarians,
never as equals. This is profound. This is really really
helpful to understand where the Chinese are coming from. So
in my early years, foreigners were gods. Now we're tending
(51:45):
to be seen as the barbarians, never as equals. And
this is important because if China is going to integrate
with the world, its view is it should be in charge.
It's not joining an American led system or a Western
No China in charge.
Speaker 1 (52:05):
So you've talked about these sort of big macro chaines
that you've seen in the decades you've been going to China.
I'm curious, is there is there anything on the more
subtle end, something that's changed in a kind of less
obvious or small but still interesting.
Speaker 2 (52:21):
Way generation generational change. The younger people I meet now,
they tend to be single children, one child policy, they
tend to be more affluent, and they tend to be
less driven than their parents, so almost entitled. So it's
fascinating to see the hunger and the ambition. And now
(52:44):
this next generation looks like, yeah, they have this thing
called the lying down, lie down phenomenon in China. Like
the younger people going, why am I going to work
six days a week, nine am to night?
Speaker 3 (52:58):
What's the point do I need to be doing this
so that.
Speaker 1 (53:03):
Means we have a shot at catching China maybe, But.
Speaker 2 (53:06):
Then Jack Bob comes out Ali Baba go goes. Don't
listen to that, that's garbage. We need to keep working hard.
So there's a tension there in the society. Where's it
gonna go?
Speaker 1 (53:18):
Thanks for your time. It was great to talk with you.
Speaker 3 (53:20):
Fabulous conversation.
Speaker 1 (53:22):
Thank you. Michael Dunn is the CEO of Done Insights.
Please let us know what you think of the show,
which you want to hear more of, which you want
to hear less of particular guest ideas. You can email
(53:43):
us at problem at Pushkin dot fm. I read all
the emails. You can also find me on x rom LinkedIn.
Really do appreciate all the messages that we get. Today's
show was produced by Gabriel Hunter Chang and Trinamnino. It
was engineered by Hans Dale She and edited by Lydia
jen Kott. I'm Jacob Goldstein and we'll be back next
(54:04):
week with another episode of What's Your Problems Man.
Pushkin. Over the past few years, there's been this just
incredible transformation in the Chinese car industry, and this transformation
has been basically invisible to those of us in the
United States because the US has essentially banned Chinese cars.
What's happened is this, Chinese car makers spent decades as
(00:38):
sort of marginal players in the global car industry, but
now kind of all of a sudden, Chinese car makers
are the biggest car exporters in the world by far,
and they're not just selling cheap cars. They're selling some
of the best cars on the planet to buyers in
countries around the world. I'm Jacob Goldstein, and this is
(01:08):
what's your problem. My guest today is Michael Dunn. He's
the CEO of Done Insights, a company that consults on
the future of cars. Michael grew up in Detroit. He
studied Chinese at the University of Michigan, and he's been
consulting to the Chinese car industry since nineteen ninety. If
I were doing our usual problem framing for this episode,
I'd say something like, Michael's problem is this, how can
(01:31):
the United States catch up with the Chinese auto industry?
And we do talk about that later in the show,
and we talk about why, in Michael's view, having a
robust auto industry is just essential for the United States.
But to be honest, largely I wanted to talk to
Michael because I'm really curious about how this happened, about
how China suddenly emerged with this world beating auto industry.
(01:54):
And Michael was a great person to tell the story
because he was there to see it. But honestly, to
a large extent, I was just curious about how all
this happened, about how China suddenly emerged with this world
beating auto industry. Michael was a great person to tell
the story because he was there to see this transformation.
To start, I wanted to get a sense of where
(02:16):
things stand today, where we are now, So I asked
Michael to tell me about a few of the leading
Chinese car makers.
Speaker 2 (02:23):
First one to know is a company called shall me,
shall Me? And Chinese, of course means millet, as in
rice millet.
Speaker 3 (02:35):
Not a name. Is that how you're showing up in
your millet?
Speaker 1 (02:37):
What?
Speaker 2 (02:39):
So there's a history there. Malzatong famously said, rifles and
rice millets, that's the people's liberation Army and so as
a tribute this founder, late June who's the CEO and
founder of Shaw me one of the biggest handset makers
in the world.
Speaker 1 (02:54):
Phonemakers.
Speaker 2 (02:54):
Yeah, phone makers five years ago said we're going in
the cars. And today they manufactured two models, the XU seven,
the Yu seven that look like a hybrid of a Porsche,
and a Model three, beautifully designed. He recruited the best
designers out of Germany. It's got a battery powered vehicle,
(03:17):
really good looking, and it starts at like thirty two
thousand dollars. It's a total unbelievable shocker. Jim Farley at
Ford drives one.
Speaker 1 (03:26):
Wait, Jim Farley, the CEO of Ford, drives a Chinese car,
a Chinese car that, by the way, you basically can't
get in America.
Speaker 2 (03:32):
Right, that's just sacrilegious. As a native of Detroit, he's
crossed the line.
Speaker 3 (03:37):
What is he doing?
Speaker 1 (03:38):
What is he doing?
Speaker 2 (03:40):
Yeah, he went to China. He saw one, and he said,
I need to drive that thing to figure out just
how good they are and why they're better than we are.
And so he drove one at least for six months.
He may still have it, said he didn't want to
give it up.
Speaker 1 (03:54):
Is it right that there's a high end Chinese car
that can rotate three hundred and sixty degrees in place
and operate in the water like a boat for short distances?
Is that true?
Speaker 2 (04:07):
This is not science fiction? That's absolutely right. BYD, which
is China's leading ev maker, recently launched a high end
brand to compete against Range Drover, and it's called the
Yang Wang or Look Up or Aspire the Young Lung.
You wait, I've bin in one here in California. Drove
into a parking lot, got to a dead end, you know,
(04:29):
the kind where you have cars parked on the right,
right and left. How do I back out here? No,
no backing out. Just hit a button and the car
rotated one hundred age agrees.
Speaker 1 (04:39):
It turns on its axis.
Speaker 2 (04:41):
Yeah, right, like in place. It's spin spinned around and
then I'm facing outward. Unbelievable. I haven't had the courage
to go in the water with one yet.
Speaker 1 (04:50):
And just drive into the Pacific Ocean and see what happens.
Speaker 3 (04:53):
Someone else do that. Touch.
Speaker 2 (04:56):
But the point is that Chinese automakers have really come
up in terms of their capabilities, their R and D,
their innovation. They're not just delivering affordable vehicles, they're delivering
world class products that have all the latest features. So
this is what keeps the boardrooms in Stuttgart, in Nagoya,
(05:19):
and Detroit up at night. This is real, This is existential,
as Jim Farley's said, So.
Speaker 1 (05:26):
I want to talk a lot more about what's happening
now and how carmakers in the US and elsewhere, and
for that matter, policymakers in the US and elsewhere are
responding and should respond. But I want to spend some
time talking about how China got here. And I'm particularly
interested to talk with you because, as I understand it,
you first went was it in nineteen ninety? You first
(05:47):
went to China and worked with the car industry in
nineteen ninety? Is that true?
Speaker 3 (05:52):
That's right.
Speaker 2 (05:53):
Days after graduating from Michigan with a degree in Chinese,
I got a three thousand dollars grant to start a
company in China, three thousand bucks. So I bought an
airline ticket and Apple computer and I was gone.
Speaker 1 (06:06):
What a little farther in nineteen ninety that it goes today?
And so what tell me about the car industry as
you encountered it there in nineteen ninety. What was going
on with Chinese cars at the time.
Speaker 3 (06:22):
Pitiful, just pitiful.
Speaker 2 (06:24):
You wouldn't have like, Okay, First of all, I got
there and I announced I'm here to help. You know,
American companies sell cars to the Chinese, and my Chinese
friends on the ground said, well, that's ridiculous because nobody
here owns a private car there. We don't manufacture our
own cars, we don't have the incomes. What are you
doing here?
Speaker 1 (06:44):
Yeah, I mean China was a profoundly poorer country at
that time. Right, the economic rise of China over those
thirty five years has been maybe unprecedented in the history
of the world, certainly like the unails over that time.
Speaker 3 (06:57):
Yeah, give a little color to it.
Speaker 2 (06:59):
So the very first car I did ride in was
called the Shanghai seven sixty. There's powder blue bench, seats,
no seat belts, big steering wheel, and I thought, wow,
this reminds me of something from my earliest childhood in
the nineteen sixties. Well, it turns out the Shanghai seven
sixty is a replica of a Russian car that was
(07:20):
a copy of a German car from nineteen fifty five.
Speaker 1 (07:23):
Wow, and that's what they were still making in China
in nineteen ninety.
Speaker 2 (07:27):
That's right, only a few thousand of them, and only
for senior party officials or in my case, the president
of the university where I was studying in China got
one to be driven around in. That was it one
car in the whole basically.
Speaker 1 (07:41):
So it was an extremely high status thing to have
a car that was built on a forty year old
car at that time extraordinary.
Speaker 2 (07:49):
You drive in a car, you ride in a car
more often, you are elite, and the common person in
China has no hope of riding in a car, let
alone owning one. Now China looked around. Dunshell Ping was
a leader and he's very pragmatic guy. He famously said,
(08:11):
I don't care if the cat is black or white.
If it catches a mouse, it's a good cat.
Speaker 1 (08:15):
This is him pivoting from socialism to capitalism in some.
Speaker 2 (08:18):
Way without saying it, without saying the word capitalism. Yeah,
let's just be let's just be smarter as a nation.
So how did what did he set out to do?
He said, the way we're going to get richer. He
traveled to Japan and the United States, and he saw
these two economies are booming, very wealthy, and they both
have powerful auto industries. We want that too, So how
do we get one? We have nothing. We have no capital,
(08:40):
no no how, no management expertise, no technology, no market.
How do we get going? So he said, we'll devise
a strategy called the joint venture strategy. We'll invite automakers
from around the world to come into China and they'll
have access to potentially the biggest market in the world.
But there's a caveat we will we China will always
(09:04):
hold fifty percent or more of those companies that are
investing in So they have to joint venture and they
have to give fifty percent ownership to a Chinese partner.
Speaker 1 (09:14):
How does that fit with this country where essentially nobody
could afford a car? Like, what is the incentive for
automakers to come in if nobody could afford a car?
Speaker 2 (09:23):
Anyway, it was all about this enticing picture of the future.
We're not there yet, but look what happened with Japan,
Look what happened with Korea. China is opening up and
reforming and we're going to allow some profit making. You
guys come in and the first one is going to
have access to the biggest potential market and was all
(09:44):
a promise of the future.
Speaker 1 (09:47):
I've heard you talk about what it was like at
Chinese car factories at that time when you went in.
Speaker 3 (09:53):
What was it like, wow, early days.
Speaker 2 (09:57):
I was at a company called Cherry, which today is
China's leading exporter, ships of more than a million cars
around the world, including to Europe, UK, Australia. But at
that time, the manager said, I want you to walk
the line with us. We have real quality issues. And
I said what kind of quality issues? He goes, well,
so people here are so unfamiliar with cars that, for example,
(10:19):
you see that rear view mirror on that car, tell
me what's wrong with it? And I looked closely, and
I looked, oh, okay. The rear view mirror was assembled
facing outward.
Speaker 1 (10:31):
So you looked at it. If you were driving, you
wouldn't see the mirror.
Speaker 2 (10:35):
No, you don't see the mirror. The mirror is in
the correct location, but it's facing.
Speaker 1 (10:39):
Outward because the person making it has never driven, probably
has never been in a car.
Speaker 3 (10:45):
No clue, no clue.
Speaker 2 (10:47):
So that's one small example of the kinds of quality
issues they had. How to assemble a car when we've
never driven one. We don't know what that looks like.
Speaker 1 (10:58):
So okay, So danksaw Ping sets up these rules. We're
gonna we're gonna build a car industry using four and
know how by having foreign companies come in and do
joint ventures exact and that, in fact happens. Lots of
companies do it right, Volkswagen does it. Audi becomes the
high status car in China. What's the big inflection point
(11:22):
after that? Like, obviously China's economy grows, people get cars.
People are in China are driving Oudis and there's a
GM brand, right, is it Buick that's big in China.
Speaker 2 (11:31):
Yeah, sensationally popular. Just everyone wants a Buick.
Speaker 1 (11:36):
And we're talking like turn of the century. Now two
thousand is where we are.
Speaker 2 (11:39):
In our starting in the two thousand, So think about it.
Two thousand and twenty ten, you go from a may
less than a million cars a year sold in China
to becoming it by twenty ten, the largest car market
in the world, far surpassing the United States. Buick selling
eighty percent of the worldwide sales are now in China,
(12:00):
making lots of money. The president of GM China at
the time is said, how is business? He said, We're
making more money than God. So you got Chinese consumers
loving buicks, are building a ton of them, selling them
faster they can build them, and making big profits on it.
So all is good for Western audio as you mentioned
Audi with super BMW Mercedes come in. It's a party
(12:21):
for Western automakers.
Speaker 3 (12:23):
Yeah.
Speaker 2 (12:24):
And then but for the people in Beijing who you
know Dung's successors. Yeah, they're looking around saying, wait a second,
We're the largest market in the world. We produce more
cars than anyone else. But where are the Chinese cars?
Speaker 3 (12:38):
What?
Speaker 2 (12:39):
This is not acceptable? All this money going to the
foreigners and the joint ventures. And oh, by the way,
we now import one hundred billion dollars worth of oil
a year. This is a problem. What are we going
to do about it?
Speaker 1 (12:54):
Just to be clear, why is it a problem to
import one hundred billion dollars worth of oil every year?
I mean certainly they have a lot of exports. They
have plenty of capital to buy the oil.
Speaker 3 (13:03):
Yeah.
Speaker 2 (13:03):
They don't like the idea of being vulnerable to outsiders.
This goes back hundreds of years in Chinese history. We
don't want to be vulnerable in any way. And also
Chinese whenever possible, they don't like to spend money outside
their own country.
Speaker 3 (13:20):
So they look around and they go, we're vulnerable on
the oil front.
Speaker 2 (13:24):
We don't want to get into Mid East quagmires like
the United States has done.
Speaker 3 (13:28):
Let's avoid that mistake.
Speaker 2 (13:30):
And then, as a point of national pride, why is
it that we can put you know, rockets into orbit,
but we have a nuclear bomb, but we don't have
our own cars. This has got a little bit of
a national embarrassment. And so the brightest mind of Beijing
looked around and said, look, we've been playing a game
of catch up with the West on internal combustion engines.
(13:52):
Every time we learn to make a better engine, out
or BMW or Toyota makes an even better engine, and
Chinese consumers don't like Chinese bread. What can we do
to change the game.
Speaker 3 (14:05):
So you know the.
Speaker 1 (14:05):
Answer evs electric vehicles.
Speaker 2 (14:10):
Yes, And it didn't just suddenly come to them in
twenty ten. Earlier on in the year two thousand. This
is only known later on. It's a very important guy
named Wan Gong Onan Gong born in northeast humble beginnings,
Northeast China, and the rust belt, goes to Germany, gets
(14:31):
a PhD, goes to work for Audi in the nineteen nineties,
works there for eight years. In two thousand, he comes
back secretly and delivers a white paper to the State Council,
the highest governing body in China, and he said, I've
seen it. We're never going to catch up with the
Germans or the other westerners. In Gasinba in two thousand
wrote a white paper and said the future for China
(14:52):
is electric and here's how to get there now. At
the time, everybody, kind of the leaders in China said,
that's very a brilliant take, but we have nothing. We
have zero capability and a small market and we're just
starting out. We'll tuck it, we'll put it in side.
Speaker 1 (15:09):
But good idea and eves aren't a thing, right, I
mean at that point, GM had tried an electric car
that failed, right, Tesla is not a company yet maybe
in two thousand, Yeah.
Speaker 2 (15:18):
Two thousand and three. Was only in two thousand and
three that they're founded. And you're right, GM tried that
ev one didn't work out. They ended up, you know,
collecting them and smashing them, so it didn't wasn't a
thing It wasn't a moment in time two thousand, but
in twenty ten, who's the Minister of Science and Technology
in China in twenty ten one Gum he left Audi.
Speaker 3 (15:40):
He's the guy, He's the guy in charge.
Speaker 2 (15:42):
He goes, hey, by the way, I have an idea
how he can make this pivot, dusts off his old paper.
Shijing Ping takes power. China's new leader. He looks around
and he's a definitely they call him redder than red.
He wants China to win, he wants the Communist Party
to win, and he loves anything they will give him
(16:03):
leverage on that front. So he throws his weight behind
this big new policy called Maiden China twenty twenty five.
This is this isn't a period from like twenty eleven
to twenty fourteen.
Speaker 1 (16:15):
So this is their forward looking It's like a it's
like instead of a five year plan, it's a ten
or fifteen year plan kind.
Speaker 2 (16:20):
Of yes, like with muscle, like, we're not fooling around.
We're going this is a pivot, but there's an opportunity
to change the game. We are going to throw all
kinds of funding behind the cultivation of our own independent
auto industry built on batteries and electric vehicles.
Speaker 1 (16:41):
Okay, So, I mean interestingly, there's a long history of
governments trying to sort of steer their economies and it
going quite badly, not least in China in the middle
of the twentieth century. Right, Like, the reason at some
level that China got rich was they stopped doing that.
Speaker 2 (17:02):
You could argue absolutely one hundred percent agree and so
and guess what in the early years of this effort
to throw tens of billions, even hundreds of billions of
dollars behind electric vehicles, it falls completely flat. The Chinese
consumer doesn't want two things. No electric it's short range,
(17:23):
it's unreliable. We heard about fires, and they're not good looking.
And two they're not foreign. There's no prestige. Like Chinese
electric car is a double loser. I don't want to
go there. So for most of the twenty tens, that
policy really struggles.
Speaker 1 (17:41):
So what changed? So in fact it wasn't working. It's
a classic example of like government policy not working, wasting money.
Like it could have ended that way, right, I mean,
it could have just been a thing they tried that
didn't work.
Speaker 2 (17:54):
It was very nearly that because by the end of
the decade, they were spending as much on subsidies as
they were on oil imports.
Speaker 1 (18:05):
Wow, on subsidies for cars and batteries.
Speaker 3 (18:09):
Right, it's like, please consumer, and.
Speaker 1 (18:11):
This is twenty twenty, this is the decades, this.
Speaker 2 (18:14):
Is twenty nineteen. I remember being with the CEO of
a major Chinese automaker and I asked him, I said,
what's the future of EVS. I know you guys been
trying now for almost a decade. He said, never more
than an issue here, huh, five to ten percent. Chinese
consumer doesn't want it. They're too complicated. What about charging
(18:35):
the batteries or shorter range? The government wants us to
go in that direction. But he had joined ventures with
Toyota and Honda. He said, we're making great products, we're
making great profits, consumers love the brand. We'll carve out
part of our business for EVS. But it's more like
compliance than enthusiastic.
Speaker 1 (18:55):
Keep the government happy, basically.
Speaker 2 (18:57):
Keep the government. Yep, we're trying our hardest. Yeah, we're
really going for it. So what changes? And this is
where China's probably China's secret superpower is where are most
Where are Apple iPhones built in the.
Speaker 3 (19:11):
World changin in China, in China, right. So they look
around and they go, we have the very.
Speaker 2 (19:17):
Best smartphone maker in the world manufacturing their products here.
Speaker 3 (19:23):
How do we get the best, very best e who
is Oh wait.
Speaker 2 (19:27):
A second, there's this company out of California that's ripping
it in the US and in Europe, wildly popular, defying
all expectations. And they seem to have changed consumers' minds
about what an electric vehicle can be. They can be sexy,
they can be attractive, they can be fast.
Speaker 1 (19:47):
You haven't said Tesla yet. I keep waiting for you
to say Tesla. So they see Tesla, Yes.
Speaker 2 (19:52):
You see Tesla, and they go, you ever hear of
China red carpet? Yeah, Like they laid out their red
carpet for Tesla for the first time. They said, Tesla,
we'd love to have you come here to China to
sell your cars. By the way, we want you to
make manufacture them here, just like we want everyone else
to manufacture them here. But we're going to sweeten the deal.
(20:14):
You can have one hundred percent ownership, no joint venture.
You're in charge. You bring their manufacturing capabilities in, your
suppliers in and you run the show and Elon Musk
looks around and goes, that looks pretty sweet.
Speaker 1 (20:29):
What's the catch, Ah.
Speaker 3 (20:31):
What's the catch?
Speaker 2 (20:35):
Well, it's never spoken, but it's understood that as soon
as Tesla sets up operations in China, everything it knows
will one way or another leak to Chinese automakers, and
they are very quickly. We see five, six, seven companies
(20:59):
sprout up Like Selmy, we talked about, going, Wow, that's
a super incredible car. I wonder if we can do
that ourselves here. Oh, by the way, test suppliers are
just up the road and I know them because they're
you know, they know so and so and so and
so there's Yeah. I talked to one supply chain executive
at the time and I said how long does that
(21:20):
take though, like, how quickly? And he said overnight?
Speaker 1 (21:24):
Overnight, So overnight everybody knows everything. Overnight. Everybody China could
make a Tesla if they wanted. Yeah, So when does
Tesla set up in China.
Speaker 2 (21:38):
It sets up in China, It goes into production at
the very end of twenty nineteen, first weeks of twenty twenty,
exactly when COVID's happening. So it was not an auspicious start,
but against all odds, demand for Tesla in China explodes.
(21:58):
And it wasn't because it was electric necessarily. It was
because it had all these over there update features, new
and cool features, and so it changed the Chinese consumer's
mindset about, oh, what an electric vehicle could be.
Speaker 1 (22:12):
Like it did in the US. Tesla had the same
effect in the US on exactly.
Speaker 2 (22:16):
And this is the Chinese government saw that said we
can duplicate the Tesla effect here in China. They bet
on it and it.
Speaker 1 (22:26):
Worked amazingly fast. Right, Like when I have read about this,
it seems like there's this key moment just what three
years after Tesla sets up in China or so the
is it? The Shanghai Auto Show in twenty twenty three?
Like tell me, why why do we able to talk
about that? Why is that such a big moment? And
(22:48):
were you there?
Speaker 2 (22:49):
I was, I was telling you what happened. I was
set to meet my good friend Kausmeier, former managing director
of Mercedes Benz in China. So we agreed we're going
to meet at the Changhai Auto Show. Being German, he
wants to be there on day one, early in the morning,
I'm arriving the next day. So I'm back in the
(23:09):
United States getting my passport together. I get a call
from Klaus and he and I said, Klaus, what's going on?
Speaker 3 (23:16):
Are you in China? And he said, it is a shock?
Speaker 1 (23:20):
Wow?
Speaker 2 (23:21):
Yeah, I said, what are you Okay, I'm telling you
it is a total shock. I cannot believe my eyes.
So what's going on, Klaus?
Speaker 3 (23:30):
You okay?
Speaker 2 (23:30):
Yes, I'm That's just a Shanghai auto show and the
Chinese have taken over. So taken over, it would be
inconceivable in my mind. What do you mean taking over? No,
I'm telling you it's the end of the foreign automakers
in China. So what was he looking at? If you
can imagine, if you've been to the Chinese auto show,
they're massive, biggest auto shows in the world. Think football
(23:54):
fields upon football As far as I can see, just
cars and people and more cars. And in the old
for twenty thirty years, it would be Mercedes, BMW, Audi, Buick, Toyota, Honda,
Hyundai taking center stage. And then if you had time,
you might want under down a side hall and there's
this pretty lame looking stand with a Chinese brandy and
(24:16):
all of a sudden the twenty twenty three, it's the opposite.
The Chinese are center stage and the foreigners have been
shunted the side. It's almost like through COVID we went
through some kind of crazy time machine. Chinese on the ascendancy,
Foreigners on their way out the door.
Speaker 1 (24:35):
Did you fly in the next day? Did you go yeah? What?
What was that like? What'd you say?
Speaker 3 (24:41):
Mostly?
Speaker 2 (24:42):
I saw a confidence that I had never seen before
out of the Chinese. One executive from BYD said to me,
this is not the company that you've known for twenty years.
Speaker 3 (24:54):
We're a new thing now.
Speaker 2 (24:56):
And ever since that moment, I felt like the Chinese
really really getting comfortable and confident in their own capabilities.
Speaker 1 (25:08):
We'll be back in just a minute. This segment is
brought to you by Walmart. Behind every small brand is
someone with a dream. Today, we're sitting down with one
of the founders whose products you can discover at Walmart.
(25:30):
His name is Ben Moore, and he's the CEO of
the Ugly Company, based in the Central Valley in California.
The company sells dried fruit that comes largely from produce
that is too ugly to be sold fresh. Ben told
me that he got the idea to start the company
when he was driving a truck and he often wound
up transporting fruit that packing houses couldn't sell because it
was blemished, perfectly good fruit that just looked a little
(25:52):
ugly and it was getting thrown out.
Speaker 4 (25:54):
And so I just was sat there thinking about what
can we do with this fruit other and dump it
out right? And I thought that there could be a
brand solution there, which is where the name the Ugly
Company came from, was going to get people excited about
the sustainable nature of the fruit.
Speaker 1 (26:06):
So I understand that at some point you went to
this something called a Walmart Open Call event. Tell me
what that is and why it mattered for your business. Yeah.
Speaker 4 (26:15):
So Walmart Open Call is Walmart's initiative to source from
American manufacturers and small business like ours. We fly out
and they're kind of sitting there a little bit starstruck.
When you walk into the event, you're like, oh, my goodness,
like this really is an enormous event, and you know,
just like anything else, say here's my PowerPoint, here's my products,
there's my mission, here's what we're trying to solve, and
effects you're like hey, like yeah, we want to create
(26:36):
space for you in our slot. Here's a golden ticket
and it's like a straight up Willy Waka style golden ticket.
Speaker 1 (26:42):
Literally a physical piece of paper that says you made it.
Speaker 4 (26:46):
Yeah you know, you've been selected. So there's like the
full day of just craziness. It's like, oh my god,
I'm now going to be a Walmart supplier, which is amazing.
So yeah, we, you know, six months later, launched one
hundred ninety Walmarts and now we've grown into nearly a
thousand Walmarts since then last year and a half.
Speaker 1 (27:01):
So how did getting onto the shelves at Walmart affect
your business?
Speaker 4 (27:05):
We hired an additional twenty people to work in our
manufacturing facility just specifically for the Walmart demand that was created.
So that's been great because our product sells really well
in Walmart, whereas as a small brand, it can be
really tricky working with larger distributors and you know, trying
to get your product even on the shelves and things
like that. They have all their different applications where it's
(27:25):
actually really efficient to market to Walmart customers through the
Walmart apps of things, and so well, Walmart's helping us
create demand via their platforms, right, and so it's a
huge deal for us.
Speaker 1 (27:36):
Congratulations and all your success and I wish you more
of it.
Speaker 3 (27:40):
I appreciate it.
Speaker 4 (27:41):
Thank you very much.
Speaker 1 (27:43):
This segment was brought to you by Walmart. Explore thousands
of small brands online at Walmart dot com or at
your local Walmart store. So let's talk about the role
of Chinese automakers in the world today.
Speaker 2 (27:59):
So, China's rolling in Chinese cars. I know, numbers are
often hard, to give me some numbers.
Speaker 3 (28:09):
It was some numbers.
Speaker 2 (28:10):
So five years ago, China exported a total of one
million cars, which is about less than five percent of
their total production. They're all geared up for selling in
the China market. Okay, that was one million five years ago.
This year that'll be twelve million. Twelve million. That's unprecedented
(28:30):
in the history of the automobile. Japan at his peak
was six million. China's already doubled that to twelve million.
Speaker 1 (28:37):
How many cars does the US export every year?
Speaker 3 (28:40):
US exports about it one one million?
Speaker 1 (28:43):
Yeah, and how many does Japan export every year? Now?
Speaker 3 (28:46):
Now about three three million?
Speaker 1 (28:49):
And how many cars is China exporting this year?
Speaker 2 (28:51):
Twelve million cars. It's their exporting is more than the
United States makes. Now, oh, we manufacturer about ten million cars.
They're exporting twelve million in addition to their own market,
which is like twenty five million cars. So China now
accounts for almost forty percent of global automotive production, almost half,
(29:13):
getting close to.
Speaker 1 (29:14):
Half of all the cars made in the world are
made in China, and a big chunk of those are exported.
They're exporting more than everybody else combined, certainly anybody else combined.
Speaker 2 (29:23):
Yep, exporting more than And here we are in America,
and where I'm I go to see executive I make
keynote talks around the country and everybody's like, yeah, okay,
you are the boy who cried wolf because we don't
see where where is the Chinese car?
Speaker 3 (29:37):
Here?
Speaker 2 (29:37):
When I give you these presentations, I put a map
of the world up and I go the map represents
all countries. You see a globe, Yeah, and I have
color coded and there's one country in white and everything
else is red.
Speaker 1 (29:51):
Huh.
Speaker 2 (29:52):
And that gets people in the audience to go, wait
a second, hold on, we are on an island. If
you go to Mexico, UK Australia. I was recently in Indonesia,
South Africa. I visited Chinese cars, Chinese cars, Chinese cars
pouring in and so we're surrounded and it seems like
it's inevitable that they also enter the US market.
Speaker 1 (30:15):
And so just to be clear, what's keeping them out?
Is it just tariffs?
Speaker 2 (30:21):
We have big tariffs in place, more than one hundred
percent on terraffs. That alone, Even though one hundred percent
sounds like a lot, Chinese autom manufacturers said, one hundred
percent won't stop us.
Speaker 1 (30:32):
One hundred percent doubles the price. You're paying a dollar
in tax for every dollar of car you're buying.
Speaker 2 (30:39):
Yes, and in an industry where the margins are already
pretty thin, yeah, they're like, yeah, one hundred percent tariff,
that's not really going to stop us. So the Department
of Commerce put in place a very strategic extra layer.
And without going into a lot of detail, it essentially says,
if a vehicle features any Chinese hardware or software related
(31:01):
to over there updates or self driving, it cannot legally
be registered here in the US.
Speaker 1 (31:09):
And is there a security rationale for that?
Speaker 3 (31:15):
There is? There is.
Speaker 2 (31:16):
There's two components. One is to buy time for domestic
industry because if the Chinese come in, they.
Speaker 1 (31:22):
Just, yeah, it's clearly protectionist at some level, right, Like
it's plainly protectionist. Yes, is there a valid security rationale
alongside the protectionism.
Speaker 2 (31:33):
Well, China has all kinds of mechanisms already in place
in the United States for a surveillance and a mobile
car that's vacuuming up massive amounts of data about people
and locations and buildings definitely could be weaponized and we
shouldn't be naive about that possibility. So I personally feel
(31:55):
like the Department of Commerce rules are appropriate given the
tensions between the two countries today.
Speaker 1 (32:02):
Let's talk about evs in the US, right, because substantially
all of what China is exporting to everyone in the
world is electric vehicles, create electric vehicles. But it seems
like US companies made a genuine effort to build electric vehicles.
And you have pointed out that the big US automakers
combined GM Ford Stilantis, which owns Chrysler, have written down
(32:27):
something like fifty billion dollars of investments they made into
EV's because they just weren't that popular with American buyers.
And so I don't know. One could make different inferences
from that, like maybe people in this country wouldn't want
Chinese EV's because we don't want EV's. I don't know,
Like what do you make of that fact?
Speaker 2 (32:48):
Okay, so China's ex sports. I wanted to mention this
important point. Of that twelve million that will go overseas
this year, half of those are not EV's. Oh interesting, okay.
So what we're facing is not only a challenge on
the EV front, which most people say, oh, China EV's, Okay,
(33:08):
we'll give them that because we own gasoline. The trouble
is they're competitive across the board, now, okay, okay, So
that's one second thing. Just like China struggled to get
his consumers to fall in love with EV's, so do
we here in the United States. You know, last year
less than ten percent of car sales in the United
(33:31):
States were evs. People just we tend to drive long distances,
big vehicles at high speeds, which is the antithesis of
what an EV is ideal for. You want city commuting,
short range and lower speeds. So that's a genuine sort
of American exceptionalism problem. And I'm not an advocate of
I don't think EV's will take over the United States.
Speaker 3 (33:50):
I don't think they should, but there is a role
to play.
Speaker 2 (33:54):
I think twenty twenty five percent of the market in
a normal market here in the nice it makes sense
for America.
Speaker 1 (34:01):
I mean, we haven't talked about subsidies and the persistence
of subsidies. Right there were subsidies for evs a few
years ago. Now there are not. I mean in terms
of China in particular and the rise of their automakers
and their persistence. Like, what is the story of subsidies?
Speaker 2 (34:17):
There huge still huge still and it's not in people
when you we need to invent a new word for
subsidies when it comes to China. Because here in the
United States we had a seventy five hundred dollars tax credit.
That's a subsidy in ev We had that for you
for evs right until the end of last year.
Speaker 3 (34:39):
Think of China.
Speaker 2 (34:41):
Imagine China as this massive manufacturing machine, and it says,
we want to dominate a given industry. How do we
dominate that. We invest in enormous amounts of capacity. We
throw all kinds of zero interest loans. You need free land.
How about training for your employees, energy, it discounted, whatever
(35:06):
the tools necessary for us to dominate an industry, We
the government of China, are ready to do that. We're
going to win the auto industry, just like we want
solar panels, just like we want shipbuilding, just like we
want steel and so on and so on. Today it's autos.
So when Americans go, well, China has some substance, do
they have some subsidy doesn't begin to describe the ferocity
(35:30):
with which the Chinese government will say, that's a national objective.
We're going to win.
Speaker 1 (35:36):
So do you even compete with that? Like there is
the question of should we just let them have it?
They're basically giving us cars at a discount, like they
want to spend their own money to give us cars
cheaper than they would sell in a market without their intervention.
Is there a universe where that's just like good for us?
Like great, we will take that and we'll make other things.
Speaker 3 (35:59):
In no universe that I know of, is it good
for us?
Speaker 1 (36:02):
Okay?
Speaker 3 (36:03):
Okay?
Speaker 1 (36:04):
Why?
Speaker 3 (36:05):
I because it's a short term gain for.
Speaker 2 (36:09):
The United States at the expense of our long term
viability as a competitive economy.
Speaker 1 (36:15):
Why is a car industry essential? There's another way of
asking the same question, why.
Speaker 2 (36:19):
Is the car industry essential? So the United States today has,
in my view, two car industries that are operating in parallel.
One is the old car industry out of Detroit that
brings capabilities in manufacturing that are really crucial to national
defense and security and weapons systems. You need to have
a basis of capabilities of manufacturing. So that's that brings.
(36:43):
West Coast is the second auto industry. That's your Tesla's,
your way Mos, your ubers, your tech companies. They're bringing
software AI chips to build the cars of the future.
And if we forfeit the capabilities of having our own
auto industry, we suddenly become very vulnerable to China in
(37:06):
terms of our own national defense.
Speaker 1 (37:08):
So you may to have a kind of frontier military,
you basically need to have a car industry. Is that
the core argument you're making.
Speaker 2 (37:15):
Yes, Yes, the volume. That's where the volume comes from.
That's where the ecosystems come from. Many of the components
that define the future technologies in military applications are the
same ones that go into cars. If we don't have
those at home, we're extremely vulnerable to Chinese whims.
Speaker 1 (37:36):
We haven't talked explicitly about batteries. But there is this
interesting idea, right that like, batteries are sort of analogous
to oil, right in evs, but they also are essential
for drones, which of course we've heard a ton about,
say in the Iran war. And so this notion that
batteries are an essential frontier technology, that there's this kind
of electric stack, right that includes batteries, that includes permanent
(37:59):
magnets made with a rare Earth's right, that the EV
is sort of the the representative thing you make with
this stack. But you also make drones, you also make missiles.
Speaker 3 (38:10):
Right, Batteries are the future engines.
Speaker 1 (38:15):
And China is winning batteries by a lot, right.
Speaker 3 (38:18):
They're just killing it. They're killing it.
Speaker 2 (38:21):
They own not only the ability to manufacture seventy percent
of batteries worldwide, but they also control the supply chain
into those batteries, most importantly the refining of the materials
that go into the cells that make the batteries. So
ninety percent of graphite today is processed in China. That's
(38:42):
another choke point. We don't have those capabilities at home.
So not only do we have to have the batteries,
but we also have to develop our own and how
do we get here? It was just negligence I think
on the part of American leadership at the government level
and the corporate level. It was cheaper to manufacturer regulatory
point of view, it's easier to do it in China.
(39:02):
We just blindly shipped so much to China. And now
we look and go, well, how did that happen?
Speaker 1 (39:09):
Okay, guys, I mean there was a lot of upside
right Like, there was a notion if you go back
twenty five years, there was a notion like, oh, China
will join the WTO, they'll get richer, they'll they'll democratize.
We've never had a big, rich, market based country that
had an authoritarian regime right like it. I don't think
that people were necessarily dumb at the time. It just
(39:31):
didn't work out the way reasonable people thought it would
work out. One might say, did you know all along?
Was it obvious to you.
Speaker 2 (39:41):
There's a tendency in the West to underestimate China and
its ambitions. Yeah, so what we hoped to see was
not what was real. Yeah, And in the short term
China said we'll take care of this for you, will
manufacture it half the cost and ship it back to
your margins.
Speaker 3 (39:59):
Go up, look at this.
Speaker 2 (40:00):
Beautiful Yeah, and we're all getting along until the point
at which China said, we might not need these guys anyway.
Speaker 1 (40:10):
What should the US do about cars?
Speaker 2 (40:17):
I would the starting point would be I'd have a
national campaign and say, first of all, have everybody understand
that cars and the car manufacturing industry and technology around
future of cars is crucial to our independence and our
way of life. So put that message out there. It
may not resonate today but over time.
Speaker 1 (40:37):
But I feel like people love the domestic car industry, right.
I mean when you think of like mid twentieth century
meat and potatoes America, like GM was maybe the biggest
company in the world, it was certainly the biggest manufacturer,
the biggest car maker. Like that's like Glory Day's America heartland, right, Yes,
except that geographies as time have to change.
Speaker 2 (40:58):
Yeah, I'm I'd love to be enthusiastic and optimistic about
Detroit's ability to pivot to this new era of chip
and software and.
Speaker 1 (41:11):
AI software as they talk about the software defined vehicle. Right,
This idea that new cars are like software with a
car wrapped around it is the way to think of
a car.
Speaker 2 (41:20):
Now, yeah, yes, start with software and then wrap the
metal in the glass and the rubber around it. It's
the heart of the car is software in the computer.
This is where the West Coast thrives. So the new
American auto industry must rise from the West. That's my Yeah,
that's where if I were in charge of the US government,
in charge of that, I'd say throw all of our
(41:43):
support behind your Tesla's and Waymos and ubers like logistics.
Think of it as mobility less about the old business
of hammering out a vehicle from a production line like
Ford and GM.
Speaker 1 (41:56):
First thing is get everybody to believe that we need
a car industry and a new kind of car industry,
probably in a new place. The new place is going
to be hard politically, but keep going.
Speaker 2 (42:06):
But both of them, both of them have roles to play.
I would say Detroit won't play the leading role. If
we hope to compete against China, we need the brains
and the innovation and then and the risk taking a
West Coast companies.
Speaker 3 (42:19):
That's number one. Geography.
Speaker 2 (42:21):
Second, autonomy autonomous cars, self driving cars. You've heard of
the Tesla, cyber cabs. Weimo's running in about a dozen
cities around the United States. I was just in San Francisco.
So autonomy. Whoever wins autonomy wins the new global auto industry.
Speaker 1 (42:40):
How we haven't talked about autonomy in China, Like, how
how is China doing on autonomous vehicles?
Speaker 2 (42:47):
Comparable in a few cities you'll see autonomous cars running around.
Not they're not as advanced as weimo, but they're getting
closer and closer.
Speaker 1 (42:57):
Yeah, okay, so we're all so not to be reductive
or jinguistic, but we're a little bit ahead on autonomous cars.
Speaker 3 (43:04):
Yes, we have some leadership still in autonomous cars.
Speaker 1 (43:09):
Why is it so important? Why is autonomy so important
in this particular context of this kind of great powers
competition between the US and China? Is the notion that
if the US gets to autonomous cars at scale everywhere
in a way that we can sell around the world,
et cetera. That's that's a way we could beat China. Because,
(43:31):
of course, someone would rather have a truly autonomous car
than not. I mean, is that the core reason autonomy.
Speaker 3 (43:36):
Is that's the core reason.
Speaker 2 (43:37):
Yeah that people was recently in Indonesia, sales of new
cars in Indonesia and Thailand are down in the last
five years, like forty fifty percent, and the economies aren't
doing great. But even if they're holding even you think
they're going to sustain people are opting for ride share.
(43:58):
Like those interesting venients of not owning a car and
just having vehicles show up in this case with drivers.
Speaker 1 (44:04):
Huh. Well, and it's rather like a lot of people
clustered in urban places where ridesha is particularly convenient and economical,
and having a car is less convenient and less economical.
Speaker 3 (44:15):
That's it.
Speaker 2 (44:16):
Jakarta thirty million people who owning a car is a paint.
So you're seeing this trend. Okay, younger people don't need,
don't value, don't want. There's inconvenience is expensive.
Speaker 1 (44:27):
Huh So if it's autonomous, you could have fewer cars
by far, it would be profoundly cheaper to do ride sharing.
That's that's the old dream of autonomous cars. We just
sort of stopped talking about it because it's taken so
long to get here.
Speaker 2 (44:39):
Taken so long, and today when I talk to people
in the industry, they feel they feel as though they've
gone through that drought that and then they're back up
and they're.
Speaker 1 (44:48):
Five years away for the last twenty years problem. Yeah,
So okay, So one is get everybody excited about EVS.
Two is we are autonomy. Is that the whole.
Speaker 2 (44:57):
List jobs jobs, tens of thousands, hundreds of thousands of jobs.
Speaker 3 (45:04):
So where do those go if we're not manufacturing.
Speaker 2 (45:08):
And related to jobs, there's this thing like when there's
concentrations of manufacturing, you're learning as you go, you're innovating
if you outsource that. That's one of the reasons why
Elon Musk loves to vertically integrate. I mean his whole company.
He's trying to do everything in the oar, he's doing
the superstargar station, he's doing the batteries, he's doing everything,
trying to do the AI, doing everything. Why, he says,
(45:31):
because when I outsource, that innovation in my company stops.
Now I'm dependent on someone else to innovate. I love
that insight. And so when if America just outsources in
order to have a cheaper end product for us, it's
like it's a little bit like the farmer who sells
his land to buy stuff for his family. Eventually we're
(45:53):
out of We're not doing anything anymore, we're not learning
we're not innovating, We're just burning.
Speaker 1 (46:00):
Is there some broader lesson the US can learn from China.
Speaker 2 (46:08):
One of the lessons is, for years, the United States
has been hopeful that China would change, come around, be
more like us. So one of the lessons is we
better put that aside. China doesn't change for anybody. So
if our hope is China's going to collapse or come
around and be a democracy in a short term, or
(46:30):
be a good trading partner, ally, let's dismiss that fantasy.
Speaker 3 (46:35):
It's not happening. Okay.
Speaker 2 (46:37):
Number two, we have to maybe have to get comfortable
with the idea that another country is bigger than we are.
Their industries are bigger than ours. We're not necessarily the
world leader in stuff. Okay, So what we have to
be smarter, we have to work harder, we have to
be more innovative. And Third, probably the most important one
(46:58):
I should have made it first is at a certain point,
if we look at the Manhattan Project or the United
States after Pearl Harbor or the Spotnick moment, there has
to be a mission that brings us all together and saying,
you know what, our future is genuinely at risk. Our
(47:18):
future is genuinely in jeopardy if we don't act together
to pursue a national mission. This is what China does
really well. The government set out the mission Made in
China twenty twenty five. We will lead in next generation technologies,
will dominate. We'll use it as leverage against other countries.
The US should learn from that.
Speaker 5 (47:44):
We'll be back in a minute with the lightning round.
Speaker 1 (47:57):
Let's finish with the lightning round. Okay, it's going to
be a little silly, just so you know. I understand
that Chinese cars typically have karaoke app installed, and so
I'm curious, do you have a go to car karaoke song?
Speaker 2 (48:18):
It would be a famous song by Dunley June and
China is probably China's most famous singer, a woman actually
she's Taiwanese, but the Chinese love her too, and it
would be Uh, well, I don't want to break.
Speaker 1 (48:36):
Give me a line. You have to sing a line. Sorry,
w e yo doors shun, fantastic, thank you? What what
did you? What does that mean?
Speaker 3 (48:48):
By the way, uh you asked? You asked me how
deeply do I love you?
Speaker 1 (48:56):
What's the answer?
Speaker 3 (48:57):
As deep as the fullest moon?
Speaker 1 (49:00):
Lovely ah what's one thing that's different about driving in
China compared to driving in the US.
Speaker 2 (49:07):
Chaos chaos, So think of it as like a road
rally and cars coming wrong direction, lanes not respected, cars
coming into your lane, you going into their lanes.
Speaker 3 (49:20):
In fact, when I.
Speaker 1 (49:21):
From New York, Baby come to New York, New York.
Speaker 2 (49:24):
Looks like a kindergarten compared to chiy Like whoa. So
when I first came back to the United States, I'm
driving around here and I would in Asia. When you
pass a car, as soon as you get your nose
ahead of it, you just start easing into that lane.
You just start like nosing into that lane and they
go yeah, okay, and they they kind of allow you
to and or not, and it's it's it's it's sort
(49:48):
of to bemin full contact, full contact. So in here
in California, I did that a couple of times. People
are on the horn, like you what are you doing?
Speaker 1 (49:58):
Not cool? Bro?
Speaker 2 (49:59):
Everything is so tight and chaotic, there so many cars,
so much congestion that you've got you got to bring
your game. So when people would visit me in China,
they're like, oh my God, get me out of this car.
As soon as you get this is terrifying.
Speaker 1 (50:17):
So you mentioned that you studied Chinese in college. I'm curious,
do you have a favorite Chinese author? You know, I
don't know, fiction, poetry, whatever.
Speaker 3 (50:27):
It would probably be.
Speaker 2 (50:29):
So favorites would be the Tong dynasty poets, and the
most famous one is le Bi.
Speaker 3 (50:36):
So, in fact, that's the thing that drew me.
Speaker 2 (50:39):
To China initially, as I studied ancient Chinese poetry from
that era, which was around eleven hundred eleven thirteen hundred.
Phenomenal poets, just phenomenal, and I'm not into poetry per se,
but the way they put characters together made you feel,
it made you feel something exceptional. So Lebi would be
(51:00):
at the top of that list. And then more recently
in the twentieth century, it was a guy named Lushun
whose every Chinese nos he was lived in the early
part of the century, and you had really perceptive takes
on where China was historically and what's what made China
different and maybe what China needed to do to really
(51:22):
join the world. So one of his most famous lines
was Chinese people see foreigners as either gods or barbarians,
never as equals. This is profound. This is really really
helpful to understand where the Chinese are coming from. So
in my early years, foreigners were gods. Now we're tending
(51:45):
to be seen as the barbarians, never as equals. And
this is important because if China is going to integrate
with the world, its view is it should be in charge.
It's not joining an American led system or a Western
No China in charge.
Speaker 1 (52:05):
So you've talked about these sort of big macro chaines
that you've seen in the decades you've been going to China.
I'm curious, is there is there anything on the more
subtle end, something that's changed in a kind of less
obvious or small but still interesting.
Speaker 2 (52:21):
Way generation generational change. The younger people I meet now,
they tend to be single children, one child policy, they
tend to be more affluent, and they tend to be
less driven than their parents, so almost entitled. So it's
fascinating to see the hunger and the ambition. And now
(52:44):
this next generation looks like, yeah, they have this thing
called the lying down, lie down phenomenon in China. Like
the younger people going, why am I going to work
six days a week, nine am to night?
Speaker 3 (52:58):
What's the point do I need to be doing this
so that.
Speaker 1 (53:03):
Means we have a shot at catching China maybe, But.
Speaker 2 (53:06):
Then Jack Bob comes out Ali Baba go goes. Don't
listen to that, that's garbage. We need to keep working hard.
So there's a tension there in the society. Where's it
gonna go?
Speaker 1 (53:18):
Thanks for your time. It was great to talk with you.
Speaker 3 (53:20):
Fabulous conversation.
Speaker 1 (53:22):
Thank you. Michael Dunn is the CEO of Done Insights.
Please let us know what you think of the show,
which you want to hear more of, which you want
to hear less of particular guest ideas. You can email
(53:43):
us at problem at Pushkin dot fm. I read all
the emails. You can also find me on x rom LinkedIn.
Really do appreciate all the messages that we get. Today's
show was produced by Gabriel Hunter Chang and Trinamnino. It
was engineered by Hans Dale She and edited by Lydia
jen Kott. I'm Jacob Goldstein and we'll be back next
(54:04):
week with another episode of What's Your Problems Man.
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