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How China Won the Car Industry · What's Your Problem?

0:15
Speaker 1: Pushkin. Over the past few years, there's been this just
0:21
Speaker 1: incredible transformation in the Chinese car industry, and this transformation
0:27
Speaker 1: has been basically invisible to those of us in the
0:30
Speaker 1: United States because the US has essentially banned Chinese cars.
0:35
Speaker 1: What's happened is this, Chinese car makers spent decades as
0:38
Speaker 1: sort of marginal players in the global car industry, but
0:41
Speaker 1: now kind of all of a sudden, Chinese car makers
0:44
Speaker 1: are the biggest car exporters in the world by far,
0:49
Speaker 1: and they're not just selling cheap cars. They're selling some
0:51
Speaker 1: of the best cars on the planet to buyers in
0:54
Speaker 1: countries around the world. I'm Jacob Goldstein, and this is
1:08
Speaker 1: what's your problem. My guest today is Michael Dunn. He's
1:11
Speaker 1: the CEO of Done Insights, a company that consults on
1:14
Speaker 1: the future of cars. Michael grew up in Detroit. He
1:17
Speaker 1: studied Chinese at the University of Michigan, and he's been
1:20
Speaker 1: consulting to the Chinese car industry since nineteen ninety. If
1:24
Speaker 1: I were doing our usual problem framing for this episode,
1:28
Speaker 1: I'd say something like, Michael's problem is this, how can
1:31
Speaker 1: the United States catch up with the Chinese auto industry?
1:35
Speaker 1: And we do talk about that later in the show,
1:38
Speaker 1: and we talk about why, in Michael's view, having a
1:40
Speaker 1: robust auto industry is just essential for the United States.
1:44
Speaker 1: But to be honest, largely I wanted to talk to
1:46
Speaker 1: Michael because I'm really curious about how this happened, about
1:50
Speaker 1: how China suddenly emerged with this world beating auto industry.
1:54
Speaker 1: And Michael was a great person to tell the story
1:57
Speaker 1: because he was there to see it. But honestly, to
2:00
Speaker 1: a large extent, I was just curious about how all
2:03
Speaker 1: this happened, about how China suddenly emerged with this world
2:07
Speaker 1: beating auto industry. Michael was a great person to tell
2:10
Speaker 1: the story because he was there to see this transformation.
2:14
Speaker 1: To start, I wanted to get a sense of where
2:16
Speaker 1: things stand today, where we are now, So I asked
2:19
Speaker 1: Michael to tell me about a few of the leading
2:21
Speaker 1: Chinese car makers.
2:23
Speaker 2: First one to know is a company called shall me,
2:26
Speaker 2: shall Me? And Chinese, of course means millet, as in
2:33
Speaker 2: rice millet.
2:35
Speaker 3: Not a name. Is that how you're showing up in
2:36
Speaker 3: your millet?
2:37
Speaker 1: What?
2:39
Speaker 2: So there's a history there. Malzatong famously said, rifles and
2:43
Speaker 2: rice millets, that's the people's liberation Army and so as
2:46
Speaker 2: a tribute this founder, late June who's the CEO and
2:50
Speaker 2: founder of Shaw me one of the biggest handset makers
2:53
Speaker 2: in the world.
2:54
Speaker 1: Phonemakers.
2:54
Speaker 2: Yeah, phone makers five years ago said we're going in
2:58
Speaker 2: the cars. And today they manufactured two models, the XU seven,
3:03
Speaker 2: the Yu seven that look like a hybrid of a Porsche,
3:08
Speaker 2: and a Model three, beautifully designed. He recruited the best
3:13
Speaker 2: designers out of Germany. It's got a battery powered vehicle,
3:17
Speaker 2: really good looking, and it starts at like thirty two
3:20
Speaker 2: thousand dollars. It's a total unbelievable shocker. Jim Farley at
3:24
Speaker 2: Ford drives one.
3:26
Speaker 1: Wait, Jim Farley, the CEO of Ford, drives a Chinese car,
3:29
Speaker 1: a Chinese car that, by the way, you basically can't
3:31
Speaker 1: get in America.
3:32
Speaker 2: Right, that's just sacrilegious. As a native of Detroit, he's
3:36
Speaker 2: crossed the line.
3:37
Speaker 3: What is he doing?
3:38
Speaker 1: What is he doing?
3:40
Speaker 2: Yeah, he went to China. He saw one, and he said,
3:43
Speaker 2: I need to drive that thing to figure out just
3:45
Speaker 2: how good they are and why they're better than we are.
3:48
Speaker 2: And so he drove one at least for six months.
3:51
Speaker 2: He may still have it, said he didn't want to
3:53
Speaker 2: give it up.
3:54
Speaker 1: Is it right that there's a high end Chinese car
3:57
Speaker 1: that can rotate three hundred and sixty degrees in place
4:01
Speaker 1: and operate in the water like a boat for short distances?
4:05
Speaker 1: Is that true?
4:07
Speaker 2: This is not science fiction? That's absolutely right. BYD, which
4:11
Speaker 2: is China's leading ev maker, recently launched a high end
4:16
Speaker 2: brand to compete against Range Drover, and it's called the
4:19
Speaker 2: Yang Wang or Look Up or Aspire the Young Lung.
4:22
Speaker 2: You wait, I've bin in one here in California. Drove
4:27
Speaker 2: into a parking lot, got to a dead end, you know,
4:29
Speaker 2: the kind where you have cars parked on the right,
4:31
Speaker 2: right and left. How do I back out here? No,
4:33
Speaker 2: no backing out. Just hit a button and the car
4:36
Speaker 2: rotated one hundred age agrees.
4:39
Speaker 1: It turns on its axis.
4:41
Speaker 2: Yeah, right, like in place. It's spin spinned around and
4:44
Speaker 2: then I'm facing outward. Unbelievable. I haven't had the courage
4:49
Speaker 2: to go in the water with one yet.
4:50
Speaker 1: And just drive into the Pacific Ocean and see what happens.
4:53
Speaker 3: Someone else do that. Touch.
4:56
Speaker 2: But the point is that Chinese automakers have really come
5:01
Speaker 2: up in terms of their capabilities, their R and D,
5:05
Speaker 2: their innovation. They're not just delivering affordable vehicles, they're delivering
5:10
Speaker 2: world class products that have all the latest features. So
5:14
Speaker 2: this is what keeps the boardrooms in Stuttgart, in Nagoya,
5:19
Speaker 2: and Detroit up at night. This is real, This is existential,
5:23
Speaker 2: as Jim Farley's said, So.
5:26
Speaker 1: I want to talk a lot more about what's happening
5:29
Speaker 1: now and how carmakers in the US and elsewhere, and
5:32
Speaker 1: for that matter, policymakers in the US and elsewhere are
5:35
Speaker 1: responding and should respond. But I want to spend some
5:38
Speaker 1: time talking about how China got here. And I'm particularly
5:41
Speaker 1: interested to talk with you because, as I understand it,
5:44
Speaker 1: you first went was it in nineteen ninety? You first
5:47
Speaker 1: went to China and worked with the car industry in
5:50
Speaker 1: nineteen ninety? Is that true?
5:52
Speaker 3: That's right.
5:53
Speaker 2: Days after graduating from Michigan with a degree in Chinese,
5:57
Speaker 2: I got a three thousand dollars grant to start a
6:01
Speaker 2: company in China, three thousand bucks. So I bought an
6:03
Speaker 2: airline ticket and Apple computer and I was gone.
6:06
Speaker 1: What a little farther in nineteen ninety that it goes today?
6:12
Speaker 1: And so what tell me about the car industry as
6:17
Speaker 1: you encountered it there in nineteen ninety. What was going
6:20
Speaker 1: on with Chinese cars at the time.
6:22
Speaker 3: Pitiful, just pitiful.
6:24
Speaker 2: You wouldn't have like, Okay, First of all, I got
6:27
Speaker 2: there and I announced I'm here to help. You know,
6:30
Speaker 2: American companies sell cars to the Chinese, and my Chinese
6:33
Speaker 2: friends on the ground said, well, that's ridiculous because nobody
6:37
Speaker 2: here owns a private car there. We don't manufacture our
6:39
Speaker 2: own cars, we don't have the incomes. What are you
6:43
Speaker 2: doing here?
6:44
Speaker 1: Yeah, I mean China was a profoundly poorer country at
6:48
Speaker 1: that time. Right, the economic rise of China over those
6:52
Speaker 1: thirty five years has been maybe unprecedented in the history
6:54
Speaker 1: of the world, certainly like the unails over that time.
6:57
Speaker 3: Yeah, give a little color to it.
6:59
Speaker 2: So the very first car I did ride in was
7:01
Speaker 2: called the Shanghai seven sixty. There's powder blue bench, seats,
7:07
Speaker 2: no seat belts, big steering wheel, and I thought, wow,
7:10
Speaker 2: this reminds me of something from my earliest childhood in
7:13
Speaker 2: the nineteen sixties. Well, it turns out the Shanghai seven
7:16
Speaker 2: sixty is a replica of a Russian car that was
7:20
Speaker 2: a copy of a German car from nineteen fifty five.
7:23
Speaker 1: Wow, and that's what they were still making in China
7:26
Speaker 1: in nineteen ninety.
7:27
Speaker 2: That's right, only a few thousand of them, and only
7:30
Speaker 2: for senior party officials or in my case, the president
7:34
Speaker 2: of the university where I was studying in China got
7:37
Speaker 2: one to be driven around in. That was it one
7:40
Speaker 2: car in the whole basically.
7:41
Speaker 1: So it was an extremely high status thing to have
7:43
Speaker 1: a car that was built on a forty year old
7:47
Speaker 1: car at that time extraordinary.
7:49
Speaker 2: You drive in a car, you ride in a car
7:53
Speaker 2: more often, you are elite, and the common person in
7:57
Speaker 2: China has no hope of riding in a car, let
8:01
Speaker 2: alone owning one. Now China looked around. Dunshell Ping was
8:07
Speaker 2: a leader and he's very pragmatic guy. He famously said,
8:11
Speaker 2: I don't care if the cat is black or white.
8:13
Speaker 2: If it catches a mouse, it's a good cat.
8:15
Speaker 1: This is him pivoting from socialism to capitalism in some.
8:18
Speaker 2: Way without saying it, without saying the word capitalism. Yeah,
8:22
Speaker 2: let's just be let's just be smarter as a nation.
8:25
Speaker 2: So how did what did he set out to do?
8:27
Speaker 2: He said, the way we're going to get richer. He
8:29
Speaker 2: traveled to Japan and the United States, and he saw
8:31
Speaker 2: these two economies are booming, very wealthy, and they both
8:35
Speaker 2: have powerful auto industries. We want that too, So how
8:37
Speaker 2: do we get one? We have nothing. We have no capital,
8:40
Speaker 2: no no how, no management expertise, no technology, no market.
8:45
Speaker 2: How do we get going? So he said, we'll devise
8:48
Speaker 2: a strategy called the joint venture strategy. We'll invite automakers
8:53
Speaker 2: from around the world to come into China and they'll
8:56
Speaker 2: have access to potentially the biggest market in the world.
8:58
Speaker 2: But there's a caveat we will we China will always
9:04
Speaker 2: hold fifty percent or more of those companies that are
9:08
Speaker 2: investing in So they have to joint venture and they
9:10
Speaker 2: have to give fifty percent ownership to a Chinese partner.
9:14
Speaker 1: How does that fit with this country where essentially nobody
9:18
Speaker 1: could afford a car? Like, what is the incentive for
9:20
Speaker 1: automakers to come in if nobody could afford a car?
9:23
Speaker 2: Anyway, it was all about this enticing picture of the future.
9:28
Speaker 2: We're not there yet, but look what happened with Japan,
9:31
Speaker 2: Look what happened with Korea. China is opening up and
9:34
Speaker 2: reforming and we're going to allow some profit making. You
9:38
Speaker 2: guys come in and the first one is going to
9:41
Speaker 2: have access to the biggest potential market and was all
9:44
Speaker 2: a promise of the future.
9:47
Speaker 1: I've heard you talk about what it was like at
9:50
Speaker 1: Chinese car factories at that time when you went in.
9:53
Speaker 3: What was it like, wow, early days.
9:57
Speaker 2: I was at a company called Cherry, which today is
10:00
Speaker 2: China's leading exporter, ships of more than a million cars
10:03
Speaker 2: around the world, including to Europe, UK, Australia. But at
10:06
Speaker 2: that time, the manager said, I want you to walk
10:10
Speaker 2: the line with us. We have real quality issues. And
10:13
Speaker 2: I said what kind of quality issues? He goes, well,
10:15
Speaker 2: so people here are so unfamiliar with cars that, for example,
10:19
Speaker 2: you see that rear view mirror on that car, tell
10:22
Speaker 2: me what's wrong with it? And I looked closely, and
10:24
Speaker 2: I looked, oh, okay. The rear view mirror was assembled
10:28
Speaker 2: facing outward.
10:31
Speaker 1: So you looked at it. If you were driving, you
10:33
Speaker 1: wouldn't see the mirror.
10:35
Speaker 2: No, you don't see the mirror. The mirror is in
10:37
Speaker 2: the correct location, but it's facing.
10:39
Speaker 1: Outward because the person making it has never driven, probably
10:43
Speaker 1: has never been in a car.
10:45
Speaker 3: No clue, no clue.
10:47
Speaker 2: So that's one small example of the kinds of quality
10:51
Speaker 2: issues they had. How to assemble a car when we've
10:54
Speaker 2: never driven one. We don't know what that looks like.
10:58
Speaker 1: So okay, So danksaw Ping sets up these rules. We're
11:02
Speaker 1: gonna we're gonna build a car industry using four and
11:05
Speaker 1: know how by having foreign companies come in and do
11:07
Speaker 1: joint ventures exact and that, in fact happens. Lots of
11:12
Speaker 1: companies do it right, Volkswagen does it. Audi becomes the
11:15
Speaker 1: high status car in China. What's the big inflection point
11:22
Speaker 1: after that? Like, obviously China's economy grows, people get cars.
11:25
Speaker 1: People are in China are driving Oudis and there's a
11:28
Speaker 1: GM brand, right, is it Buick that's big in China.
11:31
Speaker 2: Yeah, sensationally popular. Just everyone wants a Buick.
11:36
Speaker 1: And we're talking like turn of the century. Now two
11:38
Speaker 1: thousand is where we are.
11:39
Speaker 2: In our starting in the two thousand, So think about it.
11:42
Speaker 2: Two thousand and twenty ten, you go from a may
11:46
Speaker 2: less than a million cars a year sold in China
11:48
Speaker 2: to becoming it by twenty ten, the largest car market
11:52
Speaker 2: in the world, far surpassing the United States. Buick selling
11:57
Speaker 2: eighty percent of the worldwide sales are now in China,
12:00
Speaker 2: making lots of money. The president of GM China at
12:04
Speaker 2: the time is said, how is business? He said, We're
12:05
Speaker 2: making more money than God. So you got Chinese consumers
12:09
Speaker 2: loving buicks, are building a ton of them, selling them
12:12
Speaker 2: faster they can build them, and making big profits on it.
12:14
Speaker 2: So all is good for Western audio as you mentioned
12:17
Speaker 2: Audi with super BMW Mercedes come in. It's a party
12:21
Speaker 2: for Western automakers.
12:23
Speaker 3: Yeah.
12:24
Speaker 2: And then but for the people in Beijing who you
12:27
Speaker 2: know Dung's successors. Yeah, they're looking around saying, wait a second,
12:33
Speaker 2: We're the largest market in the world. We produce more
12:35
Speaker 2: cars than anyone else. But where are the Chinese cars?
12:38
Speaker 3: What?
12:39
Speaker 2: This is not acceptable? All this money going to the
12:41
Speaker 2: foreigners and the joint ventures. And oh, by the way,
12:45
Speaker 2: we now import one hundred billion dollars worth of oil
12:48
Speaker 2: a year. This is a problem. What are we going
12:52
Speaker 2: to do about it?
12:54
Speaker 1: Just to be clear, why is it a problem to
12:56
Speaker 1: import one hundred billion dollars worth of oil every year?
12:58
Speaker 1: I mean certainly they have a lot of exports. They
13:00
Speaker 1: have plenty of capital to buy the oil.
13:03
Speaker 3: Yeah.
13:03
Speaker 2: They don't like the idea of being vulnerable to outsiders.
13:07
Speaker 2: This goes back hundreds of years in Chinese history. We
13:11
Speaker 2: don't want to be vulnerable in any way. And also
13:15
Speaker 2: Chinese whenever possible, they don't like to spend money outside
13:19
Speaker 2: their own country.
13:20
Speaker 3: So they look around and they go, we're vulnerable on
13:23
Speaker 3: the oil front.
13:24
Speaker 2: We don't want to get into Mid East quagmires like
13:27
Speaker 2: the United States has done.
13:28
Speaker 3: Let's avoid that mistake.
13:30
Speaker 2: And then, as a point of national pride, why is
13:33
Speaker 2: it that we can put you know, rockets into orbit,
13:37
Speaker 2: but we have a nuclear bomb, but we don't have
13:40
Speaker 2: our own cars. This has got a little bit of
13:41
Speaker 2: a national embarrassment. And so the brightest mind of Beijing
13:46
Speaker 2: looked around and said, look, we've been playing a game
13:49
Speaker 2: of catch up with the West on internal combustion engines.
13:52
Speaker 2: Every time we learn to make a better engine, out
13:55
Speaker 2: or BMW or Toyota makes an even better engine, and
13:59
Speaker 2: Chinese consumers don't like Chinese bread. What can we do
14:02
Speaker 2: to change the game.
14:05
Speaker 3: So you know the.
14:05
Speaker 1: Answer evs electric vehicles.
14:10
Speaker 2: Yes, And it didn't just suddenly come to them in
14:14
Speaker 2: twenty ten. Earlier on in the year two thousand. This
14:19
Speaker 2: is only known later on. It's a very important guy
14:22
Speaker 2: named Wan Gong Onan Gong born in northeast humble beginnings,
14:27
Speaker 2: Northeast China, and the rust belt, goes to Germany, gets
14:31
Speaker 2: a PhD, goes to work for Audi in the nineteen nineties,
14:35
Speaker 2: works there for eight years. In two thousand, he comes
14:37
Speaker 2: back secretly and delivers a white paper to the State Council,
14:41
Speaker 2: the highest governing body in China, and he said, I've
14:45
Speaker 2: seen it. We're never going to catch up with the
14:47
Speaker 2: Germans or the other westerners. In Gasinba in two thousand
14:50
Speaker 2: wrote a white paper and said the future for China
14:52
Speaker 2: is electric and here's how to get there now. At
14:56
Speaker 2: the time, everybody, kind of the leaders in China said,
14:59
Speaker 2: that's very a brilliant take, but we have nothing. We
15:02
Speaker 2: have zero capability and a small market and we're just
15:06
Speaker 2: starting out. We'll tuck it, we'll put it in side.
15:09
Speaker 1: But good idea and eves aren't a thing, right, I
15:11
Speaker 1: mean at that point, GM had tried an electric car
15:13
Speaker 1: that failed, right, Tesla is not a company yet maybe
15:17
Speaker 1: in two thousand, Yeah.
15:18
Speaker 2: Two thousand and three. Was only in two thousand and
15:20
Speaker 2: three that they're founded. And you're right, GM tried that
15:22
Speaker 2: ev one didn't work out. They ended up, you know,
15:25
Speaker 2: collecting them and smashing them, so it didn't wasn't a
15:30
Speaker 2: thing It wasn't a moment in time two thousand, but
15:32
Speaker 2: in twenty ten, who's the Minister of Science and Technology
15:35
Speaker 2: in China in twenty ten one Gum he left Audi.
15:40
Speaker 3: He's the guy, He's the guy in charge.
15:42
Speaker 2: He goes, hey, by the way, I have an idea
15:44
Speaker 2: how he can make this pivot, dusts off his old paper.
15:48
Speaker 2: Shijing Ping takes power. China's new leader. He looks around
15:53
Speaker 2: and he's a definitely they call him redder than red.
15:57
Speaker 2: He wants China to win, he wants the Communist Party
16:01
Speaker 2: to win, and he loves anything they will give him
16:03
Speaker 2: leverage on that front. So he throws his weight behind
16:06
Speaker 2: this big new policy called Maiden China twenty twenty five.
16:11
Speaker 2: This is this isn't a period from like twenty eleven
16:13
Speaker 2: to twenty fourteen.
16:15
Speaker 1: So this is their forward looking It's like a it's
16:17
Speaker 1: like instead of a five year plan, it's a ten
16:19
Speaker 1: or fifteen year plan kind.
16:20
Speaker 2: Of yes, like with muscle, like, we're not fooling around.
16:24
Speaker 2: We're going this is a pivot, but there's an opportunity
16:27
Speaker 2: to change the game. We are going to throw all
16:30
Speaker 2: kinds of funding behind the cultivation of our own independent
16:37
Speaker 2: auto industry built on batteries and electric vehicles.
16:41
Speaker 1: Okay, So, I mean interestingly, there's a long history of
16:47
Speaker 1: governments trying to sort of steer their economies and it
16:51
Speaker 1: going quite badly, not least in China in the middle
16:56
Speaker 1: of the twentieth century. Right, Like, the reason at some
16:59
Speaker 1: level that China got rich was they stopped doing that.
17:02
Speaker 2: You could argue absolutely one hundred percent agree and so
17:07
Speaker 2: and guess what in the early years of this effort
17:10
Speaker 2: to throw tens of billions, even hundreds of billions of
17:13
Speaker 2: dollars behind electric vehicles, it falls completely flat. The Chinese
17:19
Speaker 2: consumer doesn't want two things. No electric it's short range,
17:23
Speaker 2: it's unreliable. We heard about fires, and they're not good looking.
17:28
Speaker 2: And two they're not foreign. There's no prestige. Like Chinese
17:32
Speaker 2: electric car is a double loser. I don't want to
17:34
Speaker 2: go there. So for most of the twenty tens, that
17:39
Speaker 2: policy really struggles.
17:41
Speaker 1: So what changed? So in fact it wasn't working. It's
17:44
Speaker 1: a classic example of like government policy not working, wasting money.
17:48
Speaker 1: Like it could have ended that way, right, I mean,
17:51
Speaker 1: it could have just been a thing they tried that
17:53
Speaker 1: didn't work.
17:54
Speaker 2: It was very nearly that because by the end of
17:59
Speaker 2: the decade, they were spending as much on subsidies as
18:03
Speaker 2: they were on oil imports.
18:05
Speaker 1: Wow, on subsidies for cars and batteries.
18:09
Speaker 3: Right, it's like, please consumer, and.
18:11
Speaker 1: This is twenty twenty, this is the decades, this.
18:14
Speaker 2: Is twenty nineteen. I remember being with the CEO of
18:17
Speaker 2: a major Chinese automaker and I asked him, I said,
18:20
Speaker 2: what's the future of EVS. I know you guys been
18:23
Speaker 2: trying now for almost a decade. He said, never more
18:26
Speaker 2: than an issue here, huh, five to ten percent. Chinese
18:30
Speaker 2: consumer doesn't want it. They're too complicated. What about charging
18:35
Speaker 2: the batteries or shorter range? The government wants us to
18:39
Speaker 2: go in that direction. But he had joined ventures with
18:43
Speaker 2: Toyota and Honda. He said, we're making great products, we're
18:46
Speaker 2: making great profits, consumers love the brand. We'll carve out
18:51
Speaker 2: part of our business for EVS. But it's more like
18:53
Speaker 2: compliance than enthusiastic.
18:55
Speaker 1: Keep the government happy, basically.
18:57
Speaker 2: Keep the government. Yep, we're trying our hardest. Yeah, we're
18:59
Speaker 2: really going for it. So what changes? And this is
19:03
Speaker 2: where China's probably China's secret superpower is where are most
19:09
Speaker 2: Where are Apple iPhones built in the.
19:11
Speaker 3: World changin in China, in China, right. So they look
19:16
Speaker 3: around and they go, we have the very.
19:17
Speaker 2: Best smartphone maker in the world manufacturing their products here.
19:23
Speaker 3: How do we get the best, very best e who
19:26
Speaker 3: is Oh wait.
19:27
Speaker 2: A second, there's this company out of California that's ripping
19:30
Speaker 2: it in the US and in Europe, wildly popular, defying
19:36
Speaker 2: all expectations. And they seem to have changed consumers' minds
19:40
Speaker 2: about what an electric vehicle can be. They can be sexy,
19:44
Speaker 2: they can be attractive, they can be fast.
19:47
Speaker 1: You haven't said Tesla yet. I keep waiting for you
19:49
Speaker 1: to say Tesla. So they see Tesla, Yes.
19:52
Speaker 2: You see Tesla, and they go, you ever hear of
19:55
Speaker 2: China red carpet? Yeah, Like they laid out their red
20:00
Speaker 2: carpet for Tesla for the first time. They said, Tesla,
20:04
Speaker 2: we'd love to have you come here to China to
20:06
Speaker 2: sell your cars. By the way, we want you to
20:08
Speaker 2: make manufacture them here, just like we want everyone else
20:11
Speaker 2: to manufacture them here. But we're going to sweeten the deal.
20:14
Speaker 2: You can have one hundred percent ownership, no joint venture.
20:19
Speaker 2: You're in charge. You bring their manufacturing capabilities in, your
20:23
Speaker 2: suppliers in and you run the show and Elon Musk
20:27
Speaker 2: looks around and goes, that looks pretty sweet.
20:29
Speaker 1: What's the catch, Ah.
20:31
Speaker 3: What's the catch?
20:35
Speaker 2: Well, it's never spoken, but it's understood that as soon
20:42
Speaker 2: as Tesla sets up operations in China, everything it knows
20:47
Speaker 2: will one way or another leak to Chinese automakers, and
20:54
Speaker 2: they are very quickly. We see five, six, seven companies
20:59
Speaker 2: sprout up Like Selmy, we talked about, going, Wow, that's
21:04
Speaker 2: a super incredible car. I wonder if we can do
21:07
Speaker 2: that ourselves here. Oh, by the way, test suppliers are
21:09
Speaker 2: just up the road and I know them because they're
21:12
Speaker 2: you know, they know so and so and so and
21:14
Speaker 2: so there's Yeah. I talked to one supply chain executive
21:18
Speaker 2: at the time and I said how long does that
21:20
Speaker 2: take though, like, how quickly? And he said overnight?
21:24
Speaker 1: Overnight, So overnight everybody knows everything. Overnight. Everybody China could
21:31
Speaker 1: make a Tesla if they wanted. Yeah, So when does
21:35
Speaker 1: Tesla set up in China.
21:38
Speaker 2: It sets up in China, It goes into production at
21:42
Speaker 2: the very end of twenty nineteen, first weeks of twenty twenty,
21:46
Speaker 2: exactly when COVID's happening. So it was not an auspicious start,
21:51
Speaker 2: but against all odds, demand for Tesla in China explodes.
21:58
Speaker 2: And it wasn't because it was electric necessarily. It was
22:02
Speaker 2: because it had all these over there update features, new
22:05
Speaker 2: and cool features, and so it changed the Chinese consumer's
22:09
Speaker 2: mindset about, oh, what an electric vehicle could be.
22:12
Speaker 1: Like it did in the US. Tesla had the same
22:14
Speaker 1: effect in the US on exactly.
22:16
Speaker 2: And this is the Chinese government saw that said we
22:20
Speaker 2: can duplicate the Tesla effect here in China. They bet
22:24
Speaker 2: on it and it.
22:26
Speaker 1: Worked amazingly fast. Right, Like when I have read about this,
22:31
Speaker 1: it seems like there's this key moment just what three
22:35
Speaker 1: years after Tesla sets up in China or so the
22:40
Speaker 1: is it? The Shanghai Auto Show in twenty twenty three?
22:43
Speaker 1: Like tell me, why why do we able to talk
22:45
Speaker 1: about that? Why is that such a big moment? And
22:48
Speaker 1: were you there?
22:49
Speaker 2: I was, I was telling you what happened. I was
22:53
Speaker 2: set to meet my good friend Kausmeier, former managing director
22:56
Speaker 2: of Mercedes Benz in China. So we agreed we're going
23:00
Speaker 2: to meet at the Changhai Auto Show. Being German, he
23:02
Speaker 2: wants to be there on day one, early in the morning,
23:05
Speaker 2: I'm arriving the next day. So I'm back in the
23:09
Speaker 2: United States getting my passport together. I get a call
23:12
Speaker 2: from Klaus and he and I said, Klaus, what's going on?
23:16
Speaker 3: Are you in China? And he said, it is a shock?
23:20
Speaker 1: Wow?
23:21
Speaker 2: Yeah, I said, what are you Okay, I'm telling you
23:25
Speaker 2: it is a total shock. I cannot believe my eyes.
23:28
Speaker 2: So what's going on, Klaus?
23:30
Speaker 3: You okay?
23:30
Speaker 2: Yes, I'm That's just a Shanghai auto show and the
23:33
Speaker 2: Chinese have taken over. So taken over, it would be
23:37
Speaker 2: inconceivable in my mind. What do you mean taking over? No,
23:40
Speaker 2: I'm telling you it's the end of the foreign automakers
23:43
Speaker 2: in China. So what was he looking at? If you
23:47
Speaker 2: can imagine, if you've been to the Chinese auto show,
23:50
Speaker 2: they're massive, biggest auto shows in the world. Think football
23:54
Speaker 2: fields upon football As far as I can see, just
23:56
Speaker 2: cars and people and more cars. And in the old
23:59
Speaker 2: for twenty thirty years, it would be Mercedes, BMW, Audi, Buick, Toyota, Honda,
24:05
Speaker 2: Hyundai taking center stage. And then if you had time,
24:08
Speaker 2: you might want under down a side hall and there's
24:11
Speaker 2: this pretty lame looking stand with a Chinese brandy and
24:16
Speaker 2: all of a sudden the twenty twenty three, it's the opposite.
24:19
Speaker 2: The Chinese are center stage and the foreigners have been
24:23
Speaker 2: shunted the side. It's almost like through COVID we went
24:27
Speaker 2: through some kind of crazy time machine. Chinese on the ascendancy,
24:31
Speaker 2: Foreigners on their way out the door.
24:35
Speaker 1: Did you fly in the next day? Did you go yeah? What?
24:38
Speaker 1: What was that like? What'd you say?
24:41
Speaker 3: Mostly?
24:42
Speaker 2: I saw a confidence that I had never seen before
24:45
Speaker 2: out of the Chinese. One executive from BYD said to me,
24:50
Speaker 2: this is not the company that you've known for twenty years.
24:54
Speaker 3: We're a new thing now.
24:56
Speaker 2: And ever since that moment, I felt like the Chinese
25:00
Speaker 2: really really getting comfortable and confident in their own capabilities.
25:08
Speaker 1: We'll be back in just a minute. This segment is
25:22
Speaker 1: brought to you by Walmart. Behind every small brand is
25:24
Speaker 1: someone with a dream. Today, we're sitting down with one
25:27
Speaker 1: of the founders whose products you can discover at Walmart.
25:30
Speaker 1: His name is Ben Moore, and he's the CEO of
25:32
Speaker 1: the Ugly Company, based in the Central Valley in California.
25:35
Speaker 1: The company sells dried fruit that comes largely from produce
25:38
Speaker 1: that is too ugly to be sold fresh. Ben told
25:42
Speaker 1: me that he got the idea to start the company
25:43
Speaker 1: when he was driving a truck and he often wound
25:46
Speaker 1: up transporting fruit that packing houses couldn't sell because it
25:49
Speaker 1: was blemished, perfectly good fruit that just looked a little
25:52
Speaker 1: ugly and it was getting thrown out.
25:54
Speaker 4: And so I just was sat there thinking about what
25:57
Speaker 4: can we do with this fruit other and dump it
25:58
Speaker 4: out right? And I thought that there could be a
26:00
Speaker 4: brand solution there, which is where the name the Ugly
26:02
Speaker 4: Company came from, was going to get people excited about
26:04
Speaker 4: the sustainable nature of the fruit.
26:06
Speaker 1: So I understand that at some point you went to
26:08
Speaker 1: this something called a Walmart Open Call event. Tell me
26:12
Speaker 1: what that is and why it mattered for your business. Yeah.
26:15
Speaker 4: So Walmart Open Call is Walmart's initiative to source from
26:19
Speaker 4: American manufacturers and small business like ours. We fly out
26:22
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26:25
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26:30
Speaker 4: just like anything else, say here's my PowerPoint, here's my products,
26:32
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Speaker 4: and it's like a straight up Willy Waka style golden ticket.
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Speaker 1: Literally a physical piece of paper that says you made it.
26:46
Speaker 4: Yeah you know, you've been selected. So there's like the
26:48
Speaker 4: full day of just craziness. It's like, oh my god,
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Speaker 4: I'm now going to be a Walmart supplier, which is amazing.
26:53
Speaker 4: So yeah, we, you know, six months later, launched one
26:56
Speaker 4: hundred ninety Walmarts and now we've grown into nearly a
26:59
Speaker 4: thousand Walmarts since then last year and a half.
27:01
Speaker 1: So how did getting onto the shelves at Walmart affect
27:04
Speaker 1: your business?
27:05
Speaker 4: We hired an additional twenty people to work in our
27:08
Speaker 4: manufacturing facility just specifically for the Walmart demand that was created.
27:12
Speaker 4: So that's been great because our product sells really well
27:15
Speaker 4: in Walmart, whereas as a small brand, it can be
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Speaker 4: really tricky working with larger distributors and you know, trying
27:20
Speaker 4: to get your product even on the shelves and things
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27:25
Speaker 4: actually really efficient to market to Walmart customers through the
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Speaker 4: Walmart apps of things, and so well, Walmart's helping us
27:32
Speaker 4: create demand via their platforms, right, and so it's a
27:35
Speaker 4: huge deal for us.
27:36
Speaker 1: Congratulations and all your success and I wish you more
27:39
Speaker 1: of it.
27:40
Speaker 3: I appreciate it.
27:41
Speaker 4: Thank you very much.
27:43
Speaker 1: This segment was brought to you by Walmart. Explore thousands
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Speaker 1: of small brands online at Walmart dot com or at
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Speaker 1: your local Walmart store. So let's talk about the role
27:56
Speaker 1: of Chinese automakers in the world today.
27:59
Speaker 2: So, China's rolling in Chinese cars. I know, numbers are
28:06
Speaker 2: often hard, to give me some numbers.
28:09
Speaker 3: It was some numbers.
28:10
Speaker 2: So five years ago, China exported a total of one
28:15
Speaker 2: million cars, which is about less than five percent of
28:18
Speaker 2: their total production. They're all geared up for selling in
28:21
Speaker 2: the China market. Okay, that was one million five years ago.
28:24
Speaker 2: This year that'll be twelve million. Twelve million. That's unprecedented
28:30
Speaker 2: in the history of the automobile. Japan at his peak
28:33
Speaker 2: was six million. China's already doubled that to twelve million.
28:37
Speaker 1: How many cars does the US export every year?
28:40
Speaker 3: US exports about it one one million?
28:43
Speaker 1: Yeah, and how many does Japan export every year? Now?
28:46
Speaker 3: Now about three three million?
28:49
Speaker 1: And how many cars is China exporting this year?
28:51
Speaker 2: Twelve million cars. It's their exporting is more than the
28:57
Speaker 2: United States makes. Now, oh, we manufacturer about ten million cars.
29:01
Speaker 2: They're exporting twelve million in addition to their own market,
29:05
Speaker 2: which is like twenty five million cars. So China now
29:08
Speaker 2: accounts for almost forty percent of global automotive production, almost half,
29:13
Speaker 2: getting close to.
29:14
Speaker 1: Half of all the cars made in the world are
29:16
Speaker 1: made in China, and a big chunk of those are exported.
29:19
Speaker 1: They're exporting more than everybody else combined, certainly anybody else combined.
29:23
Speaker 2: Yep, exporting more than And here we are in America,
29:26
Speaker 2: and where I'm I go to see executive I make
29:29
Speaker 2: keynote talks around the country and everybody's like, yeah, okay,
29:32
Speaker 2: you are the boy who cried wolf because we don't
29:35
Speaker 2: see where where is the Chinese car?
29:37
Speaker 3: Here?
29:37
Speaker 2: When I give you these presentations, I put a map
29:39
Speaker 2: of the world up and I go the map represents
29:42
Speaker 2: all countries. You see a globe, Yeah, and I have
29:46
Speaker 2: color coded and there's one country in white and everything
29:50
Speaker 2: else is red.
29:51
Speaker 1: Huh.
29:52
Speaker 2: And that gets people in the audience to go, wait
29:54
Speaker 2: a second, hold on, we are on an island. If
29:58
Speaker 2: you go to Mexico, UK Australia. I was recently in Indonesia,
30:02
Speaker 2: South Africa. I visited Chinese cars, Chinese cars, Chinese cars
30:06
Speaker 2: pouring in and so we're surrounded and it seems like
30:11
Speaker 2: it's inevitable that they also enter the US market.
30:15
Speaker 1: And so just to be clear, what's keeping them out?
30:19
Speaker 1: Is it just tariffs?
30:21
Speaker 2: We have big tariffs in place, more than one hundred
30:24
Speaker 2: percent on terraffs. That alone, Even though one hundred percent
30:28
Speaker 2: sounds like a lot, Chinese autom manufacturers said, one hundred
30:31
Speaker 2: percent won't stop us.
30:32
Speaker 1: One hundred percent doubles the price. You're paying a dollar
30:36
Speaker 1: in tax for every dollar of car you're buying.
30:39
Speaker 2: Yes, and in an industry where the margins are already
30:43
Speaker 2: pretty thin, yeah, they're like, yeah, one hundred percent tariff,
30:46
Speaker 2: that's not really going to stop us. So the Department
30:49
Speaker 2: of Commerce put in place a very strategic extra layer.
30:54
Speaker 2: And without going into a lot of detail, it essentially says,
30:57
Speaker 2: if a vehicle features any Chinese hardware or software related
31:01
Speaker 2: to over there updates or self driving, it cannot legally
31:07
Speaker 2: be registered here in the US.
31:09
Speaker 1: And is there a security rationale for that?
31:15
Speaker 3: There is? There is.
31:16
Speaker 2: There's two components. One is to buy time for domestic
31:20
Speaker 2: industry because if the Chinese come in, they.
31:22
Speaker 1: Just, yeah, it's clearly protectionist at some level, right, Like
31:26
Speaker 1: it's plainly protectionist. Yes, is there a valid security rationale
31:31
Speaker 1: alongside the protectionism.
31:33
Speaker 2: Well, China has all kinds of mechanisms already in place
31:37
Speaker 2: in the United States for a surveillance and a mobile
31:39
Speaker 2: car that's vacuuming up massive amounts of data about people
31:44
Speaker 2: and locations and buildings definitely could be weaponized and we
31:49
Speaker 2: shouldn't be naive about that possibility. So I personally feel
31:55
Speaker 2: like the Department of Commerce rules are appropriate given the
32:00
Speaker 2: tensions between the two countries today.
32:02
Speaker 1: Let's talk about evs in the US, right, because substantially
32:05
Speaker 1: all of what China is exporting to everyone in the
32:07
Speaker 1: world is electric vehicles, create electric vehicles. But it seems
32:12
Speaker 1: like US companies made a genuine effort to build electric vehicles.
32:18
Speaker 1: And you have pointed out that the big US automakers
32:22
Speaker 1: combined GM Ford Stilantis, which owns Chrysler, have written down
32:27
Speaker 1: something like fifty billion dollars of investments they made into
32:31
Speaker 1: EV's because they just weren't that popular with American buyers.
32:35
Speaker 1: And so I don't know. One could make different inferences
32:39
Speaker 1: from that, like maybe people in this country wouldn't want
32:42
Speaker 1: Chinese EV's because we don't want EV's. I don't know,
32:45
Speaker 1: Like what do you make of that fact?
32:48
Speaker 2: Okay, so China's ex sports. I wanted to mention this
32:53
Speaker 2: important point. Of that twelve million that will go overseas
32:56
Speaker 2: this year, half of those are not EV's. Oh interesting, okay.
33:01
Speaker 2: So what we're facing is not only a challenge on
33:04
Speaker 2: the EV front, which most people say, oh, China EV's, Okay,
33:08
Speaker 2: we'll give them that because we own gasoline. The trouble
33:11
Speaker 2: is they're competitive across the board, now, okay, okay, So
33:15
Speaker 2: that's one second thing. Just like China struggled to get
33:19
Speaker 2: his consumers to fall in love with EV's, so do
33:23
Speaker 2: we here in the United States. You know, last year
33:28
Speaker 2: less than ten percent of car sales in the United
33:31
Speaker 2: States were evs. People just we tend to drive long distances,
33:34
Speaker 2: big vehicles at high speeds, which is the antithesis of
33:37
Speaker 2: what an EV is ideal for. You want city commuting,
33:40
Speaker 2: short range and lower speeds. So that's a genuine sort
33:44
Speaker 2: of American exceptionalism problem. And I'm not an advocate of
33:48
Speaker 2: I don't think EV's will take over the United States.
33:50
Speaker 3: I don't think they should, but there is a role
33:53
Speaker 3: to play.
33:54
Speaker 2: I think twenty twenty five percent of the market in
33:56
Speaker 2: a normal market here in the nice it makes sense
34:00
Speaker 2: for America.
34:01
Speaker 1: I mean, we haven't talked about subsidies and the persistence
34:04
Speaker 1: of subsidies. Right there were subsidies for evs a few
34:07
Speaker 1: years ago. Now there are not. I mean in terms
34:11
Speaker 1: of China in particular and the rise of their automakers
34:15
Speaker 1: and their persistence. Like, what is the story of subsidies?
34:17
Speaker 2: There huge still huge still and it's not in people
34:25
Speaker 2: when you we need to invent a new word for
34:27
Speaker 2: subsidies when it comes to China. Because here in the
34:30
Speaker 2: United States we had a seventy five hundred dollars tax credit.
34:33
Speaker 2: That's a subsidy in ev We had that for you
34:36
Speaker 2: for evs right until the end of last year.
34:39
Speaker 3: Think of China.
34:41
Speaker 2: Imagine China as this massive manufacturing machine, and it says,
34:47
Speaker 2: we want to dominate a given industry. How do we
34:50
Speaker 2: dominate that. We invest in enormous amounts of capacity. We
34:57
Speaker 2: throw all kinds of zero interest loans. You need free land.
35:01
Speaker 2: How about training for your employees, energy, it discounted, whatever
35:06
Speaker 2: the tools necessary for us to dominate an industry, We
35:09
Speaker 2: the government of China, are ready to do that. We're
35:12
Speaker 2: going to win the auto industry, just like we want
35:14
Speaker 2: solar panels, just like we want shipbuilding, just like we
35:17
Speaker 2: want steel and so on and so on. Today it's autos.
35:21
Speaker 2: So when Americans go, well, China has some substance, do
35:25
Speaker 2: they have some subsidy doesn't begin to describe the ferocity
35:30
Speaker 2: with which the Chinese government will say, that's a national objective.
35:34
Speaker 2: We're going to win.
35:36
Speaker 1: So do you even compete with that? Like there is
35:39
Speaker 1: the question of should we just let them have it?
35:42
Speaker 1: They're basically giving us cars at a discount, like they
35:44
Speaker 1: want to spend their own money to give us cars
35:47
Speaker 1: cheaper than they would sell in a market without their intervention.
35:52
Speaker 1: Is there a universe where that's just like good for us?
35:55
Speaker 1: Like great, we will take that and we'll make other things.
35:59
Speaker 3: In no universe that I know of, is it good
36:01
Speaker 3: for us?
36:02
Speaker 1: Okay?
36:03
Speaker 3: Okay?
36:04
Speaker 1: Why?
36:05
Speaker 3: I because it's a short term gain for.
36:09
Speaker 2: The United States at the expense of our long term
36:12
Speaker 2: viability as a competitive economy.
36:15
Speaker 1: Why is a car industry essential? There's another way of
36:17
Speaker 1: asking the same question, why.
36:19
Speaker 2: Is the car industry essential? So the United States today has,
36:22
Speaker 2: in my view, two car industries that are operating in parallel.
36:25
Speaker 2: One is the old car industry out of Detroit that
36:28
Speaker 2: brings capabilities in manufacturing that are really crucial to national
36:34
Speaker 2: defense and security and weapons systems. You need to have
36:38
Speaker 2: a basis of capabilities of manufacturing. So that's that brings.
36:43
Speaker 2: West Coast is the second auto industry. That's your Tesla's,
36:46
Speaker 2: your way Mos, your ubers, your tech companies. They're bringing
36:50
Speaker 2: software AI chips to build the cars of the future.
36:57
Speaker 2: And if we forfeit the capabilities of having our own
37:01
Speaker 2: auto industry, we suddenly become very vulnerable to China in
37:06
Speaker 2: terms of our own national defense.
37:08
Speaker 1: So you may to have a kind of frontier military,
37:12
Speaker 1: you basically need to have a car industry. Is that
37:14
Speaker 1: the core argument you're making.
37:15
Speaker 2: Yes, Yes, the volume. That's where the volume comes from.
37:19
Speaker 2: That's where the ecosystems come from. Many of the components
37:23
Speaker 2: that define the future technologies in military applications are the
37:26
Speaker 2: same ones that go into cars. If we don't have
37:29
Speaker 2: those at home, we're extremely vulnerable to Chinese whims.
37:36
Speaker 1: We haven't talked explicitly about batteries. But there is this
37:39
Speaker 1: interesting idea, right that like, batteries are sort of analogous
37:44
Speaker 1: to oil, right in evs, but they also are essential
37:46
Speaker 1: for drones, which of course we've heard a ton about,
37:49
Speaker 1: say in the Iran war. And so this notion that
37:51
Speaker 1: batteries are an essential frontier technology, that there's this kind
37:54
Speaker 1: of electric stack, right that includes batteries, that includes permanent
37:59
Speaker 1: magnets made with a rare Earth's right, that the EV
38:02
Speaker 1: is sort of the the representative thing you make with
38:07
Speaker 1: this stack. But you also make drones, you also make missiles.
38:10
Speaker 3: Right, Batteries are the future engines.
38:15
Speaker 1: And China is winning batteries by a lot, right.
38:18
Speaker 3: They're just killing it. They're killing it.
38:21
Speaker 2: They own not only the ability to manufacture seventy percent
38:25
Speaker 2: of batteries worldwide, but they also control the supply chain
38:30
Speaker 2: into those batteries, most importantly the refining of the materials
38:34
Speaker 2: that go into the cells that make the batteries. So
38:37
Speaker 2: ninety percent of graphite today is processed in China. That's
38:42
Speaker 2: another choke point. We don't have those capabilities at home.
38:45
Speaker 2: So not only do we have to have the batteries,
38:47
Speaker 2: but we also have to develop our own and how
38:49
Speaker 2: do we get here? It was just negligence I think
38:52
Speaker 2: on the part of American leadership at the government level
38:55
Speaker 2: and the corporate level. It was cheaper to manufacturer regulatory
39:00
Speaker 2: point of view, it's easier to do it in China.
39:02
Speaker 2: We just blindly shipped so much to China. And now
39:06
Speaker 2: we look and go, well, how did that happen?
39:09
Speaker 1: Okay, guys, I mean there was a lot of upside
39:12
Speaker 1: right Like, there was a notion if you go back
39:15
Speaker 1: twenty five years, there was a notion like, oh, China
39:17
Speaker 1: will join the WTO, they'll get richer, they'll they'll democratize.
39:21
Speaker 1: We've never had a big, rich, market based country that
39:24
Speaker 1: had an authoritarian regime right like it. I don't think
39:29
Speaker 1: that people were necessarily dumb at the time. It just
39:31
Speaker 1: didn't work out the way reasonable people thought it would
39:33
Speaker 1: work out. One might say, did you know all along?
39:38
Speaker 1: Was it obvious to you.
39:41
Speaker 2: There's a tendency in the West to underestimate China and
39:46
Speaker 2: its ambitions. Yeah, so what we hoped to see was
39:50
Speaker 2: not what was real. Yeah, And in the short term
39:54
Speaker 2: China said we'll take care of this for you, will
39:56
Speaker 2: manufacture it half the cost and ship it back to
39:58
Speaker 2: your margins.
39:59
Speaker 3: Go up, look at this.
40:00
Speaker 2: Beautiful Yeah, and we're all getting along until the point
40:04
Speaker 2: at which China said, we might not need these guys anyway.
40:10
Speaker 1: What should the US do about cars?
40:17
Speaker 2: I would the starting point would be I'd have a
40:20
Speaker 2: national campaign and say, first of all, have everybody understand
40:25
Speaker 2: that cars and the car manufacturing industry and technology around
40:29
Speaker 2: future of cars is crucial to our independence and our
40:32
Speaker 2: way of life. So put that message out there. It
40:34
Speaker 2: may not resonate today but over time.
40:37
Speaker 1: But I feel like people love the domestic car industry, right.
40:40
Speaker 1: I mean when you think of like mid twentieth century
40:43
Speaker 1: meat and potatoes America, like GM was maybe the biggest
40:46
Speaker 1: company in the world, it was certainly the biggest manufacturer,
40:48
Speaker 1: the biggest car maker. Like that's like Glory Day's America heartland, right, Yes,
40:55
Speaker 1: except that geographies as time have to change.
40:58
Speaker 2: Yeah, I'm I'd love to be enthusiastic and optimistic about
41:03
Speaker 2: Detroit's ability to pivot to this new era of chip
41:09
Speaker 2: and software and.
41:11
Speaker 1: AI software as they talk about the software defined vehicle. Right,
41:15
Speaker 1: This idea that new cars are like software with a
41:18
Speaker 1: car wrapped around it is the way to think of
41:20
Speaker 1: a car.
41:20
Speaker 2: Now, yeah, yes, start with software and then wrap the
41:24
Speaker 2: metal in the glass and the rubber around it. It's
41:26
Speaker 2: the heart of the car is software in the computer.
41:29
Speaker 2: This is where the West Coast thrives. So the new
41:32
Speaker 2: American auto industry must rise from the West. That's my Yeah,
41:37
Speaker 2: that's where if I were in charge of the US government,
41:40
Speaker 2: in charge of that, I'd say throw all of our
41:43
Speaker 2: support behind your Tesla's and Waymos and ubers like logistics.
41:48
Speaker 2: Think of it as mobility less about the old business
41:52
Speaker 2: of hammering out a vehicle from a production line like
41:55
Speaker 2: Ford and GM.
41:56
Speaker 1: First thing is get everybody to believe that we need
41:59
Speaker 1: a car industry and a new kind of car industry,
42:02
Speaker 1: probably in a new place. The new place is going
42:04
Speaker 1: to be hard politically, but keep going.
42:06
Speaker 2: But both of them, both of them have roles to play.
42:09
Speaker 2: I would say Detroit won't play the leading role. If
42:11
Speaker 2: we hope to compete against China, we need the brains
42:15
Speaker 2: and the innovation and then and the risk taking a
42:18
Speaker 2: West Coast companies.
42:19
Speaker 3: That's number one. Geography.
42:21
Speaker 2: Second, autonomy autonomous cars, self driving cars. You've heard of
42:25
Speaker 2: the Tesla, cyber cabs. Weimo's running in about a dozen
42:29
Speaker 2: cities around the United States. I was just in San Francisco.
42:33
Speaker 2: So autonomy. Whoever wins autonomy wins the new global auto industry.
42:40
Speaker 1: How we haven't talked about autonomy in China, Like, how
42:44
Speaker 1: how is China doing on autonomous vehicles?
42:47
Speaker 2: Comparable in a few cities you'll see autonomous cars running around.
42:52
Speaker 2: Not they're not as advanced as weimo, but they're getting
42:56
Speaker 2: closer and closer.
42:57
Speaker 1: Yeah, okay, so we're all so not to be reductive
43:01
Speaker 1: or jinguistic, but we're a little bit ahead on autonomous cars.
43:04
Speaker 3: Yes, we have some leadership still in autonomous cars.
43:09
Speaker 1: Why is it so important? Why is autonomy so important
43:12
Speaker 1: in this particular context of this kind of great powers
43:16
Speaker 1: competition between the US and China? Is the notion that
43:19
Speaker 1: if the US gets to autonomous cars at scale everywhere
43:25
Speaker 1: in a way that we can sell around the world,
43:27
Speaker 1: et cetera. That's that's a way we could beat China. Because,
43:31
Speaker 1: of course, someone would rather have a truly autonomous car
43:33
Speaker 1: than not. I mean, is that the core reason autonomy.
43:36
Speaker 3: Is that's the core reason.
43:37
Speaker 2: Yeah that people was recently in Indonesia, sales of new
43:42
Speaker 2: cars in Indonesia and Thailand are down in the last
43:46
Speaker 2: five years, like forty fifty percent, and the economies aren't
43:50
Speaker 2: doing great. But even if they're holding even you think
43:53
Speaker 2: they're going to sustain people are opting for ride share.
43:58
Speaker 2: Like those interesting venients of not owning a car and
44:01
Speaker 2: just having vehicles show up in this case with drivers.
44:04
Speaker 1: Huh. Well, and it's rather like a lot of people
44:08
Speaker 1: clustered in urban places where ridesha is particularly convenient and economical,
44:12
Speaker 1: and having a car is less convenient and less economical.
44:15
Speaker 3: That's it.
44:16
Speaker 2: Jakarta thirty million people who owning a car is a paint.
44:20
Speaker 2: So you're seeing this trend. Okay, younger people don't need,
44:24
Speaker 2: don't value, don't want. There's inconvenience is expensive.
44:27
Speaker 1: Huh So if it's autonomous, you could have fewer cars
44:30
Speaker 1: by far, it would be profoundly cheaper to do ride sharing.
44:33
Speaker 1: That's that's the old dream of autonomous cars. We just
44:35
Speaker 1: sort of stopped talking about it because it's taken so
44:38
Speaker 1: long to get here.
44:39
Speaker 2: Taken so long, and today when I talk to people
44:42
Speaker 2: in the industry, they feel they feel as though they've
44:45
Speaker 2: gone through that drought that and then they're back up
44:48
Speaker 2: and they're.
44:48
Speaker 1: Five years away for the last twenty years problem. Yeah,
44:52
Speaker 1: So okay, So one is get everybody excited about EVS.
44:55
Speaker 1: Two is we are autonomy. Is that the whole.
44:57
Speaker 2: List jobs jobs, tens of thousands, hundreds of thousands of jobs.
45:04
Speaker 3: So where do those go if we're not manufacturing.
45:08
Speaker 2: And related to jobs, there's this thing like when there's
45:11
Speaker 2: concentrations of manufacturing, you're learning as you go, you're innovating
45:15
Speaker 2: if you outsource that. That's one of the reasons why
45:17
Speaker 2: Elon Musk loves to vertically integrate. I mean his whole company.
45:21
Speaker 2: He's trying to do everything in the oar, he's doing
45:23
Speaker 2: the superstargar station, he's doing the batteries, he's doing everything,
45:26
Speaker 2: trying to do the AI, doing everything. Why, he says,
45:31
Speaker 2: because when I outsource, that innovation in my company stops.
45:36
Speaker 2: Now I'm dependent on someone else to innovate. I love
45:39
Speaker 2: that insight. And so when if America just outsources in
45:44
Speaker 2: order to have a cheaper end product for us, it's
45:46
Speaker 2: like it's a little bit like the farmer who sells
45:49
Speaker 2: his land to buy stuff for his family. Eventually we're
45:53
Speaker 2: out of We're not doing anything anymore, we're not learning
45:56
Speaker 2: we're not innovating, We're just burning.
46:00
Speaker 1: Is there some broader lesson the US can learn from China.
46:08
Speaker 2: One of the lessons is, for years, the United States
46:12
Speaker 2: has been hopeful that China would change, come around, be
46:16
Speaker 2: more like us. So one of the lessons is we
46:19
Speaker 2: better put that aside. China doesn't change for anybody. So
46:24
Speaker 2: if our hope is China's going to collapse or come
46:27
Speaker 2: around and be a democracy in a short term, or
46:30
Speaker 2: be a good trading partner, ally, let's dismiss that fantasy.
46:35
Speaker 3: It's not happening. Okay.
46:37
Speaker 2: Number two, we have to maybe have to get comfortable
46:41
Speaker 2: with the idea that another country is bigger than we are.
46:45
Speaker 2: Their industries are bigger than ours. We're not necessarily the
46:48
Speaker 2: world leader in stuff. Okay, So what we have to
46:52
Speaker 2: be smarter, we have to work harder, we have to
46:54
Speaker 2: be more innovative. And Third, probably the most important one
46:58
Speaker 2: I should have made it first is at a certain point,
47:01
Speaker 2: if we look at the Manhattan Project or the United
47:04
Speaker 2: States after Pearl Harbor or the Spotnick moment, there has
47:10
Speaker 2: to be a mission that brings us all together and saying,
47:15
Speaker 2: you know what, our future is genuinely at risk. Our
47:18
Speaker 2: future is genuinely in jeopardy if we don't act together
47:22
Speaker 2: to pursue a national mission. This is what China does
47:26
Speaker 2: really well. The government set out the mission Made in
47:29
Speaker 2: China twenty twenty five. We will lead in next generation technologies,
47:33
Speaker 2: will dominate. We'll use it as leverage against other countries.
47:37
Speaker 2: The US should learn from that.
47:44
Speaker 5: We'll be back in a minute with the lightning round.
47:57
Speaker 1: Let's finish with the lightning round. Okay, it's going to
48:00
Speaker 1: be a little silly, just so you know. I understand
48:06
Speaker 1: that Chinese cars typically have karaoke app installed, and so
48:12
Speaker 1: I'm curious, do you have a go to car karaoke song?
48:18
Speaker 2: It would be a famous song by Dunley June and
48:22
Speaker 2: China is probably China's most famous singer, a woman actually
48:27
Speaker 2: she's Taiwanese, but the Chinese love her too, and it
48:31
Speaker 2: would be Uh, well, I don't want to break.
48:36
Speaker 1: Give me a line. You have to sing a line. Sorry,
48:38
Speaker 1: w e yo doors shun, fantastic, thank you? What what
48:47
Speaker 1: did you? What does that mean?
48:48
Speaker 3: By the way, uh you asked? You asked me how
48:53
Speaker 3: deeply do I love you?
48:56
Speaker 1: What's the answer?
48:57
Speaker 3: As deep as the fullest moon?
49:00
Speaker 1: Lovely ah what's one thing that's different about driving in
49:04
Speaker 1: China compared to driving in the US.
49:07
Speaker 2: Chaos chaos, So think of it as like a road
49:12
Speaker 2: rally and cars coming wrong direction, lanes not respected, cars
49:18
Speaker 2: coming into your lane, you going into their lanes.
49:20
Speaker 3: In fact, when I.
49:21
Speaker 1: From New York, Baby come to New York, New York.
49:24
Speaker 2: Looks like a kindergarten compared to chiy Like whoa. So
49:28
Speaker 2: when I first came back to the United States, I'm
49:30
Speaker 2: driving around here and I would in Asia. When you
49:33
Speaker 2: pass a car, as soon as you get your nose
49:36
Speaker 2: ahead of it, you just start easing into that lane.
49:38
Speaker 2: You just start like nosing into that lane and they
49:41
Speaker 2: go yeah, okay, and they they kind of allow you
49:44
Speaker 2: to and or not, and it's it's it's it's sort
49:48
Speaker 2: of to bemin full contact, full contact. So in here
49:53
Speaker 2: in California, I did that a couple of times. People
49:55
Speaker 2: are on the horn, like you what are you doing?
49:58
Speaker 1: Not cool? Bro?
49:59
Speaker 2: Everything is so tight and chaotic, there so many cars,
50:04
Speaker 2: so much congestion that you've got you got to bring
50:07
Speaker 2: your game. So when people would visit me in China,
50:09
Speaker 2: they're like, oh my God, get me out of this car.
50:12
Speaker 2: As soon as you get this is terrifying.
50:17
Speaker 1: So you mentioned that you studied Chinese in college. I'm curious,
50:21
Speaker 1: do you have a favorite Chinese author? You know, I
50:24
Speaker 1: don't know, fiction, poetry, whatever.
50:27
Speaker 3: It would probably be.
50:29
Speaker 2: So favorites would be the Tong dynasty poets, and the
50:34
Speaker 2: most famous one is le Bi.
50:36
Speaker 3: So, in fact, that's the thing that drew me.
50:39
Speaker 2: To China initially, as I studied ancient Chinese poetry from
50:42
Speaker 2: that era, which was around eleven hundred eleven thirteen hundred.
50:45
Speaker 2: Phenomenal poets, just phenomenal, and I'm not into poetry per se,
50:51
Speaker 2: but the way they put characters together made you feel,
50:56
Speaker 2: it made you feel something exceptional. So Lebi would be
51:00
Speaker 2: at the top of that list. And then more recently
51:03
Speaker 2: in the twentieth century, it was a guy named Lushun
51:05
Speaker 2: whose every Chinese nos he was lived in the early
51:09
Speaker 2: part of the century, and you had really perceptive takes
51:13
Speaker 2: on where China was historically and what's what made China
51:17
Speaker 2: different and maybe what China needed to do to really
51:22
Speaker 2: join the world. So one of his most famous lines
51:24
Speaker 2: was Chinese people see foreigners as either gods or barbarians,
51:32
Speaker 2: never as equals. This is profound. This is really really
51:38
Speaker 2: helpful to understand where the Chinese are coming from. So
51:40
Speaker 2: in my early years, foreigners were gods. Now we're tending
51:45
Speaker 2: to be seen as the barbarians, never as equals. And
51:49
Speaker 2: this is important because if China is going to integrate
51:52
Speaker 2: with the world, its view is it should be in charge.
51:58
Speaker 2: It's not joining an American led system or a Western
52:00
Speaker 2: No China in charge.
52:05
Speaker 1: So you've talked about these sort of big macro chaines
52:09
Speaker 1: that you've seen in the decades you've been going to China.
52:13
Speaker 1: I'm curious, is there is there anything on the more
52:16
Speaker 1: subtle end, something that's changed in a kind of less
52:18
Speaker 1: obvious or small but still interesting.
52:21
Speaker 2: Way generation generational change. The younger people I meet now,
52:28
Speaker 2: they tend to be single children, one child policy, they
52:32
Speaker 2: tend to be more affluent, and they tend to be
52:34
Speaker 2: less driven than their parents, so almost entitled. So it's
52:40
Speaker 2: fascinating to see the hunger and the ambition. And now
52:44
Speaker 2: this next generation looks like, yeah, they have this thing
52:47
Speaker 2: called the lying down, lie down phenomenon in China. Like
52:53
Speaker 2: the younger people going, why am I going to work
52:56
Speaker 2: six days a week, nine am to night?
52:58
Speaker 3: What's the point do I need to be doing this
53:01
Speaker 3: so that.
53:03
Speaker 1: Means we have a shot at catching China maybe, But.
53:06
Speaker 2: Then Jack Bob comes out Ali Baba go goes. Don't
53:09
Speaker 2: listen to that, that's garbage. We need to keep working hard.
53:13
Speaker 2: So there's a tension there in the society. Where's it
53:17
Speaker 2: gonna go?
53:18
Speaker 1: Thanks for your time. It was great to talk with you.
53:20
Speaker 3: Fabulous conversation.
53:22
Speaker 1: Thank you. Michael Dunn is the CEO of Done Insights.
53:35
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53:38
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53:39
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53:46
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53:51
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53:55
Speaker 1: show was produced by Gabriel Hunter Chang and Trinamnino. It
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Speaker 1: was engineered by Hans Dale She and edited by Lydia
54:01
Speaker 1: jen Kott. I'm Jacob Goldstein and we'll be back next
54:04
Speaker 1: week with another episode of What's Your Problems Man.