Good morning Grid Connections listeners.

This is a podcast where we discuss electric transportation, clean energy options, and our
power grid tying all of this together.

Today we're thrilled to be joined by John McElroy again.

He's the president of Auto Line Network and one of the most respected voices in the auto
industry.

In this episode, John brings his wealth of expertise to the table as we discuss the
ongoing transformation of the automotive landscape from electrification to global

competition.

the rise of autonomous vehicles and the shifting dynamics in the US auto industry.

We'll also touch on the increasing role of China in the EV market, the challenges posed by
tariffs and the race to develop the next generation of vehicles.

John's unique perspective gained through decades of covering the industry offers sharp
insights into where we're headed and the hurdles we still have to clear.

It's a conversation you won't want to miss.

If you find this episode valuable, please take a moment to share it with at least one
other person you think would enjoy these insights as well.

And don't forget to leave us a positive review on the podcast page.

It really helps us spread the word.

Thanks for tuning in today.

And with that, enjoy.

there's a lot of topics I know we're going to be covering today.

But John, just in case there's people listening that somehow is familiar with you and what
you do at all, can just give us little quick background about your work.

Yeah, first off, hey, thanks for having me back.

I always love talking with you because we get into these great discussions.

So I'm looking forward to today's as well.

But yeah, we do a daily newscast, Outline Daily.

We put it on our website, Outline .tv, like television.

We do a live webcast with industry executives, experts, or others in the media who really
follow this industry.

Every Thursday, that's Outline After Hours.

We also do a bunch of standalone videos about anything and everything to do with the
industry.

And that's where we're at.

mean, we're hardcore car enthusiasts, but we're actually enthusiasts for the industry.

We like to get into the nuts and bolts of how this thing works and where it's going.

Yeah, and I think what I've always appreciated about your show is you have such a
impressive, just knowledge, like whether it be motorsport to auto manufacturing and just

kind of history of stuff.

I think that's what I've always really enjoyed.

I honestly, without you, I wouldn't have gotten my start in kind of doing this anyway,
doing some of those auto line clips and hoping to do more stuff with you soon.

But let's focus on some of the stuff going on today.

And I think what's really fun too is just

You're kind of in the heart of Detroit.

You're always talking.

You had a great conversation recently with Bob Lutz on Auto Line After Hours.

And to be honest with you, his, I've definitely followed a lot of the stuff he said
through electrification.

And I found the conversation you guys had this past week to be pretty interesting where it
was, he was still very bullish in a lot of ways around electrification, but specifically

like his feedback is that just a lot of the legacy automakers just have too much

kind of vestigial systems and management at these companies.

And like his big thing was just like that they need a light in and kind of reduce some of
this management.

think there's been a lot of talk lately about layoffs at companies across the board, but I
think a lot of people think about manufacturing around that.

I'd I'd be kind of curious just to kind of talk with you and maybe recap a little bit of
that conversation.

Anything that stood out with you speaking with Bob Lutz and yeah.

one, Chase, he's 92 years old.

You know, and you expect to hear this, you know, forgetful, stumbling, you know, old guy
and not like that at all.

mean, the guy sharp as a tack.

He never, you know, grasped for what was that word or what was that name or, you know, he
was right there.

I thought his insights were brilliant.

Not everybody agrees with what he had to say, but yeah, I thought especially his comments.

on leadership, on management, and on boards of directors is something that anybody who is
an executive in the industry should listen to.

I'm not just trying to promote my show.

I'm saying you should go and listen to what this 92 year old, who remember, he worked at
Ford, he worked at General Motors, he worked at Chrysler, he worked at BMW.

This guy's just got an amazing amount of experience and he's obviously got great insights
as to what's happening.

Yeah, and I think to be honest with you, surprised me about the conversation is I just
felt like for a long time, some of the conversations I'd heard are like his things to me

sounded kind of dated or just weren't.

I think there's a fine line between obviously being like overly bullish and like thinking,
electric vehicles are here and they're going to be 100 % by next year.

But for a while there, there's a lot of conversation sometimes on auto line, on others I'd
seen with them over the years that just, sounded more like the, I don't want to say like

traditional auto exact thing, but even that they were just kind of like similar themes.

And this was just, as you said, he's 92 years old.

But his insights and I didn't agree with everything, but I still thought he had really
good points and logic behind a lot of the reasons he thought that way.

And just like the way he talked about globally with China, totally, totally.

no, I don't agree with everything that he said.

In fact, I thought he was kind of conflicted himself on sort of trashing the
administration for forcing EVs and then on the same sentence, he talks about he's on the

board of directors of this breakthrough company.

What do you call it?

Material 14, I can't remember the name off it.

But anyway, they're trying to figure out how you charge an electric car in five to eight
minutes.

You know, here on one side he's, you know, questioning the political move into EVs and yet
on the other side, on the business side, he's pushing it as hard as he can.

Yeah, no, I thought it was pretty fascinating.

And yeah, I think just the topics and stuff he brought up was a pretty, I wouldn't say
bullish or bearish.

You just kind of walked a interesting line and overall was just a very, I think astute, I
guess is the best way to describe it.

Just look at the global industry and his thoughts on China and what's going on there and
some of these things.

And I know that was one of the things I want to talk to you about and something you guys
have been covering as well as just

since we're in this election year and even leading up to it and really just the past few
years when you look at China and a lot of the tariffs that are now being proposed and

being put on Chinese EVs.

I'm really curious on just maybe what your thoughts are on this and how you see that
evolve.

Sure.

Well, look, China's got this EV thing locked up.

You let them run rampant, they're going to take over the world.

mean, I'm not exaggerating.

They will take over the global automotive market and drive just about everybody else out
of business.

Everybody else is not interested in seeing that happen.

And so the US has taken the most aggressive stance.

When Trump was president, he put a 25 % import tariff on any Chinese EV.

on top of the 2 .5 % they had to pay.

And then the Biden administration just bumped that up to 100 % tariff plus the 2 .5 % that
was always there.

So, I mean, this is the one place where the Democrats and the Republicans are in complete
agreement on they are not gonna let the Chinese into this market.

And there's no question in my mind that the Chinese would pretty much wipe out the US auto
industry.

So we need tariffs.

But having said that, tariffs are not the solution.

This is not the answer.

All the tariffs do is buy the US industry sometime.

Europe's looking at doing the same thing, though they're not nearly as aggressive on the
tariffs that they're implementing.

yeah, mean, this buys time.

In fact, I would love to see whichever administration this empowers, let's say in 2030.

Give the industry another decade and say, you know, we're going to slowly start to phase
these tariffs out year by year until they're gone.

So now you have a known period of time where you better get competitive.

And everybody points to Chinese subsidies and, you know, the week Yuan versus the dollar
and Uyghur labor and all this other stuff.

But they can't control that.

What they can control are their own internal operations.

And, you know, as you were suggesting there, I mean, that Bob Blutz was talking about.

legacy operations are very, very slow and inefficient.

And so it's no longer an answer to keep beating up your suppliers for lower cost if you're
an automaker or lay off people and fight your union.

You've got to design the product in new and innovative ways, much of the ways that Tesla
has always already blazed.

And, know, Elon Musk talks about

first principles thinking when attacking any engineering problem.

This is how SpaceX was able to bring rockets back from space and land them on their tails.

They attacked the physics that were blocking that and knocked that all down through first
principles thinking.

What I'm saying is these legacy automakers got to use first principles thinking on their
corporate structure.

They are not structurally organized to be fast and agile.

They're just not.

so that's really what I hope with the tariffs by time for.

It's for these companies and it's gonna be drastic and it's gonna be bloody, but they're
going to have to restructure themselves.

Yeah, no, I mean, you cover a lot of interesting things there because I agree with that.

don't think tariffs are necessarily the right method to try and fix this.

And I am concerned.

Is it it delaying the evidence?

Is it giving them time or does it kind of just reinforce like, well, now we don't worry
about China.

We can keep building large SUVs and these other things that make us a lot of money.

But

why we got to pull the tariffs off because you're absolutely right.

If the tariffs are, you know, the wall is up, they're going to say, OK, we'll build big
SUVs and pickups till the end of eternity.

But, you know, look at what just happened this week, too.

The Commerce Department came out and said, we're going to prohibit any connected or
autonomous Chinese vehicle and or the software or hardware from coming into this country.

And there was a realization that the tariffs really weren't going to work.

in the sense that Chinese automakers could start assembling vehicles in Mexico and come
into the US market via the USMCA trade agreement, or they could go to some other country

that has a trade agreement with the United States like Vietnam and bring cars in that way.

And the way our trade structure or trade laws are right now, there's nothing stopping
them.

And so commerce came up with this idea of, okay,

got to block any connected or autonomous vehicle and all the associated hardware and
software.

That is going to be far more effective at preventing the Chinese from getting into this
market.

Well, that's actually a really interesting topic.

And one of the things I did want to talk to you about, because in some ways that is almost
a bit of a tit for tat because that was one of the big things that China has actually

obviously always been pretty big about is whether like even with Tesla's and some other
cars going into the market about whether it be cameras and anything collecting data that

the data centers have to be there in China.

And I agree with you.

think that is a very direct.

but also probably a more effective way to go about it.

And honestly, also I think much more socially and culturally relevant in today's day,
today's age versus just slapping a tariff on something just because we're seeing such a

large introduction of so much more different layers of tech stacks in these cars.

Is there, is there anything in your opinion?

I'm just curious of, it seems like everything that's being

proposed or initiated is really around, it's kind of like the stick.

Is there anything in your opinion that's more of a carrot that you think would be an
effective way to kind of accomplish some of these things we're talking about?

Well, you know, look, the marketplace is the greatest carrot.

You know, if you do your things right as an automaker, you're going to sell a lot of cars
and make a lot of money.

And if you're running the companies, you're going to get massively big bonuses.

So there's all the motivation that they need right there.

But I think there's a need for a lot more collaboration within the industry.

think the automakers need to collaborate more amongst each other.

Suppliers, automakers, two suppliers, suppliers, two automakers.

because there's a lot of redundant work that's being done.

Just one example, just make an example.

Every car has a windshield washer, right?

There's a pump to pump water to clean your windshield.

Why can't the auto industry in the US or Europe or both or whatever, Japan, Korea, agree,
look, why don't we just set one spec for the pump and everybody buy it?

Now we'll have economies of scale in the tens of millions and the price will drop to
almost nothing.

And then now think about that through, I use the pump as one example, there's myriads of
components in a car that the customer could care less about, really doesn't have anything

to do with the brand image or anything like that.

Why not collaborate and say, hey, look, the Chinese have got a 35 % cost advantage on us.

That's what Alex Partners that studied this says.

So, you know, beating up your suppliers is not gonna get 35%.

But collaboration, where you eliminate all kinds of duplication of work and investment
could save a ton of money.

You know, take that to a powertrain.

We know that the sunset for ice is somewhere out there on the horizon.

And yet all these automakers, and I'll just pick, you 1 .5 liter, 1 .6 liter gasoline
engines, they all make them.

They're all within millimeters of the same size.

They're within grams of the same weight.

They all make the same power, same emission, same fuel economy.

And again, for most applications, the customer could care less what's under the hood.

Transmission's the same thing.

Five -speed, six -speed, seven - to eight -speed, whatever.

They don't even know what they have, most consumers.

Enthusiasts, of course, and that's important to them, but enthusiasts are maybe 10 % of
the car buying public.

So...

think that example, especially they're trying to accomplish much different things.

An enthusiast may want a Tiptronic or a manual that has more of that feel, whereas the
general consumer probably just wants the most miles per gallon.

And that's where you get these large seven or eight speed kind of automatics.

But in the end, they don't care less.

They just care more about the end result.

Right.

So anyways, the point I'm making is there's a lot of room for collaboration to take cost
out.

And I'm sort of preaching this right now because somebody's got to start getting the idea
planted and get these companies moving on it.

And it's not going to happen overnight.

It's going to be very slow.

It's going to be very uncomfortable for them.

But, you know, if you look at Renault in France, it spun off its whole ice power train
operations as a separate company called HORSE.

And now Volvo and Geely, Geely owns Volvo of course, have joined in and said, yeah, we
want to be part of this too.

And that's just one little example of where this could go.

So do you think kind of just there's kind of some interesting trends here.

So one of the other things that we've kind of talked about is the fact that there's a lot
of manufacturing plants and just resources in general that are really at under capacity.

And by kind of implementing what you're talking about, while there'd be obviously very
large cost savings, wouldn't that also kind of just make that problem even worse instead

of there being

10 companies making, let's say, the window washing pump, there's two.

And now you have these factories that are no longer making that.

I mean, what are your thoughts on that and what that kind of inevitably leads to?

yeah, no, look, if we keep doing the things the way that we're going right now, those
plants are going to go out of business anyway.

So there's an opportunity to save it and, you know, especially save a lot of the
communities that are where those, surviving plants are located.

So I think there's a real need to do this because look, China has so much over capacity.

Right.

it could easily supply the entire US market with its overcapacity.

It could easily supply the entire European market with all its overcapacity.

and even in the US and Europe, there's overcapacity, not nearly as bad as China.

But yeah, look, this is a big issue.

The US market, car market has not recovered from COVID.

You know, we'll be lucky to sell 16 million cars this year.

That's a

a million units below what we were pre -COVID.

In Europe, it's even worse.

There are two million units below pre -COVID.

Japan, it's flatlining.

Sales are going nowhere.

Same with Korea.

So, you know, we're at an era right now that I call peak auto.

I don't think car sales in the major markets are going to grow anymore.

In developing areas, yes, Africa, Latin America, Southeast Asia.

But for the big markets, the growth is over.

There is no more growth.

And so how do you deal with that as an industry where there's no hope for growing except
maybe raising your prices every year?

No, I think that's an interesting point and something I've kind of thought about and I'm
not to go down a rabbit hole, but I'm kind of curious on your thoughts on you mentioned

Latam and Africa especially.

And one of the things I've noticed that I thought was really fascinating about both of
those markets was actually in the cellular industry for a long time.

Those have been areas that have been underserved or just had challenges with whether it be
telephone lines or Internet and kind of bypassed doing all of that with the revolution.

cellular connectivity for not just phone calls but internet and having in a lot of areas
much better

just options for getting cell or internet connectivity through cellular versus kind of
what we've seen here in the U .S.

and Europe.

Do you think talking about cars we might see a similar thing?

Obviously it's still early days for kind of autonomous vehicles and ride hailing stuff.

But if you are a company and I do feel like there have been some large public companies
that have said well there's growing potential in Latam and Africa and other areas.

But do you think that that might be also instead of everyone buying a car, they're more
just like, okay, there's actually electric ride hailing or autonomous vehicles I can take.

And so that kind of changes that being a long -term revenue play for them.

Does that make sense?

Do you think that that's even realistic or yeah.

you look, you and I both thought AVs would be here in a more widespread basis than they
are right now.

I mean, I would hope, especially Africa, go that route.

Latin America is a pretty, it's a car culture, you know, it's got all the infrastructure
and everything there.

Africa is still building.

I would hope that they could leapfrog, you know, the traditional automobile infrastructure
that we have today and

To your example, the cell phone, make the leap.

No need to put up a bunch of telephone poles and wires all over the place.

Just go cellular.

And hopefully we could see the same sort of thing happen with automotive transportation,
that we have a new solution that avoids all this congestion and traffic accidents and

fatalities and all the pollution and everything that goes along with it.

Well, no, I'm glad to hear that.

That's kind of how I viewed it.

But yeah, I think there's still a long road to that.

But it's definitely been something I've been kind of thinking more about.

I guess talking about the autonomous space and how we both maybe be here a little bit
sooner.

What is your because I think you even mentioned this on one of your episodes how you've
been in and I've been in Phoenix to where they've got Waymo pretty much everywhere and you

can take them from place to place.

What do you think right now is kind of what's been holding that back?

Is it more regulation?

Is it more of these companies still not quite at the right scale?

I'm just kind of curious what you're hearing, because obviously the big thing in the news,
like for the last year, 18 months, was kind of like Cruz and others and so many of these

others that were making big waves that just kind of came to a grinding halt.

And obviously, Tesla is kind of making news about what they're trying to do.

And we'll see what happens next month.

But Waymo is actually out there doing this and pretty efficiently in certain markets.

Yeah, no, I totally agree.

Waymo's handled it really well, taking a very go slow approach, making sure everything
works, making sure all the stakeholders are on board.

And by that, mean local governments, police, fire, EMTs.

And that was one of the cruises mistakes in San Francisco.

is it just took a typical startup approach and we're the geniuses here, we're out to
change the world and make it better, so get out of our way.

And frankly, they pissed off a lot of people and when they ran into problems, that came
back to haunt them.

And so now they're trying to start over again with drivers, emergency drivers in the car
and trying to establish that they're good guys.

And I think that's one of the lessons is that

the general public is still very leery of this technology.

Very, very leery.

Both you and I know, Chase, that all you have to do is grab one of those leery people, put
them in an AV for about five minutes, and they'll forget all their worries.

In fact, they'll probably be doing email or looking at something on their phone and not
paying attention to how the car is driving.

But right now, the public is very leery about it, and that's something that these AV
companies very much have to take into consideration.

they've got to proceed in a way where the stakeholders are on board and okay with them
moving forward.

No, I completely agree.

And I think it'll be interesting to see.

I wouldn't say it's gotten politicized yet, but I do feel like there has definitely been a
lot of political pushback in certain markets.

And it'll be kind of interesting to see how that's overcome and how I like.

And like you said, I think Waymo has done a good job of that.

Cruz and others.

And I think it's also just really interesting the different strategies about how they're
doing this, whereas like Waymo and even Cruz and a couple others were doing it market by

market.

And then you've got

Tesla and kind of others that are doing more of a.

Throw it at the entire system and entire problem and see what they can get to.

Totally,

know that Elon promises the moon or promises Mars, I guess I should say.

And generally he delivers, but autonomy has been one thing that he's way behind schedule
on.

for sure.

And I do think what's interesting with his it's been really interesting seeing how he's
approached it.

And then coincidentally, a lot of like the Chinese companies in the autonomous space that
have just seemed to also be going down more of the camera approach.

And I think it is a bit easier in a market like China where so much more of the stuff is
specifically like highways and roads are not only just newer, but

You're just dealing with a lot less of the variables here domestically, but I totally
agree with you.

There's still a long ways to go, even with the ones that are doing well.

I guess one area to kind of look at in addition to that is, like you said, it's kind of
building that trust and getting people bought into it.

And right now I feel like, as I even mentioned, like it's kind of even becoming a little
politicized.

EVs especially have become politicized.

What do you think is kind the way forward?

I mean, you're in Michigan, you're in a swing state in an election here.

Have you seen still an overall big shift in interest in electric vehicles or is it kind of
what people hear and believe among others that are kind of holding it back from moving

forward still?

Well, look, you nailed it.

It's politicized.

So, you know, if you're blue, i .e.

you're probably more bullish on EVs.

If you're red, especially MAGA, you're dead set against them.

And the only thing that's going to resolve that is getting more affordable EVs on the
market, getting more charging stations, public charging stations around that are up and

running all the time.

And that's going to convince everybody.

You know, even some of the hardcore people I know who are anti -EV will admit, yeah,
somewhere out in the future we're all gonna be driving EVs.

Part of their reluctance is, you know, the Republicans have successfully categorized this
as the government shoving EVs down our throats.

And look, there's a truth to that.

As you know, there's no EV mandate per se, but there are.

is also something Bob Lutz kind of mentioned the other day that there's no official EV
mandate, but with the EPA requirements, it pretty much means you have to go EV.

Yeah.

And look, I think there will be a push in the next Congress, no matter who gets elected,
to push the mix further back into the 2030s.

So I think, you know, at first it was the original regulations, I think required something
like 62 % or over 60 % EVs by 2032.

I think everybody agrees that's probably not going to happen.

And so the Biden administration changed the mix.

And I think right now you only need like 32, 33 % EVs.

The other part though has got to be a plug -in or an extended range EV.

And that to me is a more realistic approach.

And look, the goal is to get GHG emissions down, right?

So why not move faster?

And if you can get more people into an EREV or a PHEV,

Don't hold back for perfection.

Don't wait for the, you know, just a purely Bev world.

Get them used to these things.

Get them used to plugging in.

Get them this idea in their head that, my gosh, gasoline is so much more expensive than
electricity.

I want to be plugging in.

And it'll happen.

But I think if they move, give the auto industry another design cycle, move the goalposts
back another four or five years, would make all the difference in the world.

Yeah, I think that's an interesting point because the plug and hybrid debate is when we
have a lot on this podcast and it's, is kind of funny even anecdotally about like, okay,

you go to that or people actually going to use it.

And you do see people start like, if I had a UV and I mean the volt, a lot of early volt
owners saw this too.

It's like, well, if I had a full on electric vehicle, I'd never have to use the gas side
of my vehicle.

Cause I'm already using the majority of it.

The battery side for 90 % of my driving anyway.

But just anecdotally, it's really funny.

My mother -in -law, recently got a, they got the plug -in hybrid Volvo, I think XC90 is
what it is, the large SUV one.

And they'd already had a Tesla and she actually plugs it in religiously.

She actually uses it.

She does that and tries to max it out as much as she can.

On the other hand, my mom recently just got a Mercedes plug -in hybrid and I doubt she'll
ever plug that thing in.

And ironically, they also are have a Tesla themselves.

And it's just it's an interesting thing to me that I totally agree with the theory.

And you do see some people like kind of put it together as a guy.

You know, this is doable.

I can make that leap.

But then it's like like your point was like, are we trying to do this to help with
pollution, other things?

Well, I don't know if that's actually going to be accomplished if people aren't doing it.

And there just hasn't really been good data to.

prove one way the other if people actually use plug -in hybrids or

Yeah, the only good data I've seen is out of Europe and the Europe and the US markets are
very different when it comes to P -Hebs.

So yeah, my belief is if somebody deliberately buys a P -Heb because they know it's a P
-Heb and that's what they want, they're going to plug it in.

If they're taking a P -Heb because the dealer says, look, that's all I got on the lot, you
want this, you got to take it, then they may not be plugging in.

Well, and I think maybe it was just the UK.

know that P have were part of the kind of tax incentive there, along with fully battery
electric vehicles that if you use this, you pay less than taxes or something.

You can have it as a company vehicle.

And so for a lot of these people who are getting as a company vehicle anyway, they had a
gas card.

So, yeah, they were getting a P have, but they ended up just buying.

I mean, it got better range than just the fully gas one, but it's just an interesting
dilemma.

I guess is the best way to describe it.

But I do agree with you.

think at least it's at least a step in the right direction.

And it does kind of get that exposure.

And it just does seem like when people actually start being exposed to whether it's that
or fully battery electric, battery electric pretty quickly, they can see like, God, this

actually does work with my life.

And I think obviously, P have is have a lot of potential for those right now who live in
apartments or other places where they just don't have that ability to plug in overnight.

DC fast charging has come a long ways, but it's still like 90%.

Hell, I put about 30 ,000 miles a year in my vehicle and it's still, could look it up.

I think it's still like 70 to 80 % of it is still overnight level two charging.

And that makes it just so much easier to have an EV.

That's right.

That's right.

I'm very interested in EREVs right now, extended range EVs, because it's actually the
hottest growing segment in China.

And there's a lot of interesting work being done on that.

I think we're going to see a lot more EREVs before the end of this decade.

I think PHEVs will probably phase out.

Do you think that that's going to be a universal product or it's going to be the product
we see more like in heavy trucks and SUVs just because it helps them kind of get to that

point more efficiently than a fully battery electric can it right now?

Because I don't imagine seeing EREVs in small cars, I guess is what I'm saying.

think we will see e -REVs in small cars.

But to your point, when you've got a big SUV or full -size pickup, the battery pack, it's
a pure BEV, it's got to be so big.

It's so expensive that an e -REV is actually, even though you got two powertrains, it's
actually cheaper because the batteries are so expensive.

Well, and then you can put in a smaller engine and all this stuff.

it kind of there.

Yeah, I mean, I totally get it for like larger SUVs.

And then you get kind of the pros, too, of having electric motors that help you with
towing and stuff like that.

So you can still do a lot of that truck stuff that.

Yeah.

from an acceleration standpoint.

You can have one pedal driving, all that stuff.

But here's another key.

With an eREV, you run the generator engine in an optimum RPM range.

So now you can start to take cost out of the engine because it doesn't have to go through
the whole duty cycle of a normal ICE.

And so the Chinese have taken advantage of this and companies like BYD and

Chang 'an have come out with eREV engines that have got like 15 to 1 compression ratios.

I mean you're bumping up against diesel compression ratios there and they've got claims of
really impressive thermodynamic efficiency.

44 % or something like that.

You know keep in mind most ice engines on the road today are around 30 % thermodynamically
efficient i .e 70 % of the energy of a gallon of gasoline goes out as heat or emissions.

So getting it up to 44%, you automatically make the engine more efficient, theoretically
can take out cost, and you get rid of the transmission.

And if it's a rear drive vehicle, you get rid of the drive shaft.

So there's mass and cost advantages to going to an EREV over a PHEV.

And that's why I think we're going to see a lot more EREVs.

No, and I completely agree with you.

There's you start getting a lot more of the benefits of a battery electric by like less
parts.

Totally.

I think that's something a lot of people don't fully appreciate, too, with the e -rev
thing is you just have this engine when it's on.

It's just going at a constant state.

And that is huge for.

actually it's not.

It does rev up because one of the detracting points of an e -rev is when the battery gets
low and now the generator is trying to feed power to the electric motors.

It's not at idle.

It's not at red line, but you got to run that generator a whole lot.

mean, to get a car to pick up and accelerate quickly,

Man, it takes a lot of power.

Interesting.

Okay.

I understood it, at least in some of the versions I've seen where it is more of a, it's
almost more like a diesel locomotive where it's at a more of a flat state, but

in most states, you're absolutely right.

It can run at just this optimum RPM.

But like I said, once the battery, the main storage battery is depleted, the engine's
gotta crank out a lot more electricity.

Interesting.

And that does kind of like play into some of the use cases that people talk about with
having a traditional truck.

Like if you're on a road trip towing something and then you've got this small little
engine that's just going full blast trying to power the rest of the battery.

It just seems like, I dunno.

Interesting.

small...

Look at the RAM charger, the RAM pickup that...

It's a V6 engine, exactly.

That's the kind...

I mean, that shows you how much electricity a big truck can need when it's, you know,
pulling a load or going up a grade or anything like that.

Well, it'll just be interesting to see because yeah, I think with a lot of the e -revs
I've heard and I were like even in a Chevy Bolt, it's a much smaller engine and it's

interesting to me, kind of like e -revs were pitched originally, at least from what I
heard was they would be like, yeah, there'll be like a inline three or inline four

cylinder, the small little thing.

so it pollutes a lot less.

But then in the applications where, yeah, you're playing in a V6, is it really saving that
much?

I'm not sure.

Well, is.

yeah, compared to a pure ice, absolutely it's better.

So that no, I don't know.

That's an interesting world, but it's definitely something you guys talk a lot about on
auto line.

And you're right.

There's definitely been a lot of interest out of China, but it does seem like the legacy
auto manufacturers are also very interested in it.

I know Ram is kind of the big one that announced their own.

But do you see or have you heard I forget is GM or Ford can announce?

I think maybe Ford announced they were going to do something like that.

soon but I don't know if there's been anything official.

I haven't been watching that space and medley as closely.

Ford hasn't announced anything official.

Jim Farley publicly though has talked about his interest in EREVS because remember Ford's
partner in China is Chang 'an and Chang 'an is one of the leaders in this.

GM hasn't said anything but know GM just announced to tie up with the Hyundai Group,
Hyundai, Kia, Genesis to develop a bunch of product stuff and Hyundai has talked to...

that it's very interested in E -REVs.

So that's about as much as I know, though.

Yeah, you know, just because you brought up I'm kind of curious on your thoughts.

You look at kind of what GM and Honda were doing with the Ultium tie up with this recent
announcement with Hyundai and GM.

Do you see that being a more successful or a larger scale partnership or what do you think
about that in their electrification that made GM seem like a big partner?

Because it seems like the inverse GM was

not make a whole lot of EVs, but in some ways they were ahead of Honda.

Whereas Hyundai's found a lot of success in EVs and now they're kind doing this
partnership with GM that I think surprised a lot of people.

Yeah, and this gets back to what I was talking about earlier of the need for
collaboration.

There's so much duplication of effort.

It'll be interesting to see where GM and Hyundai wanna go because Hyundai's got hybrids,
GM needs hybrids.

That could be an instant collaboration.

On the EV things, economy of scale is the key way to bring down cost.

What could they share there?

but also increasingly, what they call IVI in vehicle infotainment is becoming the most
important part of the customer experience in a vehicle.

the Chinese are super aggressive.

They're in the lead in that.

And this latest move by the State Department, or not State Department, Commerce Department
to prohibit Chinese hardware and software with stuff that touches on IVI,

There's going to be a mad scramble to try to lock up with, hook up with tech companies
that can do it.

know, GM has announced they wanted to do all this IVI stuff in -house, maybe collaborating
with the Hyundai Group is a way to make that go easier.

Interesting.

Because I know there have been some recent ish, maybe a month or two back, kind of
announcements that I believe GM made around layoffs on their software side.

And they've put such a big push into software as kind of going their own way versus what a
lot of people kind of seem to be doing, which was using CarPlay as kind of almost a crutch

and then falling back to their own internal product.

And that seems to be changing a bit.

Do you find that to be

because the company themselves are realizing that that just isn't as plausible of a plan
or is it they're also kind of getting pressure internally, maybe even from stockholders

and stuff to have that differentiation and that kind of knowledge expertise.

Yeah, that's a great question and I don't have a really good answer, but I'll say this.

Remember earlier this year, General Motors announced opening a big software operations in
California in the Valley.

just because you're a software engineer doesn't necessarily mean you know how to code the
right stuff.

just because you're a software engineer doesn't necessarily mean, especially if you've
been working on legacy systems, that you...

really fully understand how to approach this on a total systems basis, such as is required
in a software defined vehicle.

So it's entirely possible that GM said, hey, look, we just opened this place in
California.

We're hiring the best software engineers in the world.

We don't need these legacy people, legacy software engineers in Michigan.

And so I don't know if that was it or what's really going on, but I suspect it's something
along those lines.

Interesting.

And I mean, just kind of talking about layoffs, there's it definitely seems to be in the
forecast to happen more and more.

Just kind of looking at where the audit, I mean, exactly kind of going back to what you're
talking about around the SAR and just how many vehicles that are going to be produced

seems to be lower than forecasted.

Do you think that this is something we're likely to see probably after the election or
some sort of announcement more drastic about what these cutbacks are?

What is kind of just I'm curious on your thoughts about what that might look like in the
next 12 months?

cutbacks and what?

Layoffs, guess, specifically.

Look, I.

guess we only I mean it's already almost October.

So yeah, at this point there's only a month to the election anyway pretty much.

Yeah.

Look, I think that the Federal Reserve cutting interest rates is going to be a real help
to the auto industry.

Sales are running below where everyone thought they would be at the beginning of this
year.

And though prices, car prices have come down, more incentives are out there, insurance
rates have gone through the roof.

Yeah.

Gas prices are starting to moderate a bit right now, but for most of the year, they were
pretty high for most people.

So I would think that with interest rates coming down, that's gonna make cars a little bit
more affordable.

It's going to make people with low credit scores more likely to be able to qualify for a
loan.

I think it'll help the industry.

Forecasting into next year, I don't know.

I mean, who knows what's going to happen.

But these rate cuts are only good news for the auto industry.

And do you think that that's likely to continue?

I know there's point five and there's been talk about more coming in the next one.

But do you think that it's.

Do you think that that's having a larger impact, I guess, is what I'm asking, then?

The fact that there's a lack of.

Under forty thousand dollar priced vehicles that are compelling new vehicles for people to
buy right now, if that makes sense.

well, there are, you know, vehicles, Buick, Chevrolet, Ford, I'm thinking like the
Maverick in the tracks and things like that.

They can't build them fast enough, you know.

People are really latching on to more affordable cars.

My guess is the Fed will continue to cut rates.

you know, look, just keep an eye on the inflation rate.

That's what the Fed's watching.

And as long as the inflation rates coming down, it will feel comfortable cutting rates
farther.

And that seems to be what's happening right now.

No, and I'm curious then, Andrew, I guess I chose 40 ,000 as a random number, but you're
right.

There are more vehicles now than there were even just recently that are kind of lower
priced, but we still haven't seen anything.

And obviously inflation plays some into that since like pre COVID and it's we're still
seeing such a high.

I forget what is the average selling price of a car.

It's still somewhere in the 40s.

Yeah.

is, you know, a good 30 % higher than it was before COVID.

And so, no, look, your point's absolutely taken.

Car prices are too high.

You know, we've priced people out of the market.

And when you add high interest rates and high insurance costs and high gasoline prices,
lot of people said, look, I'm just going to fix up the car I've got.

I'm not going to get a new one.

Well, then I think the point you made earlier about just the used car market still being
so just out of whack compared to what it happened.

I mean, it was still kind of out of whack before COVID, but it really just hasn't
recovered since then.

Is there anything that you see on the horizon or you kind of expect to maybe get that to
maybe a healthier place at least for people who are buying used cars?

Yeah.

as I said, car prices jumped roughly 30%.

We're not going to see the automakers turn around and cut the prices 30%.

They'll add incentives and the like.

We're just going to have to grow out of this problem.

And it's going to take a number of years to be able to do that, where car prices remain
fairly steady at where they're now.

And over the years, income levels build up to where cars become more affordable again.

But in the meantime, look, who can figure out how to restructure, I'm talking legacy
automaker now, anyone of them who can figure out how to restructure their corporate

structure, anyone of them who can figure out new ways, especially using simulation to
design cost out, using Sandy Monroe and Karasoff kind of principles of taking cost out.

And anybody who comes out with much more affordable vehicles is going to hit a home run in
the market.

They'll gain market share.

I mean, kind of going back to our earlier comments about like just how a of these
companies need to kind of cut down and become more streamlined.

Do you see in the current state of the kind of like the legacy, I was going to say big
three, but like big two and a half, the automakers being able to do that, or do you think

it would require a new management or someone to really come in and just say, Hey, we got
to make kind of summer heads have to roll to kind of make these changes.

And I mean, when you have that high of overhead anyway, of course you're going to have
expensive cars.

Right, so I would say what you gotta do is look at the age of the CEOs in power and
keeping in mind that retirement age is typically around 65, 66 years old and anyone who's

close to that age is not going to take drastic action.

It's going to take the next generation of CEOs who come in that are maybe in their mid
-50s, got a decade ahead of them and are willing to tackle this.

But yeah, I just think human nature is such that somebody who's a year or two away from
retiring is not gonna take drastic action.

Yeah, fair.

Well, under a different note, I guess.

But no, I appreciate answering that.

Obviously, we've some of the topics we've talked about are more general around just the
automotive space.

But I'm kind of curious as to what you've been seeing or hearing around EV charging.

think where I live is kind of a remote spot in the Northwest.

And so there's still quite a few gaps around like public fast charging and stuff.

But for long time, I've heard that there can be kind of challenges with that in the
Michigan and kind of that region.

And I'm kind of curious what you're hearing or experiencing from like even when you have
like a press vehicle or just others or EV drivers, if there's been an interest in how that

might be impacting people buying EVs right now.

Yeah, look, I got to tell you in this area, I just keep seeing more more chargers going up
and at gas stations too, not just, you know, stand alone in a strip mall kind of a

charging situation.

I may not be a good one to ask because I'm so much more aware.

I mean, I talk to people in this area all around all the time and they say there's no
chargers and then I start pointing them out and there was like, my gosh, I didn't know

that they were there.

That's the problem is people are just not aware of what's out there.

Now, having said that, even if they are aware, we need a whole lot more charges and they
have to be more reliable.

This was supposed to happen under the Inflation Reduction Act.

obviously one of the big hangups, because I mean, there's billions out there just going
begging, but permitting has been a big issue.

And it just seems to take forever to get anything done in this country anymore.

were so tangled up in red tape and that's something else I think that will become an issue
after the election.

In fact, know, Trump has even said he'd welcome Elon Musk into his cabinet to start
attacking, you know, bureaucracy and regulations.

You know, those rules and those regulations are there for very good reasons.

But, you know, in California especially,

It takes forever to get anything done.

mean, road projects, and I'm not saying Michigan's great by any example, but a road
project that takes a year to get done in Michigan, honest to God, can take 10 to 12 years

in California.

There's no excuse for it.

So,

I think it's the epitome of the old saying the path to hell is paved with good intentions.

And I completely agree that there's just too much.

I think a lot of these regulations were put in.

I mean, you even see this with like car manufacturing regulations.

I think the big one that gets a lot of flak and I think is finally changing is around
American headlights and how it has to be so specific.

And I was based on a good intention back in

believe the 50s, but now there are so much so many more advanced kind of white
technologies coming out from these manufacturers that can't be implemented.

Yeah.

takes NHTSA seven years to write a new safety regulation.

This is ridiculous.

People are getting killed at the same time it's taken seven years to write a regulation
that could help them.

And, you know, it's even worse than that.

So NHTSA sets fuel economy regulations.

The EPA sets emission regulations.

Emissions have a direct impact on fuel economy and vice versa.

but they both have two separate sets of regs that the industry has to test for.

And then on top of that, NHTSA also controls all safety things and it's mandating all this
extra structure being added to car that does what?

Drives up emissions and drives down fuel efficiency.

And none of these agencies are coordinating things amongst each other.

And I don't blame them at all.

This is how Congress has set things up.

And there was no.

grand overall plan of how to do this.

These agencies just sort of grew up on an as needed basis.

But there I think is a perfect example of saying, let's take a step back and figure out
how we can get these things done.

And even if we lower the regulations a little bit, they're going to be implemented so much
faster that the net result will be lower emissions, higher fuel efficiency, lower

fatalities.

And hopefully lower costs, but I I completely agree.

I completely agree with you though.

I think that's truly the thing is just like there's people dying and getting injured and
that's what you're trying to solve.

And ironically, it's kind of held holding these things up.

And we're seeing this just in so many areas.

Whether it be in the auto industry or even like home building and these things that are
just making prices of everything.

and yeah, that could be its own podcast and its own rant, but.

I, yeah, I, whoever wins, I hope that somebody seriously tackles just like there does need
to be a pretty serious restructuring and focus on output.

And I think that's what you hear from so many Americans, whether I don't know if they say
it correctly when they say they want America to be run more like a business.

think what they're really looking for is accountability and that efficiency that I think
will hopefully get there.

But that, I mean, that's been a

It's a very different reason why, that has also been part of the reason China has been
able to move so fast is good or bad when they agree on something that's just what it is

now.

same, same.

That's a great clarification.

Yeah.

Winston Churchill quote, know, democracy is the worst form of government there is, except
compared to all the others.

And so it's messy and it can be slow at times, but it's proven itself to be very
resilient.

Yeah, that's true.

No, I completely agree with you there.

I think that's a good, a good kind of positive note, maybe two in this episode on since
we've been covering so many different topics.

But John, I really appreciate you coming on and talking to these.

And I know we could easily talk for another hour or two.

I'm definitely hoping to have you again on with just more of these insights and probably
have to get you after the election to talk about all the things that are now going to

happen with however the cards fall.

Well, Chase, thanks so much for having me back on.

Always a pleasure to talk with you.

You always ask great stuff and I love the conversation that we engage in.

My pleasure, same here, John.

I'll let you get going and have a great day.

Hope you enjoyed another episode of the Grid Connections podcast.

A big thank you to John McElroy for sharing his thoughts on the future of the auto
industry, from electrification and autonomous vehicles, the global EV race, and how legacy

automakers are adapting.

There's so much to consider as we look forward to the future of transportation.

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