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Runtime: 11:21
0:00 U.S. To Ban Chinese Connected & AV Cars
1:07 China Ban Blocks Mexico As Backdoor
2:01 Chinese Auto Suppliers Invest $7B In Mexico
2:45 China Car Dealers Lose $20 Billion
4:31 EV Startups Crushing Legacy OEMs In Technology
5:35 The Hague Bans ICE Advertising
6:38 VW Faces Pressure to Withdraw from China Plant
7:30 Automakers Axe 3M EVs From Future Plans
8:13 Mercedes Boosts Speed for Hands-Free Driving
8:57 Lutz’s Advice for Automakers
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U.S. TO BAN CHINESE CONNECTED & AV CARS
The U.S. government is taking no chances that Chinese connected or autonomous cars get sold in the American market. It’s proposing rules that would prohibit the import of hardware or software for connectivity or autonomy from China and even Russia. That includes any components that are sold separately or are integrated into vehicles, even if those vehicles are made in the U.S. The action is being taken by the U.S. Department of Commerce’s Bureau of Industry and Security. It says that “malicious access to these systems could allow adversaries to access and collect our most sensitive data and remotely manipulate cars on American roads.” The software rule would go into effect in 2027, while the hardware would be banned by 2030 to give automakers time to find other suppliers. The rules would apply to any vehicle used on public roads, but would exclude farming or mining vehicles.
CHINA BAN BLOCKS MEXICO AS BACKDOOR
Here’s our Autoline Insight. The Biden Administration is initiating these rules to prevent Chinese automakers from selling cars in the U.S. market under any circumstances. Despite adding 100% tariffs on imported Chinese EVs, many worried that China could use Mexico as an assembly point and ship cars north, without any tariffs, under the USMCA trade agreement. So, by banning Chinese hardware and software related to connected or autonomous cars, the Administration is effectively closing the door on all Chinese automakers. And it’s all being done under the banner of national security. The White House National Security Advisor, Jake Sullivan, says the U.S. has plenty of evidence of China pre-positioning malware in critical American infrastructure, and that’s why it’s taking action on Chinese connected and autonomous cars.
CHINESE AUTO SUPPLIERS INVEST $7B IN MEXICO
There’s no question that Chinese suppliers are making significant investments in Mexico. We talked with Nick Iacovella, the senior vice president of Public Affairs and Communications, from a group called Coalition For A Prosperous America, and here’s what they found.
“Since June, 2022 we’ve seen nearly 30 Chinese auto part manufacturers and car makers actually move into Mexico with over $7 billion of investment into added capacity.”
If this is a topic that interests you, check out that entire interview, which you can find on our website or YouTube channel, and we have a link to it in today’s show notes.
CHINA CAR DEALERS LOSE $20 BILLION
The price war in China isn’t just hurting automakers’ bottom lines, it’s also having a big impact on car dealers. According to the China Automobile Dealers Association, dealers have lost nearly $20 billion in the first eight months of the year. While sales of new energy vehicles are going strong, the overall passenger car market is only expected to grow about 4% this year. And with that slower rate of growth, inventory levels are increasing, forcing dealers to sell vehicles at a discount. And coupled with the price war, that’s what’s driving dealer losses.
EV STARTUPS CRUSHING LEGACY OEMs IN TECHNOLOGY
Legacy automakers want to be seen as tech companies and generate billions of dollars of revenue from their software, but they’re still playing catch up. According to the Gartner Digital Automaker Index, which looks at 22 global automakers, evaluating things like talent, electrical/electronic architecture and autonomy, Tesla, Chinese automakers and EV startups are at the top of those categories. Specifically, it’s Tesla at number 1, then NIO, XPeng, Rivian and Lucid. GM, VW and Toyota saw notable drops from last year’s index and Toyota was third from the bottom overall, but it wasn’t all bad news for legacy automakers. Hyundai-Kia, Honda and Stellantis were able to make significant gains. However, I think this helps show why some legacy automakers have struggled with software and technology, why they’re investing so much money in it and why they’re partnering up with Chinese automakers and EV startups to get it. Because they need to catch up.
THE HAGUE BANS ICE ADVERTISING
Remember when all the advertising for cigarettes was banned? It started out slow at first, then got banned all over the world. Well, advertising for cars with internal combustion engines could be next. Starting next year, the city of The Hague in the Netherlands is banning advertisements for fossil-fuel powered vehicles in public spaces like bus stops, billboards, and transport hubs. The ban also includes air and cruise travel ads but natural gas products are exempt. Amsterdam and Edinburgh, Scotland also have similar measures but they aren’t as strict as The Hague. And two years ago, France passed a law requiring ads for vehicles that emit higher amounts of CO2 must promote greener transport alternatives and all vehicle ads have to include their environmental impact. The goal of the bans is to help improve air quality. So what do you think? Will ICE advertising go the way of cigarette ads?
VW FACES PRESSURE TO WITHDRAW FROM CHINA PLANT
Volkswagen might pull out of a plant it owns with SAIC in China, but this has nothing to do with declining sales and profits. It’s in regards to allegations of forced labor and other violations by a local minority group, called the Uyghurs. At first VW hired an audit firm that said it found no violations, but soon after 6 execs from the firm quit saying they had nothing to do with the audit. But now another VW-hired auditor is saying the plant doesn’t comply with international standards for human rights. And also added initial interviews that should have been confidential were live-streamed and only managers, not shop-floor workers were asked questions about working conditions. This has led 50 lawmakers to sign a letter calling for Volkswagen to completely withdraw from the plant.
AUTOMAKERS AXE 3M EVs FROM FUTURE PLANS
Over the last several months, most major automakers have scaled back their EV sales goals due to the slowdown in demand. And altogether there’ll be significantly fewer EVs than they planned. According to a study from BloombergNEF, which looked at 14 automakers that set 2030 EV sales goals, they’ll now produce 23.7 million EVs in 2030, down from the 27 million they planned or more than 3 million fewer than before. Even though EV sales have cooled, the researchers say cutting these targets carries a risk of falling further behind automakers like Tesla and BYD.
MERCEDES BOOSTS SPEED FOR HANDS-FREE DRIVING
Mercedes is increasing the speed at which its Level 3 hands-free driving system will work up to. It was 65 km/h or 40 MPH, but now it’s going to 95 km/h or nearly 60 MPH. The increase is first approved for Germany and should be ready by the start of next year. Current customers will get it via an OTA update or through a trip to the dealer. And we suspect the same increase will be made in the U.S. as well. But remember the Level 3 system is only approved for California and Arizona right now. In Germany, it costs just under 6,000 euros, but in the U.S. it’s a $2,500 yearly subscription.
LUTZ’S ADVICE FOR AUTOMAKERS
We had Bob Lutz on Autoline After Hours last week and even at 92 years of age I was amazed at how polarizing of a figure he still is. But Lutz still seems up to speed with what’s happening in the industry right now. He talked about the need for better leadership at the car companies, as well as the problems with bureaucratic management and board of directors who really don’t know much about the auto industry. Here’s one quick bit of advice he shared.
“If I were running one of the large automobile companies today, the first thing I’d do today is the 20-80 rule. Find out who are the 20% of the people who are doing all the work and then focus a lot of my energy on getting rid of the other 80%. And I’ll bet you money that almost any company…I mean Chrysler was the perfect example. We did our best work when we had almost no people.”
If you work in the auto industry and especially if you’re in management, this show is full of advice.
But that brings us to the end of today’s show. Thanks for making Autoline a part of your day.
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We should ban all advertisements for travel to Hague and not promote them to anyone as a tourist or business destination. That way we can save the environment from those harmful ship, airplane, and car emissions that it takes to get there. Hague should probably recommend that to the world in the name of the environment.
Yes Great interview with Bob Lutz good job John, also isn’t that how Tesla works almost no people doing innovative work?
Isn’t GM in bed with SAIC the You tube channel connecting the dots had an expose on GM transferring a lot of intellectual information to the Chinese through SAIC and getting little in return
Personally with the ban on tobacco product advertising it was a first step in getting rid of smell everywhere especially restaurants although really got going about 1990 when things really got odor free although now there is the smell of cannabis. Merkur I think is onto something like maybe an outright ban to D.C. where there is already too much hot air. Now I see ad banning of ICE cars the first step of the broader issue of eliminating the yellow haze around cities at least China recognizes it already has a problem and it still gives ICE aficionados the ability to buy their vehicle of choice
I would much rather they ban prescription drugs from being advertised since you need a Dr. prescription to even get them anyway. Limiting what can be advertised based on health concerns then we should also cut beer commercials, fast food, weed killer, Pepsi and Coke products. I mean where does it end. Seems silly in so many places they run ads for a weed dispensary but consider banning car commercials. Sounds a lot like limiting speech. Which just for the record I’m against not being able to have liquor and cigarette commercials. However, I agree they should not be able to target children.
Dave, SAIC has joint ventures with GM and VW, VW being the oldest.
Lambo, an MD friend absolutely hates the prescription drug ads, because of patients wanting prescriptions that may not even apply to their condition, and are nearly always much more expensive than similar drugs that work as well.
Is the US also going to ban tourists from other countries that might drive a Chinese made or branded cars on a vacation to the US? Does Tesla have separate connected car and AV systems for China and the US? I understand that some Chinese made Teslas are sold in Mexico and Canada to reduce costs. Also, if a car brand uses the same model name on an ICE, hybrid and EV, can you still advertise it?
It is hilarious that the city of Hague is banning ICE commercials, but city’s are the biggest contributors to harmful emissions, by a WIDE margin! Maybe they shouldn’t advertise themselves as a tourist attraction, for, as already mentioned, the more tourists, the more things they use in the city that produce harmful emissions! Inside the city, are people only allowed to drive vehicles that do not emit emissions? Maybe they have banned ICE vehicles from the city already?!
The future is electrification and ultra low emissions. Get over it. The Hague is not a tourist destination. It is the administrative center. Most ICE engines in Europe are diesel. That is their main emission problem.
Bob Lutz talks a good game, but I don’t remember him getting rid of 80% of the people at the auto companies he helped run, for the simple reason that the 20-80 rule is bullshit and is one of those pie-in-the-sky tropisms that management love to throw around to make themselves feel important. I see age hasn’t done any cooling of the hot air that comes out of him.
The world should gradually weene itseld from Chinese products and send China to the poor house. The world don’t need such adversaries.
Bob Lutz – a legend in his own mind. A great promoter of “rules of thumb” and management cliches. There is no wonder why he didn’t last at any automaker.
Lutz had some good product ideas over the years, but changed jobs a lot. I suspect he mostly quit rather than being fired, or he wouldn’t have gone from one upper management position to another like he did. It’s hard for me to respect him much, though, as he was a climate change denier the last I knew. In any case, as always, his appearance on AAH was interesting and entertaining.
First wondered what the heck the ICC (International Criminal Court) had to do with advertising. I’ve slept in that old hotel there on the beach of Scheveningen (The Hague is in the background), and skated along that boardwalk (after roughly 90 miles on eight wheels in two days). Incidentally, also got to see the construction of the new beach promenade, with its 40ft deep pilings, and a design that can accomodate a substantially rising sea level.
Dutch cycling paths are marvelous.
Victor- I’m afraid that the move to EVs will turn out to be just another situation where we attempt to fix one problem by creating another. A recent study showed that if all vehicles globally were EVs today we would only lower carbon emissions by 1.8%. Miners who unearth the various critical minerals needed for these batteries are exposed to substantial amounts of dangerous toxins. It is estimated that one would have to drive his electric vehicle 100,000 miles to make any difference in carbon emissions. Without changing our power generating plants from fossil fuels we are just moving emissions from point of use to the power plants. Coal power plants are about 40% efficient with some newer ones at 50%. Then the losses in transmission, charging and battery storage. Then look at a strip mine and the impact to the environment. Look at a Lithium plant and the incredible amount of water and space needed. Adversely an oil spill is pretty damaging too and happens far too often. So, neither is a great alternative. EVs will help clean up the air in the heavily populated areas of the cities and another advantage is they don’t pollute while sitting in stopped traffic.
There are plenty of studies to support EV and condemn them. The real question is “Are they the future”? I tend to believe they have their advantages, and we should absolutely capitalize on their strengths. We should be looking at ways to utilize EVs where they make sense. Because they don’t make sense for everyone everywhere. I don’t even care the Gov is throwing money at it to help give it a jump start. What I do have a problem with is forcing the product on people. Banning a current product to force another. Allow manufacturers to build EVs and if it’s a better product it will sell itself. We don’t need the Gov to tell us what to buy. What makes sense in NY, Chicago, LA or DC doesn’t always make sense in North Dakota, Iowa, New Mexico. The legislators seem to forget that not everyone lives in a city or even within 30 miles of a gas station let alone a charging station.
I believe EVs have a future. I’m just not sure they ARE the future. I think it’s somewhere in between. At least for another 25-30 years. By that time who knows, Hydrogen might be a better option. I just wish people would stop thinking that EVs are this perfect answer to pollution and emissions. They are not, and maybe do have a slight advantage over ICE but I think in the long run we will discover we created a new problem to solve the old problem.
EVs make the most sense in densely populated areas, but unfortunately, that is where there is no place for the millions of apartment dwellers to charge them. Actually, the thing that makes the most sense for transportation in densely populated areas, and for trips of up to a few hundred miles between cities, is good public transit, which is sorely lacking in most of the U.S.
I’ve had this idea for a long time but I truly believe what the US needs is a mass transit system that transports people in a small vehicle. Because the problem with mass transit is it doesn’t get you to your destination. You are limited by the route. This goes for busses, trains, subways. Their shortcoming is they have limited pick-up and drop-off locations. People want to get from home to work or a particular store and not include a taxi, uber or walking blocks. So if vehicles were small enough that could easily be loaded and unloaded on a continuous path like an escalator where they could enter and exit near their destination and finish the trip in their personal vehicle I think it would really be popular. Much like a turnpike you pay to go the distance you need you enter and hopefully travel at speeds over 100mph get close to where you want to go exit and drive the remaining distance.
This obviously wouldn’t be great for inner city but from city to city I think it would be a great benefit.
Kit- imagine if you could drive to the nearest city in Fla. enter the system and in a few hours be in a major city in Indiana exit and finish your drive home making the whole trip in like 6 hours.
Yep, a fast train from Orlando to Indy would be great.