Electric Vehicles: The path to a greener tomorrow?
Tony Roth, Chief Investment Officer
Corey Cantor, Electric Vehicle Associate, BloombergNEF
Tony Roth:
Hello, you're listening to Tony Roth and this is Capital Considerations. Today we're going to talk about electric vehicles. With the changes that we've seen this year to the environments, the record heat that we've seen over the summer, there continues to be what I would describe as really a groundswell of interest in things that people can do in order to help change the course of global warming.
And there's probably nothing that is more tangible than change how we fuel ourselves as we move around in our lives.
In addition to the fact that the state of the art, if you will, and the environment for electric vehicles continues to develop and evolve very quickly. To help us sort through what the latest is with electric vehicles, we're going to speak to Corey Cantor, who is an electric vehicle associate at Bloomberg NEF, which is the research service covering clean energy, advanced transport, digital industry, innovative materials and commodities within, of course, the broader Bloomberg, I'm going to use the word empire as a positive word here, and Corey specializes in North American EV activity, global EV policy, electric buses, all things EV-related in the transport space.
Prior to his time at Bloomberg, Corey worked in economic policy as a Senate aid and at a think tank called NDN. Welcome to the show today.
Corey Cantor: Thank you. Tony. Glad to be here.
Tony Roth: I want to remind everybody before we start that we will talk about certain companies, but we are not endorsing or speaking negatively about any company as it relates to investment recommendations, and I know that Corey feels the same. So that applies to both Wilmington Trust and Corey and Bloomberg.
Our goal today is only to evaluate the state as we see it and the broad investment implications, but to not take a stance one way or the other on a particular company, or even a political issue. Which is another thing that's really important for everyone to understand.
Corey, I think the place to start is what is the state of the art in terms of the best thinking on whether or not if you look at the life cycle of an automobile from, on the one hand, the perspective of what we call an ICE car, which is an internal combustion engine, or on the other hand, the perspective of an EV. Does the science really bear out the idea that over the expected lifespan of those two alternatives, is the EV a better option for climate change than the traditional ICE vehicle?
Corey Cantor: To answer your question, given the previous research that we published, when it comes to life cycle analysis, we did this back in 2020. And what we found is electric vehicles are about 40 percent of the carbon emissions that are produced by an ICE vehicle in the U.S.
Now, when it comes to lifecycle analysis, there's always a it depends aspect of this. If the grid gets cleaner, electric vehicles get more beneficial over time. If the grid is dirty, such as in a place like China, the BEV and ICE kind of nexus is a little bit more of one to one. Or the payback time for that EV to kind of be life cycle net neutral is a lot longer.
Giving a percentage is one thing, but I think one number we like to use a lot is just the time it takes to reach that kind of life cycle net neutral point. So it's about a year and a half in the U.S. for EVs produced in 2020. And then as you move to 2030, it'll take about a year. And the reason for that is in the U.S. people drive a lot. So, compared to countries like France or Germany, that might take a little bit longer in terms of its payback time, even though France has a much cleaner grid than the U.S. because of all the nuclear and renewables on their grid.
Tony Roth: Corey, just focusing on the U.S. then, keeping it really simple, very crude math. If we can get to for the average U.S. driver to equality, if you will, in terms of carbon output over the lifespan of the of the vehicle, and let's say the average car is a lifespan of probably 5, 8, 10 years, given today's current grid that an EV would be really a small fraction of the amount of total carbon emissions of an ICE vehicle.
Corey Cantor: We have it basically at two fifths. So, if you're comparing a medium ice car to a medium BEV, we have about 50 tons of CO2 for a medium ice car and about 20 tons of CO2 over its life for a medium BEV—battery electric vehicle. A lot of that EV emissions that goes into it is in the manufacturing process at the beginning when you're making the battery because EVs have less parts than their ice counterparts. And then once you've built it and you're charging off the grid, the grid is highly efficient.
So you're not losing so much energy. I mean, even on a super layman's level when I'm explaining life-cycle emissions or emissions from ice versus EV to just the general consumer, when you're burning gasoline in a car, you're losing a lot of that power to the atmosphere. With the EV, the kind of electricity conversion process is a lot more efficient over time.
So, even if you're using coal or natural gas, you also have renewables in the same grid. It still is a lot less energy loss propelling that car forward over time.
Tony Roth: So, a country, like, as you were mentioning, Germany, France, certainly some of the Scandinavian countries that I have seen an incredible transformation in their commercial marketplace for battery electric vehicles, where they constitute the large majority of sales now, where they have a large component of their grid fueled by renewables. They would be really greatly contributing to helping to reduce greenhouse emissions by going into the battery electric vehicle space.
Corey Cantor: Yeah, that's 100 percent true. The cleaner the grid that you're placing, or you're charging your EV from the better off you are in terms of fighting climate change.
So, if we were kind of sending to certain markets first, before anywhere else, those Scandinavian countries, even places like a Costa Rica or Chile that have more renewables. You look at UK, you look at France. That's where your biggest kind of life cycle bang for your buck is, but of course, the largest car markets in the world are U.S., China. From just a purely fighting climate standpoint, you're right. Those are the places that you'd want to see EVs go first. And they're actually going there.
Tony Roth: China has been one of the larger adopters of on an absolutely on a relative basis battery electric vehicles, you’re seeing a really acute sharp increase in their adoption in China, even more so here than here in the U.S. Given that it's not primarily climate-change driven, is it simply that on a features basis, they are competitive from our consumer experience standpoint?
Corey Cantor: Yeah, and I've been reading a lot of pieces on this just around kind of Chinese automakers going through almost a Japan-like renaissance of improving their technology and taking everyone by surprise, their features are good, but they've also had heavy investments in industrial policy for the back half of a decade now, into the batteries themselves. So again, it's a competitive space. Not every Chinese automaker is the same.
But it's been a focus for them. Now in China on the life cycle emissions question. It takes closer to, at least according to our analysis, 12 years to reach that life cycle net-neutral point in China compared to just about a year and a half in the US. And that's because there's a lot of coal on China's grid.
So there's a lot of work for them to do on the power side, but they're way further along on the EV transition than we are here in the U.S.
Tony Roth: Are they leaders in battery technology in terms of the, the, an IP standpoint, or is it simply just in the manufacturing of those batteries?
Corey Cantor: Companies like BYD and CATL have been not only demonstrating that kind of economies of scale production, more and more batteries being built every year, but also some of those next generation chemistries, which is going to be more important moving forward.
It's kind of both. That's why it is a for all the automakers over here to think about, and they are thinking about batteries in a pretty nuanced way. You have to get good at building the kind of chemistries that exist currently to put them in EVs. And then also think ahead to—nothing’s going to change too dramatically in the next 2 to 3 years, but more towards the end of the decade—what type of batteries are you going to have ready for those electric cars?
Tony Roth: A lot of people say, well, I don't want to buy an EV today because it only has 250, 300 miles range.
Corey Cantor: Yeah.
Tony Roth: And wait another 18 or 24 months, it’s going to have 1000 miles range. Sort of like Moore's law, where it's going to double every 18 months. Is that accurate in your mind? How fast will it get to the point where a battery electric vehicle has the same kind of range on a single charge as an ICE vehicle on a tank of gas?
Corey Cantor: You do see some electric vehicles made by Lucid, for example, getting above 400 miles of range or so.
So they do exist out there. Charging to me seems like the better long-term solution just because as you're kind of making EVs go further and further, you either need to have more, I'd say efficient batteries or they have to get bigger and with the batteries getting bigger, there is a weight issue. EVs are already quite heavy. So how heavy do you want to make this car? And two, it's just more and more of those material costs. So, ultimately, the goal of automakers is to reach more and more of the addressable market. And we've seen this in the sense of Tesla bringing down its prices from if we were talking 10 years ago, the Model S was in the $70 to $80,000 price range. Now they have a Model 3 that's less than 40,000 dollars without the tax credit, no subsidies. For everyone else, they have to figure out how to bring those costs down. So continuing to focus on range will, I think, only delay that. Now, what can happen, and I think the question that I start thinking about, especially in recent years, is how long does it take to charge to 200 miles?
How long does it take to charge to 400 miles? That becomes kind of a key question, because if you're keeping it under 20 minutes, I think that's what consumers are going to care about the most. What are you getting in terms of your chemistry mix to get you to X amount of miles in 20 minutes? And that I think we'll see a lot of improvement through better LFP, for example, lithium iron phosphate, which is a battery chemistry that has been in China for a bit, has been batteries in general for a bit, but it's becoming a more popular alternative here in the U.S. for certain models.
Tony Roth: You don't think there'll be any transformative change from a material standpoint, if I can use that word, hopefully accurately here, or a structural standpoint, in terms of what the batteries consist of in the next, let's say, half decade, such that we're going to have an advancement into solid state batteries where all of a sudden we're going to be able to have a battery of the same weight as we do today.
And it's going to provide two or three times as much range. But you do think that the whole experience of the car may become much more tenable as in the same weight parameters as we have today for that battery, which is now the heaviest part of the car for most of these battery electric vehicles, that the battery will be more readily chargeable so that you can jam a lot of electrons in there, if you will, without degrading the battery, ruining the battery, which if you go to the fast charger too many times, then you start to see the battery start to degrade, but you think that's where the big improvements are coming.
Corey Cantor: In the mid to near term. Solid State a lot of these automakers are tracking it for 27-28 as they're kind of roll out of it and more than just kind of like pilot phasing and given how long it's taken some of them to kind of scale up the current batteries in place, maybe that 2028 is the target, but then it gets delayed a year or two. Maybe five years before a kind of bigger leap, but in the meantime, improving that charging time and also the chargers is going to be critical over here in the U.S.
Tony Roth: When we think about, not necessarily the climate change, but the greenness of batteries versus gasoline cars, a lot of people say, well battery electric vehicles are really not so great because of all the damage they do to the environment in terms of mining these metals, whether it's lithium, these rare earth metals.
Corey Cantor: Right.
Tony Roth: And that when you combine the total environmental footprint, not just the greenhouse gas effect, but also these other things, the battery electric vehicle really isn't that much better than a gasoline vehicle.
What's your reaction to that?
Corey Cantor: There's a great piece in the Washington Post that just shows how much mineral extraction or material extraction goes into the fossil fuel industry writ large. Often when people, I think, are comparing the EV to an ICE vehicle, there's that kind of thinking on a one-to-one basis, but there's so much that goes to oil and gas drilling.
What's going to be going into electric vehicle mineral mining on a comparative basis is just a fraction of that overall amount. My old political science slash energy professor used to say, there's no such thing as a free lunch.
So just like any energy transition material, there's going to be some tradeoffs. But compared to one on the extraction side for oil and gas and two in the actual use of the vehicle, it's far better for the environment on a climate change basis. And in terms of improving the mining, you're seeing more EVs made with batteries that don't include nickel and cobalt. For the longest time that used to be the argument. Well, the kind of human rights aspect around cobalt is problematic and you've seen automakers shift away. That's one other great thing about EVs. Because of all these materials and different chemistry mixes, as time progresses, assuming that they're safe and they can go the distance that consumers want, there’s a lot of switchability in place, so you don't have to necessarily stay with the same chemistries moving forward. Although, as you know, the lithium is the pivotal one, and they're finding a lot more of it than they even thought now that they're kind of looking for it in different countries.
Tony Roth: I think what you're saying is that the assertion that the total environmental footprint of a battery electric vehicle is comparable to an ICE vehicle because maybe 40% of the same carbon emissions over the life cycle of the vehicle, but also the harm it does to the surface of the earth in mining these metals is really specious.
Because there's a lot of mining that goes on, obviously, for a traditional vehicle, whether it's the metals to go into creating the engine or whether it be the mining of the energy that comes out of the ground and it's more of a apples-to-apples comparison.
Corey Cantor: Yeah, exactly.
And I pulled up the Washington Post piece, just in front of me, just because it was such a good stat. The 2019 global fossil fuel extraction for coal, oil, and gas was about 15 billion tons. And if you compare that to the clean energy mineral economy in 2020, that was about seven million tons. So, again, huge difference. Now, EVs aren't kind of taking over the world that point in 2020. So there's a lot more work to do, and that number will grow over time. But we're talking a magnitude difference. Seven million compared to 15 billion. If that seven million grows by 10x and goes to 700 million, you're still getting better bang for your buck.
And that's all clean energy economy, including wind and solar and geothermal and storage.
Tony Roth: I don't know what assumptions various studies use for recyclability. Obviously, when you pull hydrocarbons out of the ground and burn them, they're not recyclable. That's it. But when you pull lithium out of the ground, you put it into a vehicle you know we haven't gotten generally speaking to the point of a vehicle's life cycle yet where we can then take that vehicle, break it down and recapture that lithium, which I would have to believe is going to be a commercially advantageous activity.
Corey Cantor: And there are companies like Redwood Materials, where J.B. Struble from Tesla is sitting at created that company. And so you're right, not just lithium, but the nickel and cobalt in older EV batteries kind of creating a closed loop circle. I think the other big question to your assumption earlier about how long are these batteries going to last, Right? You had the earlier EVs —your kind of 2010 to 2015 Nissan Leaf that weren't necessarily as high quality as say the Tesla electric vehicle batteries and so it's still very much in play. Places like Redwood Materials are smart kind of getting out ahead. But it's going to take some time until you have enough EVs in the ecosystem to begin recycling them at a higher volume. That being said that's again another benefit of electric vehicles.
You have that material for the life of the car, even with the battery degradation that you mentioned, not only can you recycle those materials and use them in EVs again, you could use them in energy storage. So if you lose, let's say 20% of a battery's life over a, let's say 10 years or 14-year period, that's still a perfectly good energy storage asset for utility.
Now, how those batteries will move around and what business models emerge there have to be determined.
Tony Roth: That future recyclability, whether it's actually pulling the lithium out, the raw lithium, or just keeping the battery in the same basic format and using it as a storage vehicle for a less sensitive type of application than a car driving down the road, that's generally probably not even included in a lot of these assessments.
Corey Cantor: They're not and when we were looking at our life cycle analysis in 2020, and we're gonna be doing it again this year, we were looking at just vehicle manufacturing, battery pack manufacturing, and the use case. So, we didn't look at recycling for ice vehicles in terms of emissions and recycling in terms of the battery pack.
And the reason is the lack of data, frankly, and also making an apples-to-apples comparison isn't necessarily fair to the EV side of the ledger, but it's something we're interested in looking forward to in our own research over the next six months to a year.
Tony Roth: Okay. So, Corey, let's change gears for a moment and focus on another aspect of charging, which is not how long it takes, but just the access to charging, because it's great if it takes a half an hour, even 35 minutes, if you can drive up and plug your car in and say, okay, I know it's going to take me half an hour. But it's another story entirely if you have to drive off the road five miles, try to find a charger because you're not driving a Tesla. And when you find the charger, which is an Electrify America charger or some other company. Guess what? It doesn't work or it works at 1/10th the speed is supposed to work.
The biggest concern that a lot of folks have is from an experience standpoint. How am I going to charge this thing when I go anywhere?
I think that the direction of the current administration seems to be sound, but the commercial dynamics of trying to get the public policy to impact the commercial situation on the ground in the United States seems like we've got a real problem. And for somebody that has to use a car to travel any distance, it could be a real obstacle to a good experience.
Corey Cantor: There's two challenges.
One is that you have to get more chargers built in general. To your point on the Biden administration, they've allotted about $5 billion for what's called the National EV Infrastructure Program, NEVI, and then another $2. 5 billion towards a community charging grant program, which is more for a mix of kind of high speed and level two.
NEVI looks at your highway corridors. They passed that law almost two years ago now and to date, only a few states have selected the charging companies that are actually going to be building those chargers. So, I'm not going to go out and say that no single new charger has been built under the NEVI program, but I'd say it's been minimal, just because they've gone through the process of creating a plan, then picking the charging companies, and then now it’s the beginning of that execution phase.
So there's a lot more work to do on the policy and build out front around chargers. And then secondly, there is this combined charging standard CCS, which is probably what would be in a Rivian or any non-Tesla vehicle versus the North American charging standard, which is what Tesla has renamed its supercharger.
So, there's also the two charging types and who's going to win out. So, there's a lot of complication and confusion for consumers on the charging infrastructure side, and it's a real barrier to entry because for people like you and me who follow the EV industry, you understand the difference and the benefits of the Tesla network versus the non-Tesla network, but if you're someone just reading about it for the first time, what do you pick?
When is this adapter going to come out? Should I wait a year? It's a real barrier for new consumers to overcome. It'll get better. But again, this has been something that has been holding up the industry for a couple of years.
Tony Roth: So, Corey, I go to visit my mom with my family a bunch of times a year, which is New York City from Philadelphia. I can make it there and back without charging - or I go to Cape Cod once a year, and I come back once a year and we have to charge once and it sucks and we have to sit there and wait on line and then sometimes we have to wait for a charger that doesn't work.
Or work so slowly, we have to get back on the back of the line. It's just a horrible experience, but I can bracket that because it's only once a year. If I was somebody that had to routinely travel, I wasn't driving a Tesla, or I had to drive more than a few 100 miles round trip, I would really have hesitation, because I actually feel that it's likely to get worse before it gets better in the U.S., which is to say that the pace of adoption of battery electric vehicles is far outpacing the pace of even Tesla installing new infrastructure, much less the CCS standard, which was what most companies use.
And so, I think, that one has to be very cautious in this country in adopting that battery electric vehicle lifestyle, if you're not really careful around a charging plan, you really understand how you use the car and how you're going to charge it, even in a world where you have a lot more competition for chargers.
So let me change speeds again here and go back to something you mentioned earlier, which were Chinese battery electric vehicle manufacturers where, from our perspective, being Americans, we think of Tesla when we think of electric vehicles and we think the Tesla is the, sort of progenitor, battery electric vehicle company, but as happens in so many industries, a lot of that IP is appropriated and applied and sometimes applied better by Asian companies. In this case, it's been a real interest of the Chinese government to fund and get behind and now there's any number of Chinese BEV manufacturers.
There’s BYD, Neo, XPang. From what I read, the quality and the price for a feature of those vehicles are outpacing tesla. I wonder whether or not we're going to start to see those vehicles show up here in the U.S.? I know they're starting to show up in Europe.
Core y Cantor: You're definitely starting to see European automakers concerned, right? They launched a kind of subsidy investigation over the last month, looking at the advantage that Chinese automakers may have. BYD has been not only expanding its operations or its exports into the European market, but you look at places like Israel, for example, BYD’s cars have done very well there. You look at Latin America, BYD inked a deal to buy Ford's old plant in Brazil. So that's a 2024, you know, beginning that operations.
They're not shy about looking to grow their markets share. And one thing when it comes to both Tesla and BYD that I like to remind folks is, I think often we put EVs into a different bucket, there's the auto sector and here's the EV sector, but Tesla doesn't think of it like that.
Whenever they're asked about it on an investor call, they say we're competing in the automotive business. And the same with BYD. BYD this year is aiming for about three million sales. And when BYD sells electric vehicles, they sell both battery electric, fully electric vehicles and plug-in hybrid electric vehicles.
So that's with both your electric plug and your gas car element of it. Tesla just BEVs. So together, though, the two of them are going to be aiming for about two million for Tesla, fully electric and BYD about three million. So that's five million car sales in a single year just for two automakers. In terms of the other Chinese startups, they're all doing fine.
You have some incumbents like SAIC or GAC, who are also upping the ante on their EV adoption, but it's a really competitive marketplace over there. There's even been a price war of lowered prices where the Chinese government has had to come in and say, stop lowering your prices guys, or stop competing on that way, because you're kind of devaluing the electric vehicles, and harming the overall market there.
In terms of the U. S. kind of shifting gears there. I'm not sure that BYD is going to be entering in the near term, given that kind of heightened tension between the U.S. And China. What you might want to keep an eye on is Volvo. So Volvo is the Swedish company, but they're Chinese owned. And so, Volvo has some high quality EVs coming. They've announced the EX30 for next year. So really attractive cars, great technology. The one thing that they haven't had is the use of the Tesla charging standard over here, which they've announced that they're going to switch to.
So, I think that would be a more likely first step than BYD entering the market. But when BYD does, it'll be a big moment. And there's been some articles around them going to Mexico first.
Tony Roth: Why would Tesla allow a company like Rivian, for example, which has now signed on to the so-called North American charging standard, which is the old supercharging standard.
I mean, I understand that Rivian is so tiny compared to Tesla. Can Tesla make anywhere close to as much money just through licensing their standard or selling electricity to customers as they can selling cars? Is that why they're opening up their standard?
Corey Cantor: When they've announced this deal to kind of open up their network, if you look at the fine print, they say something like we're opening up 12, 000 chargers out of the 18, 19, 000 plus available.
And so what chargers will they be is an open question. I think from Tesla's perspective, it's a win/win because it's a recurring revenue stream moving forward. You look at the big, for example, gas companies, meaning oil companies in the U.S. You know, you got your Exxon Mobiles. You got your BPs.
Tesla really has the opportunity to establish itself in the early days as one of the major players. So much so that a lot of automakers have almost waved the white flag and said, Tesla, take care of our public charging because we don't want to deal with it. A group of seven automakers came together to form a charging consortium that doesn't have a name yet, but includes the likes of GM and Honda, Kia, BMW, amongst others, to create another public charging company to compete with Tesla.
They have a goal of close to 30,000 chargers that they want to put by a not set date, but again, they're already behind. It's good to see more and more automakers realizing that just like the battery is key and central to the EV experience, so is charging. When you talk to a lot of folks around OEMs, they just don't want to deal with it.
So they want to either outsource it to an EVgo or Electrify America. I think automakers have seen that some of those companies may have been a mistake to rely on. Because if they were so confident in the public charging network as is, they wouldn't have agreed to go to Tesla's network. So from Tesla's standpoint, I don't think there's too much to lose. For Tesla’s executive team, that's billions of dollars in potential revenues every year versus the one-time car sales.
And ultimately, we have seen Tesla having to lower prices to kind of counterbalance lessening demand. And so even if Tesla kind of continues to create new models that are exciting, just like any automaker, there's only so many cars you could sell in a single year versus the kind of recurring charging that happens all the time.
Tony Roth: Their demand has exceeded their capacity for a while now.
Corey Cantor: Yeah.
Tony Roth: That seems to be somewhat cyclical where all of a sudden there's competition and you can go on the website and find any number of vehicles at the local Tesla dealership. If you will.
I know it's not a dealership, but that's the store waiting to be sold.
Corey Cantor: Sales store, yeah.
Tony Roth: And then all of a sudden they immediately drop the price. It's fascinating the way the MSRP, if you will, on a Tesla just wavers all over the place because they're always trying to make sure that they can move the cars.
And if they're oversubscribed, then they just jack the price up. But one of the things that I find to be most fascinating, and I would be probably most concerned about if I was an individual that owned a lot of stock in a traditional automobile manufacturer, is the labor cost of producing the vehicles.
Let's assume somehow that the IP of a Ford or GM could, roughly speaking, reach parity with the Tesla, not exclusively in terms of battery technology, motor technology, because of course, these cars use motors instead of engines. but the overall package of the vehicle. We certainly can experience whether you go into a Cadillac or a Model S, the Cadillac is probably a much more comfortable experience than a Model S.
Corey Cantor: Yeah.
Tony Roth: There's a lot of, a lot of legacy technologies that these legacy automakers can bring to the experience of the customer that's still superior to what Tesla delivers. But let's assume all of the IP is equal. You still have to build the car at a competitive price point, and if your labor costs are two to three times higher because you have union workers—again, this is not to speak ill of unions or condone unions one way or the other, it’s just to look at the economics. It would seem that even if you give these legacy automakers, the benefit of the doubt.
It seems very unlikely they'll ever really be able to be competitive with either the Chinese or the Tesla's of the world that don't have unions, because there's such an incredibly price-competitive market now.
Corey Cantor: I'll throw dealer models on top of that, too, just so we're kind of covering all the, all the costs.
Tony Roth: Right, yeah, right. Please.
Corey Cantor: Tesla has that advantage of the direct sales. Without having the middleman involved. And then also the, the union labor difference. These are all challenges that automakers are going to have to kind of figure out how do they make their workers happy enough while still competing. Because on both sides, whether you're talking from the union perspective or head of Ford's perspective, Jim Farley's perspective, you got to find that kind of middle ground.
Otherwise, everyone is worse off in the long term. If Ford is at a non-competitive, position because they struck a bad deal for the company, then basically they're going to fall further behind Tesla and further behind some of those Chinese companies. On the other hand, the automakers have not been investing in batteries in the way that they need to, and they really need to scale up quickly. And so if the company is not able to do that, they'll still fall behind. You look at GM's Ultium, for example, this year, and they've sold under 10, 000 units of Ultium, not Bolt and Bolt EUV, the old platform, which is doing quite well.
It's a longer way of saying, I think labor is definitely a part of the conversation. But there's so many challenges the big three face. One thing that they might do, which I think would be a mistake is saying, You know what? We're so far behind Tesla and the Chinese companies, let’s just go back to doing only ice cars or even ice with hybrid because ultimately, then you're just seeing the ground for the future. I don't think all three of them would do that. But you've definitely seen a step back around, not just the strikes, but this whole year after they failed to kind of meet their own internal targets.
Tony Roth: I think you're being kind, it sounds like, to this legacy automakers.
Corey Cantor: Can I say one more point on this, yeah not to sound too generous. I think there is a real risk for Ford, Stellantis, and GM. And just like when I've had conversations with people in the press about, is the EV industry here to stay and all of our data says, yes, all the sales are increasing, you know, maybe future years, where will growth be?
Will it slow in certain years because of these kind of challenges, perhaps, but just because the big three have been the big three historically, you know, they used to be close to 90% of all U.S. sales for the overall auto market. In the first half of this year, they were down to 41%. And moving forward in the first half of this year, they only did about 18% of all electric vehicle sales compared to Tesla at 50%.
I'm pretty confident there will be U.S. domestic EV manufacturers moving forward, but it might look like Tesla, Rivian, and pick one of the big three that make it. Just because the world has been a certain way for 30, 40 years, this is a once in a 100-year kind of transition and people who aren't able to adapt can be left behind. Whether you're talking about the Big 3, or even Toyota has been a laggard on electric vehicles. It doesn't mean that they won't exist in some form, but they'll exist in a different form than they have historically.
Tony Roth: And Toyota, I think it's been interesting because they have been a laggard. And their chairman had been very outspoken for a long time around the limitations from a grid standpoint and a charging standpoint, and they've totally reversed their posture, but the cars they've been bringing out are just so uncompetitive from a range standpoint, because their technology, their IP is just so far behind. And so that's interesting.
What do you think about the European car manufacturers? You see Volkswagen heavily moving towards this although the software is horrible. You see BMW and Mercedes. Are their labor costs as heavy as the U.S. in that regard and do they have technology that is competitive with the top Chinese and Tesla, or are they also lagging like many of the Japanese from an IP standpoint,
Corey Cantor: VW I'd say most prominently has a big labor union that throws its weight around. So that's been a challenge, but the software for VW in particular has been a huge problem with the issues that they've had there.
We've talked today about batteries. We've talked about charging, but there's also the software element, too, that has to be up to par. On Mercedes, one stat that I really found interesting to show their progress, because I think a lot of times people like me come on and we talk a lot about Tesla, we talk about BYD, but there is progress for places like Mercedes.
So, Mercedes in the third quarter of 2022, about 4% of their sales in the U. S. were electric. A year later, same quarter, about 15% of their sales were electric. So again, that's a positive trajectory. If we had seen a GM or another automaker go from 4% and then year on year go up to 15%.
That's the type of movement you want to see that we haven't seen to date with some other automakers. So Mercedes solid shape, you know, Volvo also in good shape. And then BMW also has been seeing good EV share of sales in the premium category. But these are all more of your nicer cars. Not so much in the, everyone is buying one kind of Toyota Camry, Honda Accord. That's going to take a couple more years and Tesla will probably get there first based on their kind of current trajectory.
Tony Roth: When we talk about the viability of a lot of these companies and technology, and we talk about EVs in general, a lot of times it’s missed that inherent in Tesla are really two very critical and very fascinating and interesting kinds of technologies.
One they’ve been very successful on already, which is the battery electric vehicle in and of itself. But the other one is the idea of automation and self driving, which has been a big part of the promise of Tesla and the identity that Elon Musk has created for Tesla and indeed almost every other car manufacturer that's big in battery electric vehicles is trying to do the same thing that Tesla is, which is bring some level of automation.
We have done, I think, a really nice job of untangling that spaghetti for the purposes of our conversation today. But I think that is sort of incumbent on us to acknowledge that as part of the conversation, because to the extent that any one automaker is able to be successful with this idea of delivering an automated vehicle where you could sleep in the back and it doesn't matter if it takes seven hours instead of five hours to drive up to Cape Cod for me. I'm sleeping. Who cares? The car takes care of it all. That's a game changer to the economy from a productivity standpoint and a customer experience, but just from a basic productivity standpoint.
So I wanted to finish today by putting that idea of automation on the table and having you react in any way you want.
Corey Cantor: When I first got to my job. So that was, you know, over four years, I'd say that he's had the same level of hype to it. People were saying, Oh, where do we direct our resources between autonomous and electric?
And since I've been here, EVs have kind of sped ahead in terms of their success rate, while AVs have been in a similar place. I've actually ridden in a WAYMO before and it was actually a little bit scary for the first two minutes and then quite boring, which I think is kind of the point of automation. It is a space that's going to be really interesting, both from a climate perspective and a car strategy perspective.
But frankly, one I don't see playing a role until the 2030s. Tesla talks about the self driving. They have good betas out there and they have a different approach using cameras compared to others who are using things like LIDAR. But it's really, really hard. And I think if we're being honest, it's something that is going to have to be regulated in a smart way for consumers to really feel comfortable enough to use it on a mass scale and not just a set of people who kind of a fully bought into the tech for a long time. So we'll see.
Tony Roth: And it'll be interesting to see to what degree that is a microcosm or a token of the broader type, if you will, of AI. Will the promise of AI in fact, be much more extended or will it come sooner? Because I think that a lot of the automation is AI driven. It'll be interesting to watch and Corey, for that reason, we'd love to have you back on again in the future. This has been a great conversation.
Corey Cantor: Yeah, thank you so much, Tony. It just goes to show you got to do these every year or every six months with how much things change. And yeah, a lot of topics we didn't even touch on. It's a, it's really an interesting time and we'll see how things shake out for the rest of the year.
Tony Roth: Thank you so much again, Corey, and please check Wilmington Trust dot com for a full round up of our latest thought leadership on the investment world and planning and other areas. We'll be back again soon with another episode of Capital Considerations.
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