1 00:00:00,480 --> 00:00:05,480 US consumers bought just under 16,000,000 new cars in 2024, 2 00:00:05,560 --> 00:00:09,720 which is 2.2% more than the prior year and the new sales 3 00:00:09,720 --> 00:00:14,080 record since the pandemic. Most automakers did well as they 4 00:00:14,080 --> 00:00:18,240 adjusted to slowing demand for EVs and focused on their core 5 00:00:18,240 --> 00:00:22,160 business in the United States of gasoline powered trucks and 6 00:00:22,160 --> 00:00:24,840 SUVs. The American car market 7 00:00:24,840 --> 00:00:28,760 continues to be dominated by larger and heavier cars, where 8 00:00:28,760 --> 00:00:33,240 demand for SUVs has grown hugely over the last 50 years. 9 00:00:33,520 --> 00:00:37,360 Brands like Toyota and Ford benefited from growing demand 10 00:00:37,360 --> 00:00:42,400 for hybrids in recent years. Mazda saw the biggest gains, 11 00:00:42,400 --> 00:00:46,920 which sales up at nearly 17% in the United States, where they 12 00:00:46,920 --> 00:00:50,760 sold more cars in 2024 than ever before. 13 00:00:51,080 --> 00:00:54,440 Other top performers were Honda and Mercedes-Benz. 14 00:00:54,640 --> 00:00:58,840 The best selling vehicle in the United States was once again the 15 00:00:58,840 --> 00:01:03,360 Ford F Series truck, followed by the Chevy Silverado and then the 16 00:01:03,360 --> 00:01:07,240 Toyota Rav 4. This is no surprise as the F 17 00:01:07,240 --> 00:01:11,080 Series has been the best selling truck in the United States for 18 00:01:11,080 --> 00:01:15,920 47 years and the best selling vehicle of any kind in the US 19 00:01:15,920 --> 00:01:19,440 for 42 years. General Motors and Ford both 20 00:01:19,440 --> 00:01:23,520 reported their best year of U.S. sales since the pandemic, as 21 00:01:23,520 --> 00:01:27,040 lower interest rates, higher inventory and dealer incentives 22 00:01:27,240 --> 00:01:31,360 persuaded shoppers to buy. The worst performers in terms of 23 00:01:31,360 --> 00:01:35,600 sales in 2024 were Stalantis, followed by Tesla. 24 00:01:35,880 --> 00:01:40,640 Despite Tesla's stock price rising more than 70% in 2024, 25 00:01:40,840 --> 00:01:44,280 the number of vehicles they sold fell by 1%. 26 00:01:44,480 --> 00:01:47,680 This was their first sales decline in more than a decade, 27 00:01:47,840 --> 00:01:50,960 and it came in a year when they're much hyped truck was 28 00:01:50,960 --> 00:01:55,200 introduced, which is supposed to be more in line with American 29 00:01:55,200 --> 00:01:58,640 vehicle purchasing trends than the sedans that they've been 30 00:01:58,640 --> 00:02:02,600 selling up until now. This decline in sales for a 31 00:02:02,600 --> 00:02:06,760 company priced for extreme growth indicates that investors 32 00:02:06,760 --> 00:02:10,360 may be pricing in growth that's unlikely to occur. 33 00:02:10,680 --> 00:02:14,680 In recent years, Tesla investors have mostly ignored sales 34 00:02:14,680 --> 00:02:19,080 figures, focusing instead on the eventual development of robo 35 00:02:19,080 --> 00:02:23,640 taxis, robots, solar roofs, a battery business and rocket 36 00:02:23,640 --> 00:02:27,360 equipped sports cars, all of which are coming next year. 37 00:02:27,800 --> 00:02:32,600 Stellantis, which is made-up of 14 automotive brands, was formed 38 00:02:32,600 --> 00:02:36,080 by a merger between Fiat Chrysler and Peugeot Citron. 39 00:02:36,400 --> 00:02:40,120 The company's revenues have been hit by weak demand, Chinese 40 00:02:40,120 --> 00:02:43,960 competition and regulatory uncertainty around electric 41 00:02:43,960 --> 00:02:46,280 vehicles. They missed analyst 42 00:02:46,280 --> 00:02:51,280 expectations, warned on profits and the CEO left abruptly last 43 00:02:51,280 --> 00:02:53,840 month. Reflecting these difficulties, 44 00:02:54,040 --> 00:02:58,200 the stock fell by more than 40% in 2024. 45 00:02:58,560 --> 00:03:02,760 Stalantis's problems are largely driven by the fact that they 46 00:03:02,760 --> 00:03:06,600 raised prices in the post pandemic period, focusing on 47 00:03:06,600 --> 00:03:11,960 high end models pricing some new Jeeps north of $100,000, which 48 00:03:11,960 --> 00:03:15,960 caused vehicle sales to crater. Stalantis to today have some of 49 00:03:15,960 --> 00:03:19,520 the highest inventories of vehicles on dealer lots, as 50 00:03:19,520 --> 00:03:22,600 their expensive cars and trucks are simply not selling. 51 00:03:23,240 --> 00:03:27,520 Dodge, which was once famed for its Hemi V8 engines, has just 52 00:03:27,520 --> 00:03:30,000 pivoted to building electric vehicles. 53 00:03:30,200 --> 00:03:34,240 While Architectural Digest raved about the new electric muscle 54 00:03:34,240 --> 00:03:37,600 cars, automotive journalists were less positive. 55 00:03:38,240 --> 00:03:42,800 I'm not sure how them Du Bois would feel about paying $70,000 56 00:03:42,800 --> 00:03:47,040 for a car that's slower than a cheaper Tesla Model 3, which 57 00:03:47,040 --> 00:03:51,320 also has more range. On the plus side, the Charger is 58 00:03:51,320 --> 00:03:54,960 a great name for an EV and it does have speakers where the 59 00:03:54,960 --> 00:03:58,080 exhaust pipe should be so that you can still annoy your 60 00:03:58,080 --> 00:04:09,280 neighbours revving up your EV. Over the summer, Jaguar entirely 61 00:04:09,280 --> 00:04:12,480 halted production of all of their cars, which were not 62 00:04:12,480 --> 00:04:16,680 selling very well, so that they could fully electrify the brand 63 00:04:16,680 --> 00:04:20,440 by 2025. In November, they unveiled a new 64 00:04:20,440 --> 00:04:24,960 brand identity, which drew a lot of press and switched the design 65 00:04:24,960 --> 00:04:29,400 focus from classic British heritage to a more colorful and 66 00:04:29,400 --> 00:04:33,360 controversial look. Their advertising campaign used 67 00:04:33,360 --> 00:04:37,160 the slogan Copy Nothing, and they unveiled a new logo of 68 00:04:37,160 --> 00:04:41,120 which appeared to be copying the Dyson vacuum cleaner logo. 69 00:04:41,360 --> 00:04:45,160 I guess both firms are now in the electric appliance business. 70 00:04:45,520 --> 00:04:50,960 Jaguar later revealed a concept car, the Type 00, which appears 71 00:04:50,960 --> 00:04:54,600 to have been designed using Microsoft Paint and has no rear 72 00:04:54,600 --> 00:04:58,400 window, but at least it still has wheels for now. 73 00:04:59,160 --> 00:05:03,640 Auto manufacturers stepped up their R&D spent massively over 74 00:05:03,640 --> 00:05:07,120 the last 10 years, spending 10s of billions of dollars 75 00:05:07,120 --> 00:05:11,080 developing electric vehicles and self driving technologies with 76 00:05:11,080 --> 00:05:14,600 little to no short to medium term returns on their 77 00:05:14,600 --> 00:05:18,240 investments. As the growth in demand for EVs 78 00:05:18,240 --> 00:05:22,320 appears to be waning, is electrification killing the car 79 00:05:22,320 --> 00:05:25,800 industry? The pace of US car sales picked 80 00:05:25,800 --> 00:05:29,880 up towards the end of 2024 as falling interest rates and 81 00:05:29,880 --> 00:05:32,920 improved dealer inventories attracted shoppers. 82 00:05:33,200 --> 00:05:37,320 There was a lot of talk after the US election that EV buyers 83 00:05:37,320 --> 00:05:40,840 would rush out to take advantage of the Biden era electric 84 00:05:40,840 --> 00:05:44,200 vehicle tax credits, which are worth up to seven and a half 85 00:05:44,200 --> 00:05:48,440 $1000 before they possibly go away as Trump promised to 86 00:05:48,440 --> 00:05:51,280 eliminate these incentives on the campaign trail. 87 00:05:51,600 --> 00:05:55,760 There was a small pop in EV sales in December, with General 88 00:05:55,760 --> 00:05:59,480 Motors doing quite well. But if that's what a rush looks 89 00:05:59,480 --> 00:06:02,560 like, what will sales be like without the government 90 00:06:02,560 --> 00:06:06,480 incentives in place? Even with the tax incentives, 91 00:06:06,680 --> 00:06:10,080 Boston Consulting Group reported earlier this year that 92 00:06:10,080 --> 00:06:15,640 automakers lose roughly $6000 on every EV they sell in America. 93 00:06:16,120 --> 00:06:21,560 Last year, Rivian revealed that it lost $33,000 on every truck 94 00:06:21,560 --> 00:06:24,120 they sold. Around the same time, Lucid 95 00:06:24,120 --> 00:06:29,840 reported that they lost $338,000 on each car sold. 96 00:06:30,280 --> 00:06:33,240 The problem for both of these companies is that they're 97 00:06:33,240 --> 00:06:37,320 selling in the luxury vehicle segment and EV buyers want more 98 00:06:37,320 --> 00:06:40,920 affordable cars. The biggest success in EV 99 00:06:40,920 --> 00:06:46,360 adoption globally has of course been Norway, where 90% of new 100 00:06:46,360 --> 00:06:49,560 sales are electric. This was achieved through 101 00:06:49,560 --> 00:06:54,680 massive government incentives, where EV subsidies make up 2% of 102 00:06:54,680 --> 00:06:59,160 Norway's national budget. New electric vehicles in Norway 103 00:06:59,320 --> 00:07:04,400 are exempt from several taxes, including a 25% value added tax 104 00:07:04,400 --> 00:07:07,640 on cars. According to the IER, an 105 00:07:07,640 --> 00:07:12,960 equivalent ICE vehicle in Norway would be subject to $27,000 in 106 00:07:12,960 --> 00:07:16,280 various taxes that are avoided by buying an EV. 107 00:07:16,920 --> 00:07:21,040 For that reason, it's no surprise how many EVs are sold. 108 00:07:21,320 --> 00:07:25,440 Electric cars were additionally made exempt from any road or 109 00:07:25,440 --> 00:07:28,800 fairy tolls and were allowed to drive in bus lanes. 110 00:07:29,040 --> 00:07:32,240 A number of these incentives have been reduced over time, 111 00:07:32,520 --> 00:07:36,240 partially because of complaints that they disproportionately 112 00:07:36,240 --> 00:07:39,360 benefit the wealthy who can afford EVs. 113 00:07:39,800 --> 00:07:43,720 Norway was able to afford to spend billions a year on EV 114 00:07:43,760 --> 00:07:47,120 subsidies like this because they have the largest sovereign 115 00:07:47,120 --> 00:07:50,680 wealth fund in the world, funded by revenue from their oil and 116 00:07:50,680 --> 00:07:54,520 gas production. With such high EV adoption, all 117 00:07:54,520 --> 00:07:57,440 of the important EV infrastructure has been 118 00:07:57,440 --> 00:08:01,920 installed in Norway, making the cars extremely convenient there. 119 00:08:02,520 --> 00:08:06,280 According to Vox, one of the negative side effects of the EV 120 00:08:06,280 --> 00:08:10,520 subsidies in Norway is that they've made driving so cheap 121 00:08:10,680 --> 00:08:14,560 that fewer people use public transportation, bicycles or 122 00:08:14,560 --> 00:08:17,240 walk. Norway today has one of the 123 00:08:17,240 --> 00:08:20,520 lowest rates of public transportation usage in Europe 124 00:08:20,760 --> 00:08:24,880 and a higher car ownership rate than Denmark and Sweden. 125 00:08:24,880 --> 00:08:29,480 It's Scandinavian neighbours. EV subsidies have been found to 126 00:08:29,480 --> 00:08:31,960 really move the needle in Germany. 127 00:08:31,960 --> 00:08:36,240 Electric vehicle sales dropped almost 40% last year when the 128 00:08:36,240 --> 00:08:40,200 German government ended its €6000 EV subsidy. 129 00:08:40,400 --> 00:08:45,160 In 2022, Sweden eliminated a number of EV subsidies, which 130 00:08:45,160 --> 00:08:49,120 resulted in a 20% drop in electric vehicle sales. 131 00:08:49,680 --> 00:08:53,840 A huge part of the transition to electric vehicles globally is 132 00:08:53,840 --> 00:08:57,760 driven by government policy rather than customer demand. 133 00:08:57,960 --> 00:09:01,680 And even with government incentives in place, automakers 134 00:09:01,680 --> 00:09:05,040 are still generally losing money building these cars. 135 00:09:05,880 --> 00:09:09,400 A huge problem affecting the demand for new EVs is the 136 00:09:09,400 --> 00:09:11,840 terrible depreciation buyers are hit with. 137 00:09:12,120 --> 00:09:16,320 I made a video last year on how many EVs have more than halved 138 00:09:16,320 --> 00:09:18,840 in value over their first year of ownership. 139 00:09:19,080 --> 00:09:22,240 It'll take quite a while to recover that kind of loss with 140 00:09:22,240 --> 00:09:26,360 fuel savings. In the UK there was a huge surge 141 00:09:26,360 --> 00:09:30,320 in EV sales in December when sales of battery powered cars 142 00:09:30,320 --> 00:09:33,480 jumped around 60% from a year earlier. 143 00:09:33,720 --> 00:09:37,880 The reason this happened is that under UK law, automakers are 144 00:09:37,880 --> 00:09:44,840 fined 15,000 lbs, which is around $19,000 per car if 22% of 145 00:09:44,840 --> 00:09:49,360 their sales were not electric. Thus, they had to sell EVs at 146 00:09:49,360 --> 00:09:51,680 great discounts to avoid the fines. 147 00:09:51,960 --> 00:09:55,560 Despite the end of year surge, which automakers still fell 148 00:09:55,560 --> 00:10:00,040 short of the 22% target and the target for next year will be 149 00:10:00,040 --> 00:10:03,840 28%. The required quota of electric 150 00:10:03,840 --> 00:10:08,160 vehicles to be sold in the UK ratchets up every year until 151 00:10:08,160 --> 00:10:13,640 2035, when it reaches 100%. The British Society of Motor 152 00:10:13,640 --> 00:10:17,600 Manufacturers and Traders told the press that the discounts 153 00:10:17,600 --> 00:10:21,600 needed to boost EV sales to hit last year's targets were 154 00:10:21,600 --> 00:10:27,000 unsustainable, so 2025 could be even worse for the industry. 155 00:10:27,440 --> 00:10:31,040 Last year, according to Bloomberg, only one in 10 156 00:10:31,040 --> 00:10:35,520 private buyers in the UK chose an EV, with business and fleet 157 00:10:35,520 --> 00:10:38,320 customers driving the majority of the demand. 158 00:10:38,640 --> 00:10:43,440 Stellantis cited the UKEV mandate when it announced plans 159 00:10:43,440 --> 00:10:46,920 in November to stop manufacturing Vauxhall vans in 160 00:10:46,920 --> 00:10:50,120 the UK after 120 years of production. 161 00:10:50,440 --> 00:10:55,360 Nissan, who employ over 7000 workers in the UK, said last 162 00:10:55,360 --> 00:10:59,760 November that the EV mandate risks undermining the business 163 00:10:59,760 --> 00:11:02,440 case for manufacturing cars in the UK. 164 00:11:02,720 --> 00:11:07,320 Ford, who laid off 800 British auto workers in November, blamed 165 00:11:07,320 --> 00:11:11,080 unprecedented regulatory and economic headwinds. 166 00:11:11,400 --> 00:11:15,560 So far, the British government is resisting pressure to weaken 167 00:11:15,560 --> 00:11:19,360 the EV mandate, but they may have to back down if it starts 168 00:11:19,360 --> 00:11:24,160 to impact employment. The change from ICE cars to EVs 169 00:11:24,320 --> 00:11:26,920 is mostly a minor one for consumers. 170 00:11:27,160 --> 00:11:30,600 The new cars serve the same purpose as the old ones did and 171 00:11:30,600 --> 00:11:33,840 mostly work the same other than having a huge screen on the 172 00:11:33,840 --> 00:11:35,960 dashboard to distract the driver. 173 00:11:36,400 --> 00:11:40,800 The major worry for EV buyers is whether they'll be convenient to 174 00:11:40,800 --> 00:11:44,280 charge and if they'll be as durable as an ICE vehicle. 175 00:11:44,520 --> 00:11:47,440 For manufacturers, the transition is much more 176 00:11:47,440 --> 00:11:50,560 complicated. All of the intellectual property 177 00:11:50,680 --> 00:11:53,520 that they've built up from decades of manufacturing 178 00:11:53,520 --> 00:11:58,560 mechanical cars loses its value when they move to building EVs. 179 00:11:58,800 --> 00:12:01,720 The firms have to shift from their background in mechanical 180 00:12:01,720 --> 00:12:04,680 engineering to software development and battery 181 00:12:04,680 --> 00:12:08,080 manufacturing, which might involve an entirely different 182 00:12:08,080 --> 00:12:11,360 workforce. If tailpipe emissions were the 183 00:12:11,360 --> 00:12:14,360 only thing that mattered to governments, they might push 184 00:12:14,360 --> 00:12:18,320 ahead with the change and just let customers buy EVs from 185 00:12:18,320 --> 00:12:21,000 China. But the auto industry employs 186 00:12:21,000 --> 00:12:25,440 2.4 million Europeans and more than 4 million Americans. 187 00:12:25,920 --> 00:12:28,000 It's not just auto workers either. 188 00:12:28,160 --> 00:12:31,560 There are 13 million Europeans and a similar number of 189 00:12:31,560 --> 00:12:36,160 Americans who rely on the auto industry for employment, making 190 00:12:36,160 --> 00:12:39,600 various components that are part of the auto industry supply 191 00:12:39,600 --> 00:12:42,920 chain, repairing cars, or selling spare parts and 192 00:12:42,920 --> 00:12:46,160 consumables. The workers who make car seats, 193 00:12:46,160 --> 00:12:50,040 door hinges, windshields, suspension components, and so on 194 00:12:50,200 --> 00:12:53,640 should be fine, as these are needed on EVs too. 195 00:12:53,880 --> 00:12:56,680 But the highest paid jobs have historically historically been 196 00:12:56,800 --> 00:13:00,480 in manufacturing, engine and transmission components, and 197 00:13:00,480 --> 00:13:04,400 these workers and businesses won't be able to easily 198 00:13:04,400 --> 00:13:08,560 transition to making batteries and electric motors for EVs. 199 00:13:08,760 --> 00:13:11,000 It's an entirely different skill set. 200 00:13:11,400 --> 00:13:14,880 For this reason, governments are forced to weigh their 201 00:13:14,880 --> 00:13:18,600 commitments to workers and voters in their countries 202 00:13:18,600 --> 00:13:21,680 against their commitments to the Paris Climate Accords. 203 00:13:22,120 --> 00:13:26,440 In recent months, a number of major automakers have announced 204 00:13:26,440 --> 00:13:29,760 plans to slow their transition to electric vehicles. 205 00:13:30,120 --> 00:13:32,960 Volvo announced that they wouldn't move as quickly as 206 00:13:32,960 --> 00:13:37,240 planned to an all EV lineup, and both Ford and General Motors 207 00:13:37,240 --> 00:13:40,400 said that they would delay the introduction of previously 208 00:13:40,400 --> 00:13:44,200 announced models. Five years ago, Ford said that 209 00:13:44,200 --> 00:13:48,120 it would go almost completely electric in Europe by the end of 210 00:13:48,120 --> 00:13:51,760 the decade, but they're now walking back those plans. 211 00:13:52,040 --> 00:13:55,480 In November, they announced that they would be laying off another 212 00:13:55,480 --> 00:13:59,960 4000 workers in Europe, where the transition to EVs is losing 213 00:13:59,960 --> 00:14:04,320 traction industry wide. Volkswagen and Stellantis have 214 00:14:04,320 --> 00:14:08,120 issued a profit warnings in recent months, citing a broad 215 00:14:08,120 --> 00:14:11,600 slowdown in vehicle sales and that governments are pulling 216 00:14:11,600 --> 00:14:15,600 support for EV purchases. Volkswagen even announced that 217 00:14:15,600 --> 00:14:18,960 they can't rule out plant closures in Germany for the 218 00:14:18,960 --> 00:14:23,360 first time in their history. General Motors, which has had a 219 00:14:23,360 --> 00:14:27,240 lot of success with EVs, has still lowered their planned EV 220 00:14:27,320 --> 00:14:30,520 production and said that they would delay the launch of the 221 00:14:30,520 --> 00:14:33,560 first Buick EV, which they had been planning. 222 00:14:34,200 --> 00:14:38,280 Overproduction has LED Ford to announce that they're cancelling 223 00:14:38,280 --> 00:14:42,360 their planned all electric three row SUV and that they will 224 00:14:42,360 --> 00:14:45,920 instead use the plant that they've been retooling to build 225 00:14:46,040 --> 00:14:48,560 F series Super Duty pickup trucks. 226 00:14:49,120 --> 00:14:53,720 A lot of this turmoil stems from EV production growing faster 227 00:14:53,720 --> 00:14:57,200 than consumer demand, particularly in Europe where 228 00:14:57,200 --> 00:14:59,480 governments are mandating the change. 229 00:14:59,760 --> 00:15:04,200 According to NPR, a slowdown in EV sales growth doesn't 230 00:15:04,200 --> 00:15:07,320 necessarily signal that EVs aren't coming. 231 00:15:07,520 --> 00:15:10,960 They argue that the question is about the pace of the journey, 232 00:15:11,040 --> 00:15:15,000 not the destination, making the case that the nature of any 233 00:15:15,000 --> 00:15:19,000 adoption curve is that new technologies catch on. 1st with 234 00:15:19,000 --> 00:15:22,320 a a tiny slice of tech geeks, the innovators. 235 00:15:22,560 --> 00:15:25,560 Then they reach the early adopters who will put up with 236 00:15:25,560 --> 00:15:29,560 some inconveniences and are willing to pay a little more for 237 00:15:29,560 --> 00:15:31,960 cool tech. The problem for EV 238 00:15:32,000 --> 00:15:36,680 manufacturers, according to NPR, is that mainstream buyers are 239 00:15:36,680 --> 00:15:40,480 much harder to win over. They point out that it took 20 240 00:15:40,480 --> 00:15:43,000 years for hybrids to become mainstream. 241 00:15:43,360 --> 00:15:46,920 Right now, most car owners are happy with the existing 242 00:15:46,920 --> 00:15:50,360 technology and see no reason to make a change. 243 00:15:50,560 --> 00:15:54,400 It may still take some time to convince them, but this won't 244 00:15:54,400 --> 00:15:58,320 help investors who were expecting 50% annual sales 245 00:15:58,320 --> 00:16:02,600 growth and are now seeing both higher competition and lower 246 00:16:02,600 --> 00:16:07,320 overall market growth. GM, Ford and Volkswagen have all 247 00:16:07,320 --> 00:16:11,680 said that they are committed to ramp up their EV businesses, but 248 00:16:11,680 --> 00:16:15,400 that the pace of consumer adoption might not be as fast as 249 00:16:15,400 --> 00:16:19,960 was previously expected. A big dilemma for politicians is 250 00:16:19,960 --> 00:16:24,280 that while they want cheaper EVs for environmental reasons, they 251 00:16:24,280 --> 00:16:28,120 don't want to undermine their domestic auto manufacturers or 252 00:16:28,120 --> 00:16:31,520 local employment by importing them from abroad. 253 00:16:31,800 --> 00:16:35,520 Governments so far are not backing down on their mandates, 254 00:16:35,640 --> 00:16:39,160 but they are equally not willing to see their manufacturing 255 00:16:39,160 --> 00:16:42,360 industries be wiped out by cheap Chinese imports. 256 00:16:42,920 --> 00:16:47,560 According to most auto analysts, EVs are still expected to 257 00:16:47,560 --> 00:16:51,560 eventually make up most of the global automotive fleet due to 258 00:16:51,560 --> 00:16:54,600 tightening environmental legislation around the world. 259 00:16:54,880 --> 00:16:58,360 While many big automakers are struggling to meet government 260 00:16:58,360 --> 00:17:02,160 targets due to lower than anticipated consumer demand, 261 00:17:02,360 --> 00:17:05,720 they are still lobbying governments to keep many of the 262 00:17:05,720 --> 00:17:10,160 requirements in place, but with more time for compliance and 263 00:17:10,160 --> 00:17:12,839 lower penalties for companies that don't meet the 264 00:17:12,920 --> 00:17:16,280 requirements. The reason that they want this 265 00:17:16,480 --> 00:17:19,280 is that they've invested billions of dollars in new 266 00:17:19,280 --> 00:17:23,079 facilities and don't want this investment to become worthless 267 00:17:23,200 --> 00:17:26,280 if the government's mandated demand goes away. 268 00:17:26,800 --> 00:17:30,400 A change in direction from governments would be extremely 269 00:17:30,400 --> 00:17:33,880 difficult for big businesses, as governments have encouraged 270 00:17:33,880 --> 00:17:37,880 companies to install things like charging infrastructure or to 271 00:17:37,880 --> 00:17:40,240 mine for minerals needed for batteries. 272 00:17:40,480 --> 00:17:44,160 If governments change direction, a lot of this investment could 273 00:17:44,160 --> 00:17:47,480 become worthless. According to the New York Times, 274 00:17:47,680 --> 00:17:52,160 3 of America's largest automakers are strategizing on 275 00:17:52,160 --> 00:17:56,440 how to ask Donald Trump to not scrap the federal regulations 276 00:17:56,440 --> 00:17:59,800 that compelled the industry to sell electric vehicles. 277 00:18:00,080 --> 00:18:04,080 While they don't love Biden's rules, they've already invested 278 00:18:04,080 --> 00:18:08,800 close to $150 billion into EV manufacturing and worried that 279 00:18:08,800 --> 00:18:12,040 if Trump made an abrupt change, they could lose out to 280 00:18:12,040 --> 00:18:15,680 automakers like Toyota and Mazda, who focused on 281 00:18:15,840 --> 00:18:19,880 traditional cars and hybrids. A big question for the coming 282 00:18:19,880 --> 00:18:23,920 years is whether governments will continue to subsidize EVs 283 00:18:24,080 --> 00:18:26,800 while they're still mostly being sold at a loss. 284 00:18:27,080 --> 00:18:30,880 Even after the subsidies, Trump says that he won't. 285 00:18:31,040 --> 00:18:34,280 And while European governments seem more committed, their 286 00:18:34,280 --> 00:18:37,880 budgets are a lot tighter and they may not be able to afford 287 00:18:37,880 --> 00:18:40,760 the subsidies. While Norway was able to 288 00:18:40,760 --> 00:18:44,240 complete the transition to EVs and get all of the charging 289 00:18:44,240 --> 00:18:48,280 infrastructure in place, they did it at enormous cost, which 290 00:18:48,280 --> 00:18:51,000 they could afford due to their fossil fuel wealth. 291 00:18:51,320 --> 00:18:54,240 Other countries don't have that much money to throw at the 292 00:18:54,240 --> 00:18:57,600 problem. According to most estimates, the 293 00:18:57,600 --> 00:19:00,880 battery of an electric vehicle typically accounts for around 294 00:19:00,880 --> 00:19:06,520 40% of the overall vehicle cost. This compares to ICE cars, where 295 00:19:06,520 --> 00:19:09,760 the engine makes up only around 1/10 of the value of the 296 00:19:09,760 --> 00:19:13,120 vehicle. It's not unreasonable to ask if 297 00:19:13,120 --> 00:19:16,480 a company is even in the EV business if they don't make 298 00:19:16,480 --> 00:19:20,080 their own batteries. China is the world's leading 299 00:19:20,080 --> 00:19:24,360 producer of EV batteries, accounting for 75% of battery 300 00:19:24,360 --> 00:19:29,280 cell manufacturing capacity. China also produces and refines 301 00:19:29,280 --> 00:19:32,960 over half of the world's lithium, cobalt, and graphite. 302 00:19:33,600 --> 00:19:38,760 China's BYD started out making batteries for mobile phones and 303 00:19:38,760 --> 00:19:41,360 only later moved to building EVs. 304 00:19:41,560 --> 00:19:45,200 They were, after all, already building the most complicated 305 00:19:45,200 --> 00:19:48,680 component. Most manufacturers outside of 306 00:19:48,680 --> 00:19:51,280 China don't make their own batteries. 307 00:19:51,520 --> 00:19:55,880 Tesla, for example, buys most of its battery cells from suppliers 308 00:19:55,880 --> 00:20:00,520 like CATL and Panasonic. They have, however, made efforts 309 00:20:00,520 --> 00:20:04,160 to produce their own 4680 battery cells, which are 310 00:20:04,160 --> 00:20:07,720 currently only used in the Cybertruck, a low volume 311 00:20:07,720 --> 00:20:12,040 vehicle. Northfold was founded in 2016 312 00:20:12,200 --> 00:20:15,760 with the goal of manufacturing EV batteries in Europe and 313 00:20:15,760 --> 00:20:17,920 selling them to European automakers. 314 00:20:18,160 --> 00:20:22,880 It quickly became the symbol of Europe green ambitions and later 315 00:20:22,880 --> 00:20:26,560 its failings. Northvolt took in around $13 316 00:20:26,560 --> 00:20:30,360 billion in debt and equity financing since its founding 317 00:20:30,640 --> 00:20:33,880 last year. They manufactured less than 1% 318 00:20:33,880 --> 00:20:36,240 of the batteries they were theoretically capable of 319 00:20:36,240 --> 00:20:40,240 producing and ended up filing for bankruptcy in November. 320 00:20:40,440 --> 00:20:43,760 After burning through billions of dollars in investment they 321 00:20:43,760 --> 00:20:47,520 raised from firms like Volkswagen and Goldman Sachs, 322 00:20:47,920 --> 00:20:52,440 Northvolt quickly transformed from Europe's best shot at local 323 00:20:52,440 --> 00:20:56,000 battery production to a company companies struggling to survive 324 00:20:56,200 --> 00:21:00,360 due to production difficulties, the loss of BMW as a major 325 00:21:00,360 --> 00:21:05,560 customer, and a lack of funding. Pure EV companies like Lucid and 326 00:21:05,560 --> 00:21:09,320 Rivian have been struggling despite building vehicles that 327 00:21:09,320 --> 00:21:13,160 are praised by their owners. Lyon Electric, a Canadian 328 00:21:13,160 --> 00:21:17,480 electric bus manufacturer, received almost $50 million in 329 00:21:17,480 --> 00:21:22,080 taxpayer subsidies before filing for bankruptcy, resulting in the 330 00:21:22,080 --> 00:21:24,240 complete loss of those public funds. 331 00:21:24,720 --> 00:21:29,000 Some of the slowdown in sales at Tesla has been blamed on Elon 332 00:21:29,000 --> 00:21:32,560 Musk's involvement in politics, which might be pushing some 333 00:21:32,560 --> 00:21:36,000 buyers away who don't share his political views. 334 00:21:36,320 --> 00:21:40,720 While 1/3 of E VS sold in America are sold in California, 335 00:21:41,000 --> 00:21:45,520 a left-leaning state, CNN found that many of the reasons people 336 00:21:45,520 --> 00:21:48,680 choose in EV are unrelated to politics. 337 00:21:48,840 --> 00:21:52,200 And a lot of conservatives do buy electric vehicles. 338 00:21:52,560 --> 00:21:56,040 EV buyers are often the same same people who upgrade their 339 00:21:56,040 --> 00:21:59,680 computer and mobile phone every year because they love new 340 00:21:59,680 --> 00:22:03,080 technology. EV buyers are driven by things 341 00:22:03,080 --> 00:22:07,200 like brand status, charging station availability, a desire 342 00:22:07,200 --> 00:22:11,320 to own the newest technology, and of course incentives like 343 00:22:11,320 --> 00:22:14,760 rebates. According to LendingTree, Tesla 344 00:22:14,760 --> 00:22:18,480 buyers are amongst the most indebted new car buyers and they 345 00:22:18,480 --> 00:22:21,640 take out the longest duration car loans to finance the 346 00:22:21,640 --> 00:22:25,000 purchase. It is possible that the slowdown 347 00:22:25,000 --> 00:22:28,560 in sales at Tesla is less related to politics and is 348 00:22:28,560 --> 00:22:32,920 driven instead by increased competition in the EV space and 349 00:22:32,920 --> 00:22:36,680 slowing demand from mainstream buyers who are happy with the 350 00:22:36,680 --> 00:22:40,200 existing technology. According to Ernst and Young, 351 00:22:40,360 --> 00:22:44,280 fewer buyers are considering buying an EV today than we're 352 00:22:44,280 --> 00:22:48,200 considering 1A year ago. A recent Wall Street Journal 353 00:22:48,200 --> 00:22:54,480 article argues the 2025 may be the year that net zero dies, as 354 00:22:54,480 --> 00:22:58,400 voters lose patience with the project and grow less shy about 355 00:22:58,400 --> 00:23:01,440 saying so. Some of that can already be seen 356 00:23:01,440 --> 00:23:04,160 in recent election results around the world. 357 00:23:04,600 --> 00:23:08,880 The author argues that Britain's Labour Party has already started 358 00:23:08,880 --> 00:23:12,720 to backtrack on its green electricity pledges and may be 359 00:23:12,720 --> 00:23:17,120 getting cold feed about the EV mandate now that job losses are 360 00:23:17,120 --> 00:23:20,080 starting to mount in the domestic auto industry. 361 00:23:20,640 --> 00:23:23,960 He says that the climate policies pursued by Angela 362 00:23:23,960 --> 00:23:28,000 Merkel and her successor Olaf Schultz are at the root of 363 00:23:28,000 --> 00:23:31,480 Germany's slowdown, and the politician likely to replace 364 00:23:31,480 --> 00:23:36,120 Schultz promises a significant rethinking of energy and climate 365 00:23:36,120 --> 00:23:39,640 policies. If German voters do step back 366 00:23:39,640 --> 00:23:44,600 from net zero, the rest of the EU is unlikely to be far behind. 367 00:23:45,160 --> 00:23:48,640 The reason that voters have grown tired of net zero is that 368 00:23:48,640 --> 00:23:51,760 they were promised that the transition could happen with no 369 00:23:51,760 --> 00:23:56,440 noticeable dent to prosperity or reduction in living standards, 370 00:23:56,600 --> 00:23:58,760 which no longer appears to be true. 371 00:23:59,120 --> 00:24:02,200 While some jobs are disappearing, the green jobs 372 00:24:02,200 --> 00:24:05,440 that were supposed to replace them are not materializing. 373 00:24:05,440 --> 00:24:09,720 In Europe, France's government recently suggested that meeting 374 00:24:09,720 --> 00:24:13,760 it's net 0 targets would require households to tolerate lower 375 00:24:13,760 --> 00:24:17,640 temperatures inside their homes during the winter and to travel 376 00:24:17,640 --> 00:24:21,000 less on holidays. None of which is particularly 377 00:24:21,000 --> 00:24:24,680 surprising. The article says that the main 378 00:24:24,680 --> 00:24:28,640 reason net Zero might die in 2025 is because of how 379 00:24:28,640 --> 00:24:32,320 destructive the policies have been on the auto industry, a 380 00:24:32,320 --> 00:24:36,520 huge employer in Europe. It seems to me that we're likely 381 00:24:36,520 --> 00:24:40,240 to see significant turmoil in the auto industry in the coming 382 00:24:40,240 --> 00:24:44,040 years, where historic brands like Jaguar and Dodge could 383 00:24:44,040 --> 00:24:47,760 disappear if they botched the transition to electric vehicles 384 00:24:47,960 --> 00:24:51,840 by alienating their existing customers without convincing a 385 00:24:51,840 --> 00:24:54,560 new audience to buy their new products. 386 00:24:55,240 --> 00:24:58,240 The biggest problem for the auto industry might be the 387 00:24:58,240 --> 00:25:02,160 geopolitical tensions between the US, Europe, and China. 388 00:25:02,520 --> 00:25:06,480 Automakers may struggle to deal with changing environmental 389 00:25:06,480 --> 00:25:11,240 regulations, new trade rules, tariffs, restrictions on tech 390 00:25:11,240 --> 00:25:15,440 transfers, and a general reversal of globalization. 391 00:25:15,720 --> 00:25:18,800 Thanks again for tuning into this week's podcast. 392 00:25:19,360 --> 00:25:23,120 If you enjoyed it, I'd love if you could write a short review 393 00:25:23,120 --> 00:25:28,560 on Spotify or Apple or podcasts or wherever you listened in. 394 00:25:28,920 --> 00:25:32,160 Have a great week and I'll talk to you again soon. 395 00:25:32,240 --> 00:25:32,600 Bye.