Porsche and Other Sports Car Icons Are Losing Appeal in China

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1:32Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. We wanted to switch gears literally and talk a little bit about cars because a couple of stories by our Hannah Elliott definitely caught our attention. Foreign automakers investing heavily in China, building factories, forging partnerships to feed the country's passion for EVs, hoping the world's appetite would grow to match. But apparently the strategy flopped. This is what Hannah has written. She's Bloomberg Pursuits staff writer and car critic co-host of the Hot Pursuits podcast that she does.

2:10Highly recommend you check that out. She is out there in our Bloomberg News LA Bureau. Hannah, nice to have you here with Emily and me. I want to get right to it. Things change, I feel like. We go through these cycles when it comes to the auto market. And for so long, we've talked about EVs and everybody leaning in. Tell us a little bit about, though, first of all, what's going on in China. Well, it's been really interesting. China has been, for years, touted as the biggest growth market, the most important growth market. Every automaker basically was sort of restructuring their product lines to feed this China market, which isn't unfounded.

2:53It's a huge population. There's a lot of money and buying power there. So, of course, China was looking really great. And Chinese buyers love EVs. They love AI. They love really futuristic software. And so a lot of automakers like Porsche, Audi, BMW, Mercedes, all oriented their production lines toward making EVs, capturing this market. What has happened has been, of course, that the American market and other markets in the world have not adopted EVs at quite the same rate that the Chinese buyers have. Which is a problem because America and North America is a huge market for all of these automakers, too.

3:34So it's really, it's almost a tale of two cities. It's a tale of two cities. They're trying to appease both of these huge markets that want very different things. That's expensive for an automaker, right? To have to kind of play. Completely, it's a billions and billions of dollars worth of money spent, but it's also very difficult time and resource wise. For instance, you know, planning these cars takes years, years, five, six, seven years in advance to roll out, to go from start, you know, blank paper to now we're in production, that can be five years at a minimum. So you really have to think to the future while you're spending billions of dollars and you're sort of chasing a moving target.

4:17So it's really a challenge. Okay. So why are the EVs flopping in the U.S.? Is it just, I mean, look, I'm no expert on cars, so I defer to you completely. Is it just Americans, they like the smell of gasoline. They don't like it's all about that. There's no shame if you do. I do know some people who tell me they literally like the smell of gas, but that's not what we're talking about here. What we're really talking about is a few factors that have really hampered the EV market. I think the number one is the network of chargers. That still remains a really big deterrent to American buyers jumping into EVs.

4:58Now, obviously, if you have a charger in your home, that's one thing. But even if you want to drive, say, from Los Angeles to Las Vegas, a lot of us on the West Coast like to do that, it takes a long time to find a charger that's working. The charger network is a really big deal. The other thing, too, is range anxiety still is a factor. I don't think it's as big as it has been in recent years, but it's still a factor. And the bottom line is a lot of consumers have figured out, we're not going to have to buy these EVs. You know, states like California, where I am now, continue to roll back their targets for EV proliferation, for cars, emission standards.

5:40Even the United, the federal government has done that too. So we sort of realize, oh, we don't have to buy these if we don't want them. and people are creatures of habit. You know, they, if they've got a car they like, they're going to stick with it. You know, it's interesting you say that. I was like driving from New York out to Connecticut and like, you know, there's little rest stops and there's obviously the places to charge. And I'm always expecting there to be a line, you know, of cars waiting. There never is. There's always a spot that somebody can kind of pull into. So it just kind of, it's interesting.

6:12While I see more EVs than I used to, it's not like they're lining up waiting. So to me, it kind of says that there isn't as many cars as we thought. I want to get into your story, though, because you get into halo cars, which are so important for some of these really high-end brands to drum up excitement. And you would think that China would be interested, but talk to us about this story. You kind of tell it through Audi, but talk to us a little bit about this. Sure. Well, Audi has really been the halo car that's bucking the trend. When we think of a halo car let's think of something like the corvette that is a quintessential halo car it's an exciting vehicle developed by the automaker to bring people into the brand get them excited about coming in and even if they don't buy a corvette they might buy something that's a little bit more affordable or more practical but they're still excited about the brand the thing that changed has been the arrival of EVs.

7:12Why? Because EVs are really fast. EVs are as fast as any Lamborghini or Ferrari. So this, and they're way more affordable. So look, like, halo cars were fast. They had this, like, exciting look to them. They had a lot of sex appeal. But now EVs are kind of doing everything a halo car could do. And they are grocery getters. This is our practical car that we buy all the time. So the allure of a halo car, meanwhile, while all these automakers are trying to sell to China, has really gone away because they're making EVs. Now that we have the internet, we don't need to go to dealerships at all to see these exciting cars.

7:55We can see them on our phones. So there's just been a whole cooling effect of sort of no halo cars like we see. Now, the exception lately has been Audi's, the new Velari, their new sports car. Now, they're not going to make that many of them, fewer than 500. So this is not going to change the world. But it's been interesting to see Audi buck the trend and say, we're still going to make a halo car, even though we don't plan to sell that many. We're hoping it will reignite a little bit of the pizzazz that we used to have. And then in the Chinese market, you talk about in the story to other just domestic alternatives that Chinese buyers are maybe more interested in.

8:36And maybe these cars are a little bit more like a Chinese halo car than than what we've seen in the U.S. market. Totally. This is a really interesting thing because companies in China like BYD, Maestro, Xiaomi have been able to develop cars that are way more affordable with halo car-like performance, with advanced software and technology and AI adaptability that consumers in China love. Again, all for a very affordable price and these by all accounts are well-made vehicles. So yet again, Western automakers like Porsche, BMW, Mercedes are kind of having their lunch eaten by these domestic automakers that are putting forth a better product for a less expensive price.

9:26And again, they're just losing ground in China. It's been really interesting to see. Does that mean that we're going to see a halo car again, maybe from some of these other automakers? Maybe, or maybe the meaning of a halo car is changing altogether. Yeah, I feel like so much is changing, right in the auto market. Have you driven a really high-end Chinese EV or a Halo? Yes, no? No, I have not. That is a great question. I haven't. They're not sold in the U.S. They're not legal to be sold in the U.S. I haven't. Now, you can drive them if you go to Europe or Mexico, of course. I haven't. I would really like to.

10:02I can't wait till I can. All right. Editors for Hannah, please send her there. No, but what's interesting though, So Hannah, what's your view? You know the auto market and have been covering the global auto market for a long time. Restrictions on Chinese EVs. Should we open up the market? Would it push U.S. makers to be more competitive, high-end, low-end? Would it be a good thing competitively, in your view? Or would it really hurt the U.S. automakers? I always wonder about that when we think about capitalism. What's good? Is competition good, making everybody better? I think it's a great question.

10:37I think about it a lot. I am not an economist, so take this with a grain of salt. But yes, I would love to see cars. I want to have the best products in the world available to American consumers. And again, I'm not an economist and I'm not a politician. But my knee jerk reaction as someone who covers cars is, yes, give us the best products. Let the market sort itself out. i'm really blown away at how quickly an ev carol can go from zero to 60 miles an hour i did not know this um and even in 2015 though hannah writes in her article um ludicrous mode let the tesla accelerate to 60 miles an hour in 2.8 seconds um it's just so interesting like i said i'm no car expert but um well this is really changing the market no i get it and like you're talking with our Bloomberg Intelligence Michael Mann, too, like, I just think there's so much going on in China, right?

11:32Their expertise, Hannah, is something that the world we know is watching, and we can't underestimate what they can do. That's exactly right. And, Emily, you're so, you don't have to be a car expert to know these speeds are blistering fast. Yeah, it's a roller coaster. Hey, listen, before you go, there was one other story that our team actually highlighted for us. And this is about Tesla BYD enjoying golden summer to electric cars. I saw Tesla came out with some numbers ahead of the weekend, better than maybe what folks were thinking, but still there's a lot of competition out there. How are you thinking about Tesla right now?

12:10I did see that piece and I thought it was a great piece. I think it's very interesting for two reasons. Number one, people seem to be a little bit less ready to cancel Elon Musk, the founder, co-founder of Tesla. There was for many months, a lot of backlash politically against him. That seems to have died off a bit. So perhaps that explains part of the bump. Also just the high cost of gas prices. Let's be honest. It's summer driving season. People want to hit the road. We don't want to fly right now because the airports are crazy busy and a lot of people want to drive and gas. Gas is expensive.

12:51I know in California, it's almost$7 a gallon in some places. Gosh, that's painful. Both those factors, I think, have very real repercussions. Hey, listen, kiddo, always good to check in with you. Be well. Hannah Elliott, be sure to check out her Hot Pursuit podcast. She does it with Matt Miller. It's a great listen. She's, of course, Bloomberg Pursuit staff writer and car critic. And as we said, the Hot Pursuits podcast.

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