AAH #756 – A Darkening World for EV Startups

TOPIC: Car Tech PANEL: Dr. Prasad, CAR; Paul Eisenstein, Headlight.news; Gary Vasilash, shinymetalboxes.net; John McElroy, Autoline.tv

Episode Transcript

Speaker 1 (00:00):
Hey everybody, thanks for joining us on auto line after hours.
Mister Gary is here as always. I'm doing well, you too,
absolutely yeah. So we got to let everybody know. We've
got Venkatesh Prasad from the Center for Automotive Research in
Ann Arbor, who goes by Prasad. And we got Paul
Eisenstein from Headlightnews dot com.

Speaker 2 (00:23):
Headlight no, no, no, no, no, Headlight dot newsn dot com. Oh, okay,
you're going to send people the site in Arkansas.

Speaker 3 (00:31):
Anyone want that? So we got We got to give
your title because it is it is an important title,
and then a little bit of your background to put
this all in context. You're the senior vice president of
Research and chief Innovation Officer at the Center for Automotive Research.
And before that you had more than twenty six years

(00:51):
at Ford, and notably you you founded and led the
Ford Silicon Valley Labs in Palo Alto. So that's quite
a quite a statement as we hear more and more
about things coming out of Silicon Valley nowadays.

Speaker 4 (01:06):
Thank you, Thank you Gary, thank you John, and thank
you all. Good to see you out here.

Speaker 3 (01:10):
See you so, I mean, you're a tech guy, so
give us. Your your overview of what the landscape looks
now in the auto industry in terms of tech fascinating.

Speaker 4 (01:24):
I'd say as technology just does its job. It pushes
along and forces a lot of what it enables, and
sometimes it destroys to change and doesn't really wait for
what much to happen.

Speaker 1 (01:44):
So it's not that we're seeing a real divergence here
with the new eavy startups, you know, taking a totally
different approach to doing cars, especially when it comes to
technology versus the legacy auto makers. Do you see that
converging at any point?

Speaker 2 (02:00):
Now?

Speaker 1 (02:00):
What I'm thinking is software defined vehicles, zonal compute and
that sort of thing.

Speaker 4 (02:05):
Yeah, I think they'd be selective convergences. And by that
I mean the legacy car makers. And these are those
who have to find free cash flow by selling highly
profitable products. And those profits come from products that they
know how to make and make well and where there's

(02:26):
a clear consumer demand, customer demand, and those tend to
be intel combustion engine vehicles, and so they can resilhouette
those vehicles and tune them in a way in which
they can sell them profitably. And so while they do that,
make the free cash flow they need and put that
into the growth business they would sooner or later, and

(02:52):
they have and you've seen these play out in a
number of forms. They need new capabilities, and to find
those new capabilities they either build or they buy or
their partner. And so when they look to partner, they
look to partner with certainly trusted, tested suppliers that they have.
But then those tested and trusted suppliers also have to

(03:15):
have new capabilities, and so that's when the startups come in.
That's when people who are experimenting without the burden of
having to run a legacy operation and have two operating
systems ICE and EV can quickly adapt to the changes
needed needed, but they don't have scale, and so they're

(03:35):
looking for that validation and so that's when those partnerships
would come in.

Speaker 2 (03:40):
I'm curious about where the industry is going versus what
consumers are asking for now. I'm a tech person, yeah,
I mean I always have boxes of new things to
play with, But at the same time, I get into
a lot of new cars and get either I have
the micro off words syndrome, whether there's tons of stuff

(04:03):
that I either never knew I had or don't use.
And there's many a time where I just get angry
Rivian putting controls for your mirrors and your seats and
your events on the touch screen. And when I look
at studies and when I talk to a lot of consumers,

(04:24):
I get this mixed message. People want the technology, but
they're angry at their technology. So I wonder if you
can address this this sort of schizophrenia if you will
in the market. Yeah.

Speaker 4 (04:37):
No, I think that dichotomy is a valid and legitimate one.
I think going back to sort of the the sort
of framing of that whole question against the context of
you know, what technology does, and ultimately firms have to
take technologies. Companies have to take technologies and then tune
it to what the market needs in the near term

(04:57):
and midterm and long term. And then I pretty quickly
discovered that the design question, the meta design question, how
do you design? How do you take technology that's doing
its job? And they said earlier on, but then in
some sense harnessed that to get the optimal design you
need for the profits, you need the customer satisfaction, you

(05:18):
need all that to happen, and that then comes to
a usability design question down below. But there's also the
bigger design of how do you design the organization, how
do you design what goes into making these things possible.
I think these are all still emerging being tested out.
And so just the fact that you know, you can't
just go open the door latch, and the expectation was

(05:39):
that you know, if it did, if you couldn't open it,
you try again, and that was like a magic number
of one hundred and thirty million seconds or so. Today
you press a button and you go past one hundred
and thirty minute seconds. You got to wait for a
click to hear, and so that's you know, we've gotten
used to it in sometimes humans, we've gotten trained with
these digital interfaces that we have no tolerance. But when
you went to an analy interphase, just by opening a

(06:01):
latch mechanical one, if it doesn't open in that you
know one hundred and thirty many seconds, you're going to
try it again, because that's what we used to with
mechanical systems. And you see this digital thing, you press
a button of light glows and then you hear a click, right,
that already has gone past your time budget for human
you know acceptance. And so there's a number of user
interface questions that are going to come up at the

(06:23):
individual sort of widget level, but also at the system level.

Speaker 2 (06:26):
Do you see some automakers pulling back. I hear this
anecdotally and I've seen a few things. Hyundai has put
more emphasis on having secondary controls, for example, for climate
and for audio, as opposed to keeping everything just on
the touch screen. Yeah.

Speaker 4 (06:45):
No, I think there was certainly a rush to put
everything on the touch screen because it chiefs it seemed
that there was a good way to reduce costs, reduce complexity.
But there's a recognition that at the end of the day,
you want to go from ad B and you want
to come back safely, and you want to you know,
also perhaps allow that to happen without necessarily being on

(07:08):
a screen yet another time, because you're so screen inundated
from the time you one wakes up to when we
go to sleep, and so you know, you want that
little bit. Perhaps is that it'll come back and say
I don't want that. I just want to drive without
that screen.

Speaker 3 (07:24):
So you know, John mentioned startup ev companies are appearing.
You mentioned the legacy companies that that have the cash
flow from ice. Okay, So so it's it seems that
these are two entirely different cultures, yet both of these
cultures are competing in the same marketplace. So how do

(07:52):
either of these companies perform successfully perform in a way
that will allow technological advances such as autonomous driving or
more evs.

Speaker 4 (08:04):
Yeah, no, I think it's through uh stage and carefully
orchestrated partnerships, a series of partnerships where where the startups
can offer a lot with the right kind of support,
can offer a lot of innovation designs or innovation in

(08:27):
vative designs, but also production innovations, you know pathways. But
the large manufacturers, the producers have that scale, They have
the ability to take things to scale and and be
able to then industrialize it if you will. I think
that's that's where that that the complementary capabilities lie.

Speaker 3 (08:49):
So you think it's complementary versus.

Speaker 4 (08:53):
I think there'd be a bit of both. I mean
they'll be clearly You've seen Tesla take its form and
grow and bid go to scale, and they haven't dependent
on been dependent on a legacy car maker. But you
have others who are coming to the marketplace now, and

(09:15):
one can see that they have the need for scale
and it's not easy, and the legacy car makers need
to move quickly and need to move with with the
ability to both balance their legacy portfolio and quickly move
when they have the opportunity to do so with respect

(09:37):
to the EVPs and so, yes, they have in house designs,
but there's always the capability that takes you to the
next level that often you find on the outside because
it's odds you might have an in house but you
might see it proven just enough on the outside, whereas
the in house version may not have had the chances

(09:58):
to get that proof, that early proof that you need
in terms of design iterations.

Speaker 1 (10:03):
Jerry, I know you had some info from some recent
studies from the Center for Automotive Research that have triggered
some some questions in your mind.

Speaker 3 (10:12):
Well, okay, so you guys most recently did the study
of tariffs, and now we got reporting today that there's
closer to a deal with the EU which may bring
it down to fifteen percent from the twenty five percent
it did before. But so when you guys did this study,
and our friend Edgar Fowler, who who was on the show,

(10:33):
was involved from cart so you were saying that it
would be an increased cost of one hundred and seven
point seven billion dollars to all US automakers and an increased
cost of forty one point nine billion to the D
three automakers. And it impacted D three production wium of
six point eight million vehicles. So this is just cost

(10:55):
of producing vehicles in the United States, and talk to
us a little bit about that. I mean, and and
and then I want to mention you guys used as
one of your data points the American Automobile Labeling Act,
and I was shocked to see some of the numbers
in terms of the Detroit three and what their domestic

(11:16):
content is.

Speaker 4 (11:17):
Right, So I think on the one hundred and eight
rough one hundred eight hundred and seven some billion dollar number,
I think the best way to look at this is
to look at how that costs gets distributed. So there's
there's two parts. What the sources of the what the

(11:39):
line items are that result in that cost. And that
was based on the assumption that there's uniform twenty five
percent kind of on all creating partners with no relief
for any existing agreement. And then you can so you
look at that total money and you say, well, who
are all the players here that at the end of

(11:59):
the day, they need to come together for this industry
to be viable and for consumers to benefit. And that's
the suppliers who supply components and and subsystems to the OEMs,
and then the finished products get distributed and you have
the dealers who then take it to the end user.

(12:22):
And so no one explicitly or otherwise until we have
to want to speak about the end user, the consumer,
the customer, the help can we want to protect them.
So then you essentially get to dividing this number by
by you know, not by three, but across spread acrosts,
three different entities, the suppliers, the OEMs and distributors and

(12:46):
UH and then you. So that's how that dynamic works.
And so with the latest EU US agreement, you turn
the knob sided differently, you go through the math again,
but you're going to still come up with a pretty
large amount because it's not as if the US exports
a whole lot to Europe or Europe exports a whole
lot to the US where that's going to be this

(13:08):
big shift in these numbers. So I think that's where
we are today.

Speaker 3 (13:13):
Yeah, So to the point of of you know suppliers
to the industry. So so I already quized John on this,
so I'll throw this one to you, Paul so Ford,
what vehicle has the most domestic content as measured by
the American Automobile Labeling Act. What vehicle is it and
what is the percentage of domestic content?

Speaker 2 (13:35):
I thought I remembered the Tesla.

Speaker 3 (13:37):
No, no, just where we're I think about Ford now.

Speaker 1 (13:40):
Just.

Speaker 2 (13:44):
My instinct would be to say the Mustang. But I'm
probably wrong. You probably are, so if I were to
look at it, I don't know.

Speaker 3 (13:56):
Yeah, it's it's It's surprised me. It's the Ford Ranger
pickup truck. Forty six percent domestic content.

Speaker 1 (14:03):
That's all.

Speaker 3 (14:03):
That's all.

Speaker 2 (14:04):
And by the way, by domestic you are talking absolutely US,
not North American.

Speaker 3 (14:09):
I think it's the USMCA. I believe that's that's in
those numbers, right.

Speaker 2 (14:14):
Only forty six percent. If I remember this year.

Speaker 3 (14:17):
That was cars dot Com did the study.

Speaker 2 (14:19):
Yeah, yeah, and America four dropped out of the top
twenty if I remember correctly.

Speaker 3 (14:24):
But then okay, so let's let's move on to general motors.
So what vehicle has the most domestic content according to
the AA LA in twenty twenty five.

Speaker 2 (14:37):
Damn, I wish I remembered I wrote this.

Speaker 3 (14:40):
This one is just flabbergasting. It's the bright drop.

Speaker 2 (14:45):
Remember the YES sixty five, which is of course Canadian assembled.

Speaker 3 (14:50):
Which goes back to the point of view MCA. So
it's now if we were to take that out of this. Okay,
So now we'll say what vehicle consumer vehicle call General
Motors product.

Speaker 2 (15:02):
Well, I'm going to fail this. I'm not even going
to get a D in this.

Speaker 3 (15:06):
I don't know Colorado Canyon forty nine.

Speaker 2 (15:09):
So the small pickups, all.

Speaker 3 (15:13):
Right, So then so here we'll give you the third
one and you may get this right because you're you
now have a clue. Stillantis bingo, you're right.

Speaker 2 (15:23):
See, oh good, I got a D plus.

Speaker 3 (15:26):
Right, And it's shockingly it's seventy four percent domestic content.

Speaker 2 (15:30):
Seventy four Yeah, and Stillantos as a whole is relatively
low if I remember on domestic content.

Speaker 3 (15:36):
Yeah, it's like the Dodge, Hornet and five hundred E.
They're the only ones that I find have zero percent,
which was the Hornet and the five hundred have zero.
But what's surprising to me was the Nautilus, which is
assembled in China has five percent domestic content.

Speaker 1 (15:53):
I'd love to know what that five percent is Matt's.

Speaker 3 (15:59):
Precip So I mean to get back to your point though,
I mean, so you know these percentages, you know, so
if we go to Colorado Canyon, this means fifty one
percent is non domestic content. So this would be fifty
one percent that tariff is being paid on.

Speaker 4 (16:13):
Yeahs are being paid on. And then you gotta go
through the materials and say, you know, is this already
covered by something else? Is it covered by a bilateral agreement?
Is it a material that now perhaps can sit somewhere else,
get processed and then show up and then get charged
less because it's not the you know, the original farm
in which it was imported that's now being imported in

(16:39):
physical in market terms, so it could be sitting in
a in a economic zone where it gets you know,
pre assembled and sold. So there's all kinds of nuances
that come into play here.

Speaker 1 (16:52):
Well, we just saw more tariffs get dumped on a
bunch of steel and aluminum.

Speaker 4 (16:55):
Right completely to that point.

Speaker 1 (16:57):
So that you know, for example, and it's very specif
it was like mufflers, exhaust systems, clutches that sort of thing.
You pay a fifty tax on any of the steel
or aluminum that's in the component, and then you pay
the tariff on the components.

Speaker 2 (17:14):
So it's a double dip.

Speaker 1 (17:16):
It's a double whammie, right.

Speaker 2 (17:18):
Similar to what's going to happen with copper soon from
what he's been saying.

Speaker 1 (17:22):
Yeah, well, again, they're they're they're looking at very specific
It's it's not a blanket, you know, kind of a
tariff on the f that's cumulative. It's on very specific products.
And it also hits any kind of commercial vehicle just
about with an engine greater than a thousand ccs. So

(17:42):
that's everything, right, and then a lot of agricultural stuff,
especially tractors.

Speaker 2 (17:48):
Which is great for American formers.

Speaker 4 (17:50):
It goes back to the Eardi accommodation we were having.

Speaker 3 (17:53):
Having so Okay, so John and I were talking about
this before the show, and I know that car looks
into plants and factories and what's going on in that space.
So as we look at these terraffs, as we look
at the possibility of reshoring, I mean, what is your

(18:16):
sense of how long it would take for that to
meaningfully be producing in the US, so these teriffs would
be avoided.

Speaker 4 (18:26):
I think just to the point points made just a
few minutes ago about how much content is not either
within the US MCA region or purely domestic US made.
The supply chains still go back and forth outside, So
that's one piece to keep in mind, and the other

(18:49):
pieces so you resure, but you still depending on the
ins and outs of how trade happens and how how
freight logistics happen. And then the second piece is when
you come back, you never come back the way it
something might have left. You come back with increased levels
of automation to come back with the need to be

(19:10):
comparable now with new markets that you have to be
to be competing in either directly at the product level
or if you're a supplier, you have to be ready
to be able to supply to China, supply to Europe
and to the US, And so that brings in a
whole lot of dynamics that then say, some pieces subsystems
can some some subsystems can come back in the course

(19:33):
of a year. If you're talking of total vehicle return,
that really depends on where a plant was going to
be ready for receiving this new program anyway, or you'd
come so close to making a decision and you said
it was going to be either here or in Mexico,
and there's some advantage of being in Mexico. Was probably

(19:54):
a site costs differential working against US and keeping a
plant here in the UN as keeping the program assigned
to a plant in the US. But now that's gone away,
and therefore you bring it back here. So otherwise it's
really hard.

Speaker 1 (20:07):
Let me ask Garry's question, but in a slightly different way.
You know, at some point the tariffs, uh, the on
shoring because of tariffs is going to level out. They're
going to figure out what the appropriate level is. The
market will figure that out. How long do you think
that's going to take.

Speaker 4 (20:26):
That can go through a couple of iterations, you know,
it has to. There's always a lagging impact of almost
everything we speak about in the world of times, because
it takes a while before you have for the stock
to deplete and that you buy the next wave of
of components, and then you go through the design yourself.

Speaker 1 (20:48):
Would it be five years, would it be eight years,
would it be.

Speaker 4 (20:51):
No, I'd say it'll be, you know, four or five years.
That's how that's how long it takes.

Speaker 2 (20:55):
At the way least I wonder about this, we seem
to be taking this position, which I'll be honest, I
think the administration it just doesn't have a clue about
how particularly the auto industry works and why globalization is important.
And it's not just because in Vietnam they have low wages,

(21:18):
because we know that wages are not as much as
many people believe in the total cost of vehicles, for example.
So when we look at globalization, a lot of it
has to do with we have huge number of vehicles.
Compared to where we were forty fifty years ago, we
might have had a handful of models from a particular brand.

(21:41):
Now we have an endless supply of nameplates and trips,
and the volumes are so much lower. And the way
that you allow for that is by finding a place
to produce vehicles that go worldwide, so we get worldwide volume.
Can we really keep the system that we have We

(22:04):
have huge choice in models and nameplates. If what we
have to do is essentially build everything.

Speaker 4 (22:12):
Here, now, that's gonna be it's gonna be very hard,
and especially because the goal itself of getting to electrified
propulsion hasn't changed that goal postmen have moved on a
little further. Uh. And so what that really means is
that it's the the motes that existed before to creating

(22:33):
products and defending yourself against competition have been reduced or
gone away to a large extent. And so it's gonna
be very tempting. And you're seeing this in terms of
entry into the auto space by people who were not
there before. So you have people who are battery manufacturers
are now making cars and doing a great job, people

(22:53):
who are tech manufacturers experimenting and making cars, and so
you've got to see a lot of a lot of options,
and so you might find this world where you have
a lot of brands make some of which you haven't
heard of it all, and a lot of different options.
At the end of the day, this has to consolidate
because you do need volumes, but the volumes could come
at the subsystem and components level and assembly final assembly

(23:16):
being relatively simplified, as especially as you are seeing a
lot of these these announcements these days about simplifying the
assembly process and making them more efficient. You might almost
do contact manufacturing on those you might have different pathways.

Speaker 2 (23:28):
Now but I still don't know how you can bring
things back. You have a lot, so it wasn't that
long ago where if you didn't sell one hundred thousand
vehicles of a particular modelstand you couldn't make money. And
now we have a lot of five, eight, ten, fifteen
thousand unit models, and that is primarily because we find

(23:51):
a place, whether it's in the US or somewhere else where.
We're making up the additional volume through exports or through sharing,
top hats and so on. Right, And it would seem
to me that if we're going to bring a lot
of manufacturing back in, you're going to have to have
fewer models and perhaps fewer manufacturers too.

Speaker 5 (24:11):
I don't say how you can do it other worse right,
I'd say you certainly need enough capacity, enough utilization of
the factor of the capital investments you make to your mind.

Speaker 4 (24:23):
So there's gonna be consolidation in many different ways.

Speaker 2 (24:27):
And less choice for consumers.

Speaker 4 (24:29):
Consumers might get choices in a different way, and maybe
that's where the consumer mindset itself is shifting. So they
may not necessarily want the physical the physicality associated with choices,
but they might want the feature choices, and that might
come because you can use old hardware in a way
in which I mean old old hardware, but I mean

(24:50):
you can use hardware that's ready for reprogrammability and ways
by which it can be mixed before they couldn't do
earlier on. So that level of you know, I think
flexibility and newness people might come to come to expect
as opposed to seeing a new model year every year. Right.
I think that's been discussed quite a bit.

Speaker 3 (25:12):
Less your car to to study almost a year ago today,
almost twenty fourth came out affordability the twenty five thousand
dollars electric vehicle, and you guys use twenty five thousand
dollars as saying okay, this is a low price. It
was just ye, you know, not how you do it.
But you know you were talking earlier about suppliers, and
this whole discussion brings to mind this. This is a

(25:34):
quote from that study, and I want you to comment
on that for suppliers, and particularly smaller and lower tier suppliers,
large and long term orders are key for amberateurization of investments.
Without this assurance, suppliers view heightened risk and the ev
transition as automakers adapt investment plans to match market conditions. Okay,
that was just talking about trying to capacitize for evs. Now,

(25:59):
the tariffs aren't top of that because this was written
that's before tariffs were anything. So what do these suppliers do?
How do these suppliers react to a increased costs and
b the investments that are necessary to bring us to
more evs.

Speaker 4 (26:17):
Yeah, I think one thing they might do in the
very short term is to go back to their customers
to look for extensions or look for business in terms
of components or subsystems that they were supplying. They were
needed for ice, or needed for plug ins, or needed
now for extended range vehicles. While they still have to

(26:39):
pay their monthly dues on the new tools sitting there
that was designed to package sales into modules and package
modules into batteries. And so they had to figure out
a way by which they can get some revenue and
either defer payments or reduced payments on these other tools
that they have. That's the reality that they're facing. So

(27:00):
I went ahead and bought these tools that were contingent
on these orders that were coming in or near you know,
certainty of orders coming in to build electric vehicles. But
since that went away, that big order likely either got
muted or put on hold for a while, or went

(27:21):
away all together. They have to now look for alternative
ways which they can get revenue, and so these are
always but wish they have to sort of go back
and take an I get back into that, you know,
fuel exhaust pipe business, because you know I did that.
I did this for you for five years or ten
years and did well, and so can we go back
to that.

Speaker 1 (27:42):
Gosh, we're at the bottom half of the show. Not
right now, We're going to have to wrap this segment up.
But I really want to thank you for coming on
the show.

Speaker 4 (27:49):
Thank you very much, Thank you appreciate We should we
should give a plug.

Speaker 1 (27:53):
Yeah, yeah, so yes, the Management Briefing Center for anybody
who's in Detroit. The conference is going to be at
the Michigan Central Train Station in downtown Detroit.

Speaker 4 (28:07):
And number fifteenth. Evening there's a reception and sixteenth and
seventeenth we have action packed discussions. It's really exciting in
so many different ways. As we just discussed, there are
so many topics that are likely to be revisited, and
some might sound familiar but might have a completely new
dynamic associated with them others we all need, and so

(28:29):
we are really excited about that event and hosting it
for the first time. Now on sixth this is going
to be our sixtieth anniversary off NBS. That's going to
happen for the first time, not in Traversity, but it's
going to happen here in Michigan Central, right in Detroit.
So welcome.

Speaker 1 (28:43):
And a lot of people in the industry know about
the management briefing seminars. I'm glad you brought that up here,
you know.

Speaker 3 (28:48):
And even if they're not in Detroit, I'm looking at
this lineup and they might want to consider flying into Detroit.

Speaker 2 (28:56):
Who do you see as the star of the show
or the stars.

Speaker 3 (29:01):
Well, there's this guy who's sitting next to me.

Speaker 2 (29:04):
He's always the store.

Speaker 1 (29:05):
J Pratt from Toyota is going to be there.

Speaker 3 (29:09):
I'm gonna I'm gonna completely just show anywayute people can
go online.

Speaker 1 (29:14):
And find a full lineup.

Speaker 3 (29:16):
Then it's going to be a great, great conference here.

Speaker 4 (29:19):
Thank you, gentlemen.

Speaker 1 (29:20):
Thanks, We're going to take a quick break right now.
We're going to be coming back and talking about the
latest news of the week in the automotive industry.

Speaker 6 (29:31):
We help businesses respond decisively to their most critical challenges,
from urgent performance improvement to enterprise wide transformation. We work
across the full value chain in automotive and in industrials,
helping clients navigate disruption, drive innovation, and unlock sustainable growth.

(29:52):
Alex Partners when it really matters.

Speaker 1 (29:57):
All right, we're back talking about what's going on on
in this auto industry. And one thing Gary that I
see in Paul too is man the situation is darkening
for evy startups. You've got the seventy five hundred dollars
credit that's going to go away, even perhaps more importantly,

(30:18):
all the zev credit money, which was in Tesla's case
billions of dollars going away in Rivian and Rivian and
Lucid and you know, Lucid put out a statement same
Wait a minute, this was a significant court amount of
income for us. The future done look so bright, at
least short term.

Speaker 3 (30:38):
So I mean this this gets back to what you
know Prisade was talking about in terms of, Okay, how
do you make your investments when you know you have
this uncertainty. Now there are the certainties that you just identified,
but there's the other uncertainty of the market. And Paul
and I know that you pay very close attention to,
you know, the consumer aspect of this. I mean, and

(31:00):
you know you look at numbers of projections that people
are doing now, I mean, it'll be eight percent maybe
this year.

Speaker 2 (31:05):
For you just saw Auto Pacific, I'd cam over at
Auto Pacific put out a release this week on a
study and the numbers were shocking. I actually wrote a
story on Headlight News combining that was something that Bloomberg
came up with. First Auto Pacific. They are basically halfing

(31:28):
having the market share projections through twenty twenty nine that
they had made less than a year ago, which was
what were they this week was supposed to go to
I think eleven percent, and it's they're now saying it'll
be flat at eight percent compared to last year. It
should be and I can't remember the exact number, but

(31:50):
basically twenty twenty nine is only going up to like
twelve percent.

Speaker 3 (31:56):
Five that was the big one. It was It was
that was the fifty percent drop.

Speaker 2 (32:00):
It was more it's slightly more than fifty percent.

Speaker 3 (32:02):
It's like fifty.

Speaker 2 (32:03):
Less than the numbers they had and they were actually
on the conservative side to begin with. Now, add to
the fact that we are seeing sales level and they
use the word flatten, but really are going to slightly
dip after September thirtieth, and what you have as automakers,

(32:24):
including Lucid, that are trying to make up for the
loss of the seventy five hundred dollars federal tax credit
on top of needing to motivate beyond that. You know,
we've seen some big, big deals. There are some evs
right now that are being sold or should say least

(32:48):
for as little as one hundred dollars a month. The
prologue from Honda, which was actually not doing badly. You
can get in some parts of the country a prologue,
which is what a forty eight thousand dollars EV list
price MSRP for two hundred dollars a month. I mean,

(33:10):
that's insane. That's a forty eight month lease plus a
little bit of downpayment. But that's two hundred dollars a month.
Doesn't even cover the basic materials, never mind all the
production process.

Speaker 3 (33:25):
So okay, so the question becomes do the entrance like Rivian,
like Lucid, do they survive, Can they survive hard and.

Speaker 1 (33:38):
See how I mean, what Lucid is saying is it's
going to pay the seventy five hundred dollars out of
its own pocket. This is a company that lost one
and a half billion dollars just in the first six
months of the year.

Speaker 2 (33:48):
They have one thing going for it, Saudi money, and
the Saudis seem intent on positioning themselves for what will
they still believe will be an eventual move away from oil.

Speaker 1 (34:07):
And that's how long can you afford to lose that
kind of mone?

Speaker 2 (34:11):
How long can the Saudi's afford to lose that much money?
How many more years before the sun explodes? Okay?

Speaker 3 (34:17):
But but Paul is I mean, you know, this is
the thing that has always astonished me. We're talking about,
you know, companies or organizations losing billions and billions and
billions of dollars. Okay, So the question if I were them,
and I was saying, wow, that investment isn't paying off
very well, maybe I had to put my money in
something else.

Speaker 2 (34:37):
Exactly right.

Speaker 1 (34:38):
They don't want to lose money. No one else is
an investment.

Speaker 2 (34:41):
For that, right, I get it. And it's really funny
because we've seen a couple of the losers in the
ev startup segment Faraday Future, who in the last few
months have been like, we're coming back, We're going to
make it. Faraday was at the the Pebble Beach Concord

(35:01):
just a little over a week ago showing off some stuff.
So there will be a few that, there's no question
are going to go away. I think there may be
a couple of startups that somehow or another going to
squeak through. They're going to maybe pushed through. Some folks
are going to put money in them to keep them alive,
hoping that as we move through the final years of

(35:25):
the Trump administration that we may see some positive momentum.

Speaker 3 (35:30):
But okay, what happens even to the Detroit three in
terms of their investments in evs? Do they begin to pull.

Speaker 1 (35:39):
That back already?

Speaker 3 (35:40):
I mean, but will this will be like more serious
than they are now? Because you know, you're saying the
autopacific number shows that the market is not going to
be a way.

Speaker 2 (35:51):
I'm not one hundred percent convinced that the autopacific numbers,
the revised numbers are going to be true. There evs
are such an unknown even now, Ford could be changing
the game dramatically with the Universal EV Project that they have.
What happens if we start to have a bunch of

(36:14):
thirty thousand dollars evs and we just saw some pricing
on leaf that brings it down well below thirty thousand
dollars and we start to get range. And there was
another study that just came that was well below I
think it was it was a few thousand below.

Speaker 1 (36:30):
But do you have that Seohn What was the leaf?
I thought it was twenty nine, and then you throw
in destination Church.

Speaker 2 (36:39):
I thought I just saw a lower number for the base.
But anyway, we're also addressing some of the other issues.
It was another study that just came out that said,
despite the Trump administration initially backing off on spending the
money for a national EV network that Biden had put
out the five billion dollars, that the pace of growth

(37:00):
both of the EV network is faster than people expected,
and there was a significant improvement in charging that the
problem with what do they call it, nonstart charging events
which you plug in and it doesn't work. That number
has started to drastically fall. So there's so many things

(37:21):
that could actually help the EV market even without the
seventy five hundred, and you have seen some people it
said eventually, even Musket said this, Eventually, we need to
get out of the seventy five hundred dollars subsidy. Plus
a lot of vehicles weren't being subsidized except in lease.

(37:42):
So I'm not as completely convinced that evs are a
in a near death spiral as some folks are.

Speaker 3 (37:51):
So, John, what did you mention oil is going for?

Speaker 1 (37:54):
Well, the Energy Information Agency, which is a US agency
that tracks oil production prices and all that, the numbers
are astonishing. I think a year ago this timeframe, oil
was trading at eighty one dollars a barrel. I think
right now it's at at sixty seven dollars a barrel,
and the EIA says it's going to drop down to

(38:15):
fifty and maybe below fifty next year.

Speaker 3 (38:18):
So what's the argument for not building more internal combustion engines.

Speaker 1 (38:23):
Look, gasoline prices, also by the EIA, will be consistently
below three dollars a gallon nationwide next year, So I
mean it's all the more impetus for a lot of
consumers to go out and buy a nice vehicle.

Speaker 2 (38:39):
Well, now that also is the question ice or hybrid,
because even with what's happening, there is a definite push.
There's no question as far as I'm concerned that hybrid
electric vehicles continue to take off. Consumers are liking that
automakers have found a really smart way to get hybrids

(39:00):
to work.

Speaker 1 (39:01):
I get some of them have, well, but more and more,
maybe three that are good at it, right, but.

Speaker 2 (39:06):
Are starting more and more starting to say, hey, we'll
give you great mileage and better performance and we're not
going to charge you all that much more.

Speaker 3 (39:15):
Right, But let's let's let's not lose sight of the
fact that when we talk about hybrids, it still has
an internal combustion engine. That's right, So you're still building engines, catholine.
I mean, so you know, you know, again going back
to Prasad talking about Okay, you know you need scale,
you need volume. Where's the volume in the scale going
to be. It's going to be making engines and transmissions.

Speaker 1 (39:37):
In the short term, for sure, And I'm.

Speaker 3 (39:40):
Wondering how short this short term is. I mean, it
may be longer than we think.

Speaker 1 (39:44):
Look, this is lighting a fire under automakers to really
figure out how are they going to take out cost
and come out with more compelling evs. You know Softward's
announcement last week. Uh, you know, the rest of the
legacies have got to be working on the same thing.

Speaker 2 (39:57):
Yeah, one of the things, one of the I'm sorry, John,
but one of the things that I'm intrigued by, and
it's certainly something that's happened within our group, if you will,
of journalists. It wasn't very long ago that people were
starting to suddenly beat up on Akio Toyota, the man
who very often was seen as the visionary in the industry,

(40:17):
but also was very much against a pure, unadulterated switch
to EV's. He was a very big proponent of multi energy.
And now we're seeing, first of all, some manufacturers go
back to that approach, and all of a sudden, the
companies that were using that stillantis with this still a

(40:38):
large platform that can handle any of six different types
of power trains, from pure ICE to pure EV. They're
all of a sudden looking like they're brilliant.

Speaker 1 (40:49):
Yeah. Well, you know, Akio is still excoriated by the
environmental community. They still accuse him of dragging his feet
on electric cars. But you know, Toyota got it right,
you know, for right now, hybrids really work. People love
the idea of getting up to forty miles to the gallon,
and it's why the sales of them are going gangbusters.

(41:12):
But you know, the only strong players in the US
market really are Toyota, Honda, and Ford. The rest of
them are scrambling.

Speaker 2 (41:19):
To get Hyundai, Hondai, Kia as well. If you look
at the numbers, I.

Speaker 1 (41:24):
Just their numbers are rising.

Speaker 2 (41:26):
I care here directly from driving the new Kia Sportage HIV,
which is I can't go very far in it. It's
impressive when you see the reviews. The numbers are good,
the performance is good, and if anything, they have gone
from fifteen percent HIV just a couple of years ago
to twenty five percent and they're aiming much higher as

(41:50):
they get through some production bottlenecks. So you're going to
see the Koreans become significant players. I believe Kia right
now is second only to Toyota in the number of
HIV models that they have on the.

Speaker 3 (42:03):
Market, offerings their offerings to the market. Yes, yes, so
so okay, Given all this goodness of the HV, then
what's the argument for the EV.

Speaker 2 (42:16):
Right now? It's a harder one to make, but not impossible.

Speaker 3 (42:19):
I mean, I was driving a Honda Civic Hybrid sedan
and not even trying, got fifty nine miles per gallon.

Speaker 2 (42:28):
Ask people who own them, and I have one, and
I'd still go. I'd still go to an EV.

Speaker 1 (42:35):
I love a better driving experience, better.

Speaker 2 (42:37):
Driving experience, the torque is wonderful, the control is wonderful.
I am like one pedal driving.

Speaker 1 (42:46):
It.

Speaker 2 (42:47):
I don't see myself going back unless I get a
narrow niche of products. I'd love to own a Corvette,
but now now I have hybrid version of that. Right,
maybe under certain circumstances, I'm might want a gas, more
likely hybrid model if I was doing a lot of
extended driving or heavy heavy towing. But I don't see

(43:09):
myself going back to a gas.

Speaker 1 (43:11):
Well.

Speaker 3 (43:11):
I say this in the nicest, most respectful way. You're
an outlier.

Speaker 2 (43:15):
I know more and more people that love evs when
they get in a look.

Speaker 1 (43:18):
You know the statue. Once people have an electric, they
pretty much stay with it. I want to say the
retention rate is somewhere around seventy five percent, so a
quarter of them do go away, but the vast majority
stick with electric.

Speaker 2 (43:32):
And often they go to an electrified vehicle as opposed
to an all electric vehicle, and that may be because
their outliers in terms of where they live or where
their energy costs are, or because of their use case.

Speaker 1 (43:45):
Yeah, I personally don't like the way that hybrids drive.
You know, if you mentioned the Corvette hybrid, that's for performance,
that's not even really for a fuel efficiency. I just
don't like the way they drive.

Speaker 3 (43:57):
Okay, if you're the Middle American taking the kids to
the pool.

Speaker 1 (44:03):
Then it's brilliant, gonna care.

Speaker 3 (44:05):
Yeah, that's right, And this explains why there is still
the greater number of people who are buying just plain
old cars.

Speaker 1 (44:13):
And no Middle America will be perfectly satisfied with a
hybrid driving experience until they experience driving an electric car,
and they're not going to be able to put their
finger on it exactly. Why they're just going to go, Man,
this just drives.

Speaker 2 (44:27):
Better, exactly. That's one of the reasons why I think
evs may hold on better when you start having some
of the negatives beyond price become minimized. More charging stations,
fewer charging failures. For a great example, and you and
I are whoever owns one starts saying I don't have
any problems. I just grove to driver's City. I didn't

(44:49):
have an issue. Or even better, I get the Universal
EV and what are you talking about? My vehicle costs
less than the gas model.

Speaker 1 (44:57):
The thing to keep an eye on right now, I
think is sales have used evs. You know how many
secondary buyers are there really out there in the market
that are going to buy them? Right now? Used EV
sales on a percentage basis are growing faster than new ones.
But I think that's also people rushing into the market
to get the four thousand dollars rebates that they count
on that. But that's the thing. Once the rebate goes

(45:20):
away and we let them market settle down for a
few months, I'm going to be curious how well used oneself.

Speaker 3 (45:26):
Okay, so that's a perfect segue to sort of bring
us away from talking about EV's good. But is the
announcement by Hurts that its cars. It's used cars will
now be available on Amazon Autos right now. It's going
to initially be in Dallas, Houston, LA, and Seattle, and
they have plans to expand Hurts car Salesnday's putting its

(45:49):
used inventory, hondays putting its new new inventory.

Speaker 2 (45:52):
Oh new inventory, yea, they announced that what la last
year us.

Speaker 1 (45:56):
Yeah, I mean it's just it is used as well,
because I went to the website a look and they
were all used Hyundais on there.

Speaker 3 (46:02):
Okay, So, so what happens to dealerships if Amazon begins
selling these Amazon.

Speaker 1 (46:11):
Is selling inventory that dealers are posting. So you know,
with franchise laws being what they are, uh, Amazon can
present the inventory and it's probably going to take a
cut of whatever sale happens. But you're actually going through
a dealer to get the car.

Speaker 3 (46:28):
Okay. So in the in the case of Hurts, you
go to Amazon Autos, right, they complete their purchase online
and then they pick up their vehicle at a Hurtz.

Speaker 1 (46:38):
Franchise laws vehicle right No, no, no, there's there's dealers,
they have.

Speaker 2 (46:46):
Their own out solum.

Speaker 1 (46:47):
Remember this is how rental companies make their money. They
don't make their money renting cars. They make their money
selling cars, and the rental fees pay for all the
depreciation and the maintenance. But when used cars, franchise laws
don't apply to use cars essentially.

Speaker 3 (47:06):
But I mean so I've got to believe that this
is going to have a deleitorious effect on all of
those car dealers that are one hundred yards where we're
sitting right now, because they have used lots and suddenly
maybe they're not going to be selling quite as many
vehicles as they previously had because of the frictionless buying
experience that Amazon offers.

Speaker 1 (47:28):
Well, if I were a dealer, I'd run to Amazon
and put my inventory on there, and so you know,
instead of just having people drive by my dealership and
maybe driving in or maybe they get online to go
just to my dealer to search. No, they get down
to Amazon, but my inventory is there.

Speaker 2 (47:45):
So does it lower cost? I mean, we always hear
an argument against using the franchise dealer system is the
cost it adds. Now you're adding another layer. You have
the used car dealer that doesn't go away, and they're
going through Amazon on it's going to take a cut.
So is Amazon going to make it efficient enough that

(48:08):
the whole process of selling used vehicles can absorb whatever
Amazon's going to charge.

Speaker 1 (48:13):
Look, you got to sell your inventory, right, how do
you do that? You do it with advertising? This is
just another form of advertising putting your inventory on a
website that gets mega traffic way more than your dealership
traffic site is going to have. And so the real
cost of dealerships is not that they cost a whole
lot more to sell a car. It's that they've got

(48:35):
acres of cars parked on their lots waiting for somebody
to show up, cars that they had the dealer has
had to buy from the factory, their floor planning it.
That's where all the cost comes from. So the direct
sales model was the you know, the ideal was before
the car even comes off the assembly line, you know
exactly the customer it's going to. But you know, as

(48:58):
Tesla has scaled up, it's got all kinds of inventory.
They're dropping the prices on their inventory right now. They've
got right now you can lease CPO. Tesla's funded by
I mean, they're trying to get rid of inventory. So
even there, uh, their direct sales model is not as

(49:18):
direct as.

Speaker 4 (49:19):
It used to be.

Speaker 3 (49:21):
What's your sense of all this roiling that's going on
with Tesla is how's how's it going to come out
at the end.

Speaker 2 (49:28):
If you asked me this two months ago, when Alan
was in the news every day, and was really getting
hated by both sides. He had ticked off all the
traditionally liberal, green minded buyers that supported Tesla, and then
he got into a tiff with Trump and was ticking

(49:51):
off the other side. I would have thought that Tesla
would be in much worse shape than it is. The
reality is that they're sale bills in California, the most
liberal market, the most traditionally liberal green minded market, are
down less than twenty percent. And then if you look
in Europe where he got, Musk himself got people really

(50:14):
ticked off because he stuck his nose into some politics
and in some ways was it made it even uglier,
supporting an essentially neo Nazi party in Germany and then
taking on unions and workers in Scandinavia where worker rights
are just sacrosanct. You actually saw what Norway rose, Britain

(50:37):
rose in sales, So it's not Britain.

Speaker 1 (50:41):
Norway did Britain.

Speaker 2 (50:43):
Britain did one month as well. I thought, maybe I'm wrong.

Speaker 1 (50:47):
John, No, it's Norway and they're up substantially.

Speaker 2 (50:49):
Yeah, there was a period where Britain was actually looking
better than the.

Speaker 1 (50:52):
Rest of Not right now, we'll catch up, We'll catch.

Speaker 2 (50:56):
Up on that later, but the bottom line is I
think that Tesla hasn't taken the big hit that I
thought they would, except of course, with the symbol the
vehicle that represents everything that people dislike about Musk, the
cyber truck. And that's unless they find another way. It's

(51:17):
it's doa. I mean, it's nobody wants it, and the
people who want it are the ones who are in
your face and say, haha, I bought one. Anyway, that's
not a great recipe for a business.

Speaker 1 (51:31):
Well, remember, I'm just thinking back to when we had
Warren Brown on the show a year ago, or maybe
even two years ago, maybe three years and.

Speaker 3 (51:40):
He said, look, he's been here since then.

Speaker 1 (51:42):
He's been on there real life, right, But he used
to do forecasting for General Motors production and sales forecasting,
and he said, two or three years ago, look, none
of them are going to sell more than forty thousand
of these electric pickups a year, not the full size ones.
He's the market's just not there for it. So, yeah,
the cyber trucks a total flop. It's an engineering and

(52:05):
technological masterpiece.

Speaker 2 (52:07):
I'll disagree on some angles, but okay.

Speaker 1 (52:10):
But it's yeah, but you know, going back to the
whole dealer thing. Another couple of things that broke this
week is Jaguar dealers bailing from the brand. They're looking
at the brand going all electric. They're looking at Jaguar

(52:30):
doubling the price of the cars they want to sell.
It's got disaster written all over there.

Speaker 2 (52:36):
You see anything that tells you that Jaguar is on
a course for survival. Now you asked before about startups.
In a way, Jaguar is a startup with a with
a once legendary name.

Speaker 1 (52:48):
Yeah right, and no, I look, as I said when
they first showed their wild new designs. You know, bully
for them for being so bold and making the mold
and going out there. But by the same time, they've
left all their legacy behind. All the legacy that Jaguar
owners have loved and cherished, that's gone. And now dealers

(53:10):
are looking at it and going, you know what, I'll
keep my land Rover dealership, but I'm dropping my Jaguar franchise.
And then the other thing that we saw too is
vin Fast. So Gary, what do you say. Vin Fast
is dropping the direct sales model and going with dealers.

Speaker 3 (53:27):
Well, again, this is a situation where that company has
a lot on its plate trying to bring a new name,
a new product, to for them a new market, and
to try to sell you know, direct. I think that's
just too much for them to deal with, and so
they they've cut some deals. I think the first one

(53:48):
is the dealership in Yeah, in San Diego.

Speaker 2 (53:51):
They've had they had showrooms that they were going to open,
many of which were just sitting there and never never
did anything. Vin Fast. The best thing that can happen
for them is that nobody remembers how bad the first
product was. I was stunned. I went over to Vietnam twice,
once when they first launched the company and we're making

(54:13):
versions of the bmw X five, and then when they
were just getting ready to launch the vin Fast vfaight nine,
and a lot of us, many of whom you've had
on the show, were just stunned with how faulty it
was and saying, guys, this may be good, you've got
the bones, but you need a couple of years. And

(54:33):
they just stuck with the name vin Fast and rushed
it to market. And I have not been in any
of any updated versions so far, so I don't know
if they've improved the products.

Speaker 3 (54:45):
Okay, so this gets back to the earlier point you
were making about the entrants that are into the EV market.
Now we would say, compared to vin Fast, that Rivian
and Lucid are established companies. Okay, does that company even
have a possibility.

Speaker 2 (55:06):
It's selling well in parts of.

Speaker 1 (55:09):
I don't see it striving in the US market. No,
I don't. Their business plan more than likely was predicated
on getting a bunch of ZEV credits that they could
sell as well. You know that's been Tesla blazed the
way for all the other startups. Get a bunch of money,
get all these car companies to pay for your ZEV credits. Well,
in the United States, at least, that money's going to evaporate.

(55:32):
In fact, it already has. You know, the government has
stopped even filling out the paperwork or asking for the
paperwork for all that that's been.

Speaker 2 (55:40):
Challenged in court. If I recall, and I'm not sure,
I don't know enough about the legal precedent whether or
not the Trump administration may be forced to start going
at it again.

Speaker 1 (55:53):
I think it's done. I don't see it coming back either.
I mean, you know, look, I'm all for cleaning up
the ear and improving the environment. But in my opinion,
too much has been placed on the automotive industry. Remember,
light vehicles in the United States account for fourteen percent
of all greenhouse gases, all fourteen percent. And I don't

(56:15):
see any other industry at all being regulated or fined
anywhere close to what the auto industry is. And so
even you know, I'm all in favor of evs, everybody
watches the show. No, I'm an EV proponent, but you
know they cut in a life cycle basis, the emissions
of a compared to a gasoline car in half. So

(56:36):
even if you've got everybody to drive an EV, you'd
take fourteen percent of greenhouse gases from the total down
to seven percent. I mean, it doesn't solve the problem.
And so I think that the industry has been unfairly
targeted for all these improvements. And even with a Democrat

(57:00):
administration coming in in the future, I just don't see
those levels of fines coming back.

Speaker 3 (57:05):
All right, So I've got one because this is the
year of autonomy, Yes, this is this is twenty twenty five, brother,
this is so I read that that neuro which is
a company that makes automated driving technology and has deals
with companies like Kroger to deliver autonomous groceries and so on.

(57:27):
It is now valued at six billion dollars following the
closing of a series the funding round. So I was
thinking to myself, you know, six billion, What does six
billion dollars mean?

Speaker 1 (57:39):
Probably more than Nissan's worth.

Speaker 3 (57:41):
Well that was exactly. So as of now, Nissan is
valued at eight point twenty five billion to eight point
three nine billion dollars in the market.

Speaker 1 (57:53):
Give it a week or two and would be lower.

Speaker 3 (57:56):
How is this possible?

Speaker 1 (57:59):
That what it's on so low and neuroso high or
vice versa. Because look the market, Wall Street rewards companies
that have projected future growth.

Speaker 2 (58:10):
What would what would Tesla? I didn't look today. Yesterday
it was about three point thirty per share. Yeah, so
it's over a trillion, right if you took the autonomous
forecasts at Musket has come up with whether you know,
full self driving or fake self driving, if you prefer
and robotaxi and everything. If you took that out, if

(58:32):
tomorrow for some reason that just he said, Nope, we
can't do it. How far would their price go?

Speaker 1 (58:39):
Well, you know they're trading at what is it, one
hundred and seventy times earnings or something crazy like that,
it would drop down to legacy levels. You know what's
GM trading at now? I don't know off the top
of my head. I want to say eight times earnings,
six to eight times earnings, So Tesla would drop down
to that. But it hasn't dropped down to because everybody's

(59:00):
looking at the robotaxis, they're looking at the optimist robot,
they're looking at the AI stuff that Tesla's doing, and
they're going, this company is going to continue to grow. Now,
if none of that growth materializes, then it will go
down to legacy levels of trade.

Speaker 2 (59:16):
They really have what maybe two to three years to
prove that all these alternatives.

Speaker 1 (59:20):
That's what I would give them, right, But look, you know,
the AI thing is huge. In fact, that was another
big story that just broke uh today. I think the
Wall Street Journal had it of General Motors going out
and poaching AI experts from all the tech companies in
Silicon Valley, Meda, Amazon, and.

Speaker 3 (59:42):
See you got to wonder though, John, that okay, Meta
Meta is paying like metamega dollars for AI.

Speaker 1 (59:50):
So what's GM pads what's GM. They got to be
paying that, because why would you otherwise leave this great
pay job to go work for GM.

Speaker 2 (59:57):
So is this is this how they're getting back in
to almost getting back into the cruise automation system.

Speaker 1 (01:00:05):
Well, yes, the shorthand answer is yes. But they're looking
at AI for a whole bunch of stuff. They're looking
at engineering, they're looking at finance, they're looking at HR,
they're looking at autonomy and.

Speaker 3 (01:00:17):
Other layouts right right.

Speaker 1 (01:00:20):
And so it's very interesting that top AI talent in
the valley is going, yeah, I want to go work
for a legacy automaker named General Motors. And it's the
same with Ford Skunkworks in California. And I'd love to
know Gary what the hell they're paying those people, because
the only way you're going to get them. I mean,

(01:00:40):
if you're a top level programmer, you get a million
bucks a year, that's what you get. Whereas you know
your engineers back here in Detroit are maybe getting a
couple one hundred thousand dollars depending on where they are
with their bonus.

Speaker 3 (01:00:53):
And so how do those guys feel?

Speaker 1 (01:00:55):
They probably thinking I wish I had learned coding.

Speaker 2 (01:00:58):
Probably some of them are going back for it.

Speaker 1 (01:01:01):
Yeah, they probably are. But here's the other danger. Now,
remember when we had the head of mcity on the show. Here,
what was at the beginning of the year. Late last year.
Mcity is the mobility slash autonomy test track at the
University of Michigan. He told us that his engineers have

(01:01:21):
not been writing software code for autonomous vehicles for two
years because AI is writing it all for them.

Speaker 3 (01:01:30):
Still hired the AI engineers, and you're good to go.

Speaker 1 (01:01:33):
That's right, that's right. Well, anyway, I'm out of topics.
You two, it's a good time to wrap.

Speaker 3 (01:01:43):
All right, We'll let it go.

Speaker 2 (01:01:45):
Okay, Really, I will ask you one more thing. You
just brought up something very important, and I know you
touched on it a little bit with Ford in the Universal.
One of the things I thought was really downplayed until
a couple of us started hammering the question, how much
is employment really going to go down? You talk about AI,

(01:02:05):
it's gonna go down everywhere everywhere in the business GM
I mean, Ford wanted to say, oh, we're protecting or
creating four thousand jobs. Well, yeah, but you're taking six
hundred about what a little over twenty percent almost.

Speaker 1 (01:02:23):
Are going away.

Speaker 4 (01:02:24):
That's right.

Speaker 1 (01:02:26):
Look, I mean that shows you how much more efficient
this new assembly process is, is that you can bring
more work into the plant and they're bringing more work
and they're in sourcing and still get rid of twenty
five percent of your workforce.

Speaker 2 (01:02:41):
The other question that that whole thing brought up to me,
and I've had several people this week ask me. You've
got a company Ford that can't get new products out
the door without major quality problems, and yet they're saying
this new process will be even better quality. And they're saying.

Speaker 3 (01:03:02):
This isn't hard goo, is it? I mean they just
had a new recall for three hundred and twelve thousand vehicles.

Speaker 1 (01:03:07):
Right for breaks short answer, Paul, because we will wrap
this up. I believe Ford's quality problems are systemic to
their legacy system. This new product is being developed outside
of that completely one, and so I think it has
a much better chance. I'm not going to guarantee that

(01:03:28):
the quality is going to be better. I'm sure they're
going to have teething programs. This is a radical change,
But I believe Ford's problems are not from suppliers sending
them shoddy parts. It's systemic it's I believe.

Speaker 2 (01:03:45):
Due to the.

Speaker 1 (01:03:46):
Silos within the Legacy organization, which does not exist at
the at the skunk Works. But we'll see, we'll see
how it turns out. Good, okay, all right, Paul, thanks
for coming on. Gerry, always good to see you, and
thanks to all of you for having tuned in.