Toyota's Hit EV? EU's China 'Crisis?' & Tesla Value Questioned?

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1:05hello and welcome to another episode of the pulse podcast a brand new podcast for your feed which is all about the life and death decade of the automotive industry as told through the eyes of an entrepreneur dan caesar and a former automotive engineer me imogen vogel hello imogen excited to catch up we've got some really good stories this week Yep, we are talking Toyota, we're talking Volvo, Polestar, a little bit of Tesla, and a couple of other bits and bobs as well. But before we get into any of that, how's your week been? Good. It's been a week of mixed emotions. We welcomed a Cypriot kitten to our household just a few days ago.

1:45You've seen the videos. That was exciting. but at the same time we paid a fond farewell to Quentin Wilson. We were at his funeral, which was great to reflect on his life and his contribution but has obviously left us a bit sad as well. Yeah, we were debating just before we clicked record, should we mention this? We don't want to be Debbie Downers on this podcast, but actually it would be weird if we didn't mention it. And as you say, it was a beautiful, beautiful ceremony and completely as you'd expect, there were so many different people from across the automotive industry. He was so well-loved and contributed so much.

2:25So I was very pleased that we were able to be there and support his family really. He was an incredible man, full of integrity, ahead of his time and we will miss him deeply. And we'll keep working to promote EVs as he was doing for many years. Well, I'll just share this with you because I texted Robert who was obviously very sad not to be able to make it because he's presently in Australia with his in-laws. And I said, you'll be really pleased to know it was probably the biggest gathering of electric vehicles outside one of our live shows. So he chuckled at that, but I did admire the car park near the church.

3:01Yeah, it was impressive. It was impressive. It was a beautiful day. And we paid our tributes, paid our farewells. And no, I always think about him and he was a passionate advocate for the technologies we're going to talk about today. Let's get into today's stories but first a very quick advert break. This episode is brought to you by Hankook. The Hankook Ion tyre is built exclusively for electric vehicles, engineered to deliver what EV drivers need most, confident grip, quietness, energy efficiency and long mileage. As the official tyre partner of Formula E, Hankook proves its EV technology is at the highest level of performance and brings that same innovation to every ion tyre on the road.

3:46So, story number one, Toyota's$15 ,000 electric SUV is a hit in China. That was from electric. What's going on there? Well, I mean, China is a market unto itself. You might say Toyota is a company unto itself. It is the biggest carmaker in the world. And you have to admire how it's got to that position in the market. It has famously been quite slow to electrify. And we are certainly hoping that it will accelerate. But it is, I think, slightly cynical to see it really accelerate in some markets more than others. So, we know it is selling at quite a lick in Norway, for example. They're doing very well there.

4:30They're very pro-EV in that nation. And we know in China, equally. It's a market they can't afford to ignore. And yes, the catchily entitled BZ3X is selling like hotcakes. I think they've sold over 60 ,000 of them now in China. They've sold 10 ,000 for the last two consecutive months. It's equivalent to about£11 ,500. Obviously, never be that here in England, about US$15 ,000. And it's the best-selling foreign-owned EV in China, building out cars like the VW ID.3, the Nissan N7 BMW, i3, and many, many others. And it's really interesting to see their strategy in China play out. I was at Shanghai Auto Show earlier this year.

5:18I don't know if I've mentioned that before. It's still... I've never mentioned it. I didn't know you were there. It left an indelible mark on me. But actually there, they had a sort of flagship sedan that's coming out soon. They're opening the order book for called the BZ7. And it's stunning. And it's, you know, incredible car and that's coming out. And I suspect that will be very, very successful as well. So it's really interesting to see Toyota on one hand, really go for it in the Chinese market and get some success there. So I do hope that their success in China with these cars will perhaps make them a little bit more, a little bit less reluctant to go full EV elsewhere.

5:55worth. It's really interesting because I think historically, as the fully charged show, we've not necessarily been the most positive towards Toyota. And that's largely been driven by their, I'm going to check my notes here, but the 1.690 rule that they tend to have. So very much committed to this multi-pathway strategy. And their argument on this 1.690 rule is that the critical materials that go into one battery could actually supply six plug-in hybrids worth of batteries or 90 plugless hybrids, which we should say should not necessarily be called hybrids. And it's a better distribution of resources.

6:31And they keep saying things like, you know, combustion isn't the enemy, carbon is. And I want to say, is efficiency also your enemy in this one? Because it, you know, you just wouldn't choose combustion on an efficiency basis. But obviously, since they've had their new CEO in, that commitment to that electric strategy feels like it's got a little bit more seriousness. And I think we're going to see 30 new fully electric models by 2030. So it is all steam ahead. Well, it's encouraging, but they have lobbied very, very hard for the combustion engine. So on one hand, I feel mildly guilty that we've been critical of them over the years, but they are sort of half-heartedly pushing electrification.

7:16and at the same time they're sort of lobbying against it. And they're doing that, you know, very significantly in countries closer to home. We know that. It's on the record. And, you know, the reality is that's obviously very, very disappointing to see. It becomes a self-fulfilling prophecy. If you're lobbying against something, then uptake for BEVs might go more slowly and therefore then you can always turn around and say, oh, look, people aren't as interested in BEVs as we thought. So it is a very, very cynical ploy. But my hope is really that success in China will actually lead them to, add more petrol electric vehicles with a little bit more alacrity to get into the market and to see the benefits.

7:52As I said, the cars we saw in Shanghai were incredible. They're actually Chinese-made Toyotas and they're fantastic. So hopefully, they're starting to turn a corner, but we've said that before and only time will tell. Well, it's interesting because they've also said that the BZ4X, equally very catchily named, what a naming strategy for goodness sake, But they have kind of confessed that that was a bit of a box ticking exercise. And these future electric models are much more about instilling fun into EVs. And the current CEO, Koji Sato, was like, well, you know, if a car isn't fun, it's not a car.

8:30So there is this sort of, you know, this commitment that, okay, EVs don't need to be this box ticking exercise. Of course, we know they're better to drive. Of course, we know they can be super duper fun. I just wanted to provide a bit of context on the numbers because sometimes I feel when you hear these numbers, oh, they've sold 62 ,000 of these models this year. I'm like, well, what does that really mean? How does it compare? But to give some context, Polestar have sold about 45 ,000. Well, I think they sold 45 ,000 vehicles in total in 2024. So 62 ,000 of a brand new model is enormous. It's absolutely enormous.

9:05And of course, at that price point, it's competing with things like the BYD ATO3, the GAC AONY, the Cherry iCar 03. So China is lucky to have this suite of very, very low cost EVs. The new sedan that's coming out is equivalent to£17 ,000 sterling. And it looks a bit like a Tesla Model 3, maybe even slightly more attractive, to be completely honest. So they can do it. So it's the cynicism that I object to, really. and that's what we have an issue with. But it has never been us wanting to see Toyota fail. It has always been our fear that they would shrink significantly on the basis that they hadn't been on the front foot with battery UVs.

9:46And the more and more I see of BYD and their output and China's output in general and other progressive manufacturers from around the world, the more I think that Toyota still has its head in the sand a little bit. And I would, certainly if I was in the hot seat there, I would be hoping they would move a little bit more quickly because you can get caught out. Things change very, very fast. And I did see a headline automotive news sort of congratulating themselves that they've backed the right horse with hybrids in America. But, of course, America is only 4 % of the global population. It isn't the whole world.

10:19And BYD are making huge inroads way outside of China, in Africa, in South America, obviously in Europe, in Australasia. You know, that's got to start eating into Toyota's sales figures. And if I was them, I would, you know, hasten the electric strategy. And they are capable of making these great cars. Well, you've mentioned a few things there that I think seamlessly segue to our next story, not least lobbying. How different markets are becoming increasingly interesting. And, of course, the role of legacy automakers in all of this. So, without further ado, story number two.

11:04Story number two. The Chinese will not pause. Volvo and Polestar urge EU to stick to 2035 petrol car ban. That was from The Guardian. I do think a better headline would have been to stick to 2035 ban of new petrol cars, not just a blanket ban on petrol cars, because we know that's not quite the case. Yes, gives a little bit more context. Yeah, that's really frustrating. The way it's called a ban when it really isn't that is always extremely frustrating. You know, the reality is and car companies are resistant to change. And you can completely understand why they're huge organizations, they need long term planning, they need certainty.

11:45So what's going on at the moment, just not with electrification, but a whole range of different things is obviously making it incredibly difficult to run a car business. But at the same time, progress is something that we need to accept in life. And it's really interesting to see what Michael Lerscheller from Polestar, who you've interviewed on the podcast, and what Hakan Samuelsson from Volvo have been saying this week, as the EU is being lobbied quite heavily, seemingly by German manufacturers, by German stakeholders to weaken or delay the 2035 deadline. And Samuelson has sort of rightly pointed out really that, you know, have we not been pushed to progress, the automotive industry probably would have resisted and did to an extent resist seatbelts, resisted catalytic converters, you know, it has to be moved on.

12:43And obviously, we're, you know, emissions are clearly an important part of this, but electrification, the cars are just simply more efficient. So it's interesting to see that play out in Europe at the moment. And I guess any block like Europe with Germany at its heart, which is, I have to admire what the likes of BMW, Mercedes, Volkswagen Group have achieved, but times are changing, and they're changing very, very fast. And I was at the Munich Auto Show, and I saw lots and lots of battery electric vehicles, fantastic ones from the likes of BMW, from the likes of VW, Audi, et cetera. And it's great to see that.

13:18But at the same time, behind closed doors, there's clearly a lot of pressure on the E at the moment to relent and to delay. So the issue really for me is that it is kind of a false argument. Delay might seem like it's going to help. It might seem like it will keep Asian car makers in particular at bay and out of Europe. But the reality is Chinese car makers have been so agile, they're actually selling lots of hybrids into Europe already. So they are eating share significantly, irrespective of powertrain. So they may think, you know, by lobbying against battery electric vehicles, trying to slow that process down, they're doing themselves a favor.

14:03I think actually by not competing, they're actually going to hurt themselves. And they're actually going to, I mean, they're so far behind, they're going to really struggle to catch up. Well, Volvo and Polestar would 100 % agree with you on that. And their argument is say, well, if you, you know, in the German Chancellor Friedrich Merz, he says that he wants new hybrid and highly efficient combustion engines to be considered post 2035. And Volvo and Polestar argue that, you know, you're just leaving yourself wide open to, especially Chinese car manufacturers to just eat the market up. And especially then taking advantage of lower labor costs in Eastern Europe, et cetera, et cetera.

14:43But I really loved this quote from Michael Loshella, who you're right. I interviewed back in, I think in May. He's incredibly tall. He made me feel like a little teeny tiny human being. He's run 126 marathons, which I might yeah it's ridiculous it's actually it's horrendous but by my calculation that must mean about four marathons a year given his age and when you're allowed to start running marathons and given he's had a number of different CEO titles that makes me feel sick but anyway but he's that's relevant because he said I am a marathon runner I've run 126 marathons in my life and do I train and say, it's difficult, so I'll just do a half instead?

15:28No. I thought that was great. And that's precisely what's happening with the German manufacturers right now. It's hard to transition. Of course it is, but having a tantrum about it doesn't change things and it's not going to make you more competitive. Samuelson's quote was interesting as well. He effectively alluded to the German manufacturers and he said they could do what they like, but if they take the foot off the electrification pedal, they would just widen the gap for China. Because the Chinese will set up factories in Hungary, in Slovakia, Romania, in low labor cost markets. I don't think it's possible to keep them out of the EU with tariffs.

16:02And his recommendation to Slavon de Lyon was actually, you don't have to make a decision now. You can actually delay it close to the cutoff date. We have time, we have 10 years. And that's an interesting point, I think. But I think we all know what's going to happen. I think we all know that there is going to be weakening. And that is, I think, going to be to Europe's detriment. Oh, gosh. Well, continuing on that theme, that weakening of the role of these legacy OEMs, you shared a really interesting article with me from Reuters. The headline being, China floods the world with gasoline cars it can't sell at home.

16:40This is astonishing. Tell us a little bit more. Well, we definitely, you know, the whole purpose of this podcast is to keep you up to date on the automotive industry, to keep our finger on the pulse of what's going on, because we do think it's a life and death decade. And that is going to apply equally to Chinese manufacturers as manufacturers elsewhere. And it may sound like I'm being, you know, indulging in exaggeration, hyperbole, but we think some companies might go to the wall, but equally, others will at least be significantly smaller than they are. It will be the employees who get caught out rather than the people at board level, I would say.

17:19What's interesting with China, of course, it has a glut of capacity. Everyone knows it has a glut of capacity for electric vehicles. Obviously, that is heavily incentivizing it to accelerate its sales all across the world outside of China. But less well-known is it has a glut of manufacturing capacity for non-electric vehicles as well. The same thing is playing out. It does seem to be a consequence or result of offshoring from the Western world over many, many years is now playing itself out in real time. And it is alarming. And we understand that. But the way in which Chinese car makers have been able to, even the ones that have started off as, you know, battery electric only, have been able to actually add in plug-in hybrids, e-revs, you know, the electric range extended vehicles as well.

18:09And even hybrids without a plug means that they are here, they are competing, and the costs are very, very attractive to the consumer. And at the end of the day, economics are hard to defy. So the reality is that you do wonder if with some of the kind of legacy automakers, if they would be better at just trying to get on with it, compete, make their products more competitive as soon as possible. because actually if you're in denial and don't accept the reality, then that could be seriously problematic. So it is interesting to see what's happening. Since 2020, a little fact here is that the fossil fuel vehicles exported from China have been 76 % of their exports.

18:53Yeah. That may surprise some because people may think actually they're bringing new energy vehicles, whether it's battery EVs or a fairster market, But actually, three quarters of the cars they've brought to, they've exported so far, have not had any electrification at all. Well, that was the fact that I was like, oh, goodness me, I did not know that at all. And we will link to the full article because it's well worth a read. Some great diagrams in there. It shows you so clearly how in 2022, China absolutely took over everyone in terms of volume of vehicles that they're able to export. And they are doing so in plain sight to these secondary and emerging markets where they can massively undercut the existing OEMs, capture a huge portion of market share, and are recognizing that these markets are going to take longer to transition to EVs and they're capitalizing on that opportunity.

19:43Meanwhile, the traditional OEMs, they are seeing their market share correspondingly decrease. And it does make me think that in all of this, as much as China really cares about clean air within China, actually, it's just competing fiercely. And it's not wasting time on, oh, well, we want to have a range of different powertrains available. They are cracking on and being competitive. And I feel like that's just a great lesson for all the other OEMs to pay heed to. Well, the thing that's keeping China's economy going is growth. And there has been involution. That's an over-competition internally.

20:25And the instruction is clear. We need that involution to come to an end. And that means overcapacity needs to go overseas. That is a huge megatrend. That is not going to change. And there may be borders thrown up or protectionism or talks of no one's ever going to switch from our brands. They love our brands. But the reality is completely different. The market is changing very, very fast. And you do yourself no favors by putting your head in the sand. People have to act and realize accordingly and compete. Otherwise, well, you don't need me to finish the sentence. But it is going to be fascinating a few years.

21:00But yeah, China's export capacity is not limited to battery electric vehicles by any means. I do think there's an existential debate to have though of part of the bifurcation and strategies between traditional OEMs and what's largely happening in China is this idea of how aspirational the car is as a consumer product. Because certainly at these lower price points, it's not necessarily about aspiration. It's about accessibility and price and what you value as well that you get for that money. and it feels like some of the German OEMs particularly are maybe taking a little while to catch up on the changing attitudes and I was having a debate yesterday with someone of let's say you just sort of packed in your car and let's say you took that number of thousands of pounds and put it in a bank account and you also put in the amount that you'd spend on charging or fuel if you had a petrol car and servicing etc etc and you put all of that money in a bank account and that bank account could only be used for transport.

22:00How might it change your relationship with how you move around with public transport, with the car? And I don't know, I think that's a good thought exercise. Maybe we should save that debate for a more lengthy podcast discussion. But on a positive note, I have to say the VW product range I've seen recently in Germany, BMW's Neuer Klasse vehicles, you know, that really, really impressive. So maybe a slow start was inevitable, but ultimately, I think BMW is in a fantastic position if it intends to produce the Neuer Klasse vehicles in sufficient volumes. But no one said it was going to be easy and it certainly isn't.

22:40No. Well, important things are often not easy. Maybe that's the phrase, maybe it isn't. Let's move to story three.

22:56When it comes to advancing your education, you have more options than you think. At Rasmussen University, we find ways to remove barriers, not build them. Like a new laptop if you're eligible and enroll in select online or on-campus programs. That means flexible and engaging online courses and resources, tuition savings options if you qualify, exceptional student support, and much more. Online nationally or check out their 20 campuses across six states. Start when you're ready and get the support you need. Visit rasmussen.edu. Discover a spectacular island destination with crystal blue seas, endless sunshine, and the cool Bahamian breeze.

23:33Baja Mar, located in Nassau, Bahamas, offers your choice of three luxury hotels, over 45 fine dining and nightlife venues, Jean Batiste's all-new Jazz Club, the Caribbean's most luxurious casino, and one-of-a-kind experiences for the entire family, like our 15-acre tropical water park, wildlife sanctuary, world-class golf course, and so much more. Visit Bahamar.com today. Story three, the big short Michael Burry slams Tesla valuation and warns of ridiculous dilution. So Michael Burry is the guy who predicted the big short of which the film is then based on him. Tell us a little more. Yeah, I was really interested in this story.

24:14I don't know if anyone's seen the big short. It's quite a well-known film. There's other films available. there's a film called margin call about the 2008 crash there's a brilliant book uh called uh colossal failure of common sense which is about the layman brothers going under but effectively it was a financial uh collapse in 2008 so i'm mentioning that because there might be some people listening to the podcast who don't remember that or weren't around for uh for that but obviously it had a huge huge impact uh and michael burry was actually i think he trained as a neurologist, kind of a detective doctor, basically looking at the nervous system.

24:49And he transferred into finance. And back in about 2005, I watched the big short recently, he was sort of actually starting to short some of these subprime mortgages, felt that something was going to come and had to wait very, very patiently for three years until the collapse came. But he's been on the money a number of different times. So he's highly respected. And he really has been sort of rattling the cages again this week and questioning the value of Tesla, the value of its shareholdings, very, very high. It's higher than any other automotive company in the world. Obviously, anyone who understands Tesla knows it has been an automotive and energy play.

25:33And it is going through something of a pivot. And he is questioning the value of the company, whether it's actually realistic or it too is a bubble that's about to crash. Well, he's interesting because he's also, he's sold everything. He's shut down his hedge fund and all that kind of stuff. So he can speak much more freely and he has some opinions about the AI bubble that I know that a lot of tech companies aren't particularly fond of. And actually you can follow this all along in his sub stack, but you have to pay$250 to access is Substack. So hopefully, it's got at least$250 worth of insights in there.

26:08But I think this is really interesting because basically, he's criticizing this trillion dollar compensation package that Elon Musk has recently been given. And his argument here is that in creating that trillion dollar compensation package, which is linked to various, well, basically the performance of the stock. And that in doing so, obviously, lots of shareholders having to give up some of their stock and it's also going to cause dilution of that stock. But that dilution is fine if the amount that their stock is worth increases by a certain amount. And of course, there'll be shareholders within that who would have negotiated multipliers who are going to benefit very hugely if indeed the value of Tesla continues to rise.