The EV market’s growing pains

Make Me Smart April 9, 2024 Transcript

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Kimberly Adams 

Hello everyone, I’m Kimberly Adams. Welcome back to Make Me Smart, where none of us is as smart as all of us.

Kai Ryssdal 

I’m Kai Ryssdal. Tuesday nine April today. That means it’s one topic, one show. We’re talking EVs, the EV market, lots of buzz about how it might be slowing. What’s going on? What’s the China factor? What are American companies doing? There’s a lot going on in EVs. So, we’re going to talk about that.

Kimberly Adams 

Yeah, and to figure out how it’s actually going and to make us smart about this whole thing is Robinson Meyer, who’s the executive director of Heatmap, which is a media company focused on climate change. Sorry, founding executive editor, which is way more important, of Heatmap. And so, welcome to the show, Robinson.

Robinson Meyer 

Thank you for having that. You got to get that founding in. Very appreciative.

Kimberly Adams 

It’s crucial. It’s crucial. You started it. Um, so there are all these headlines about the slowdown in the EV market. How real is that?

Robinson Meyer 

Yeah. So, what we saw in the first quarter is that EV sales growth is definitely down somewhat from the quarter before and seems to be slowing. So, US EV sales grew somewhere between 10% and 70%. We’re waiting for all the numbers to come in, in the first quarter of this year. That’s down from how they how they’ve been growing in the past when it was more exponential. But that is the second derivative, right? EV sales are no longer accelerating as much as they used to be, but they’re still growing slightly quarter over quarter.

Kai Ryssdal 

How come? Is that just because consumers a little leery. There’s not. I mean, what’s going on out there?

Robinson Meyer 

Yeah, so what it seems to be, you know, the car market the EV market right now is extremely uneven. And I think what we saw kind of a few years ago was that a lot of automakers got into the making EVs. They kind of threw a few models at the wall, and now we’re seeing what sticks. And so, for instance, Ford, you know, Ford tried to make a few EVs. They tried to make the E-Transit, which is like more of a commercial van. They tried to make the Mustang Mach-E, which is kind of a crossover. And they tried to make the Ford F-150 truck. And what they found is that lots and lots of people want to buy the Mach-E. You know, they can basically sell as many Mach-E as they make, but they’ve had a lot of trouble moving the more expensive F-150 Lightning trucks, and I think that’s kind of the story across the market as you look at automaker after automaker. The real other standout story is that Tesla is really, really slowing. Tesla had a lot of problems in Q1. They had lot of problems just selling the vehicles they have. And so, on the one hand, I think we have this this EV market that’s kind of undergoing growing pains. And on the other hand, we have a very specific Tesla story where Tesla’s sales are really, really, really slowing down.

Kimberly Adams 

I think we can get to Tesla separately. But I’m really curious about this idea of like throwing models at the wall and seeing which one works because these car companies have been around for a very long time, and typically are quite good at figuring out what kind of cars consumers will want and making said cars. Why is it so much harder when it comes to EVs?

Robinson Meyer 

I think there’s two reasons. I mean, I think to some degree, the kind of cars that have sold the best over the past decade are also the kind of cars that we see moving the most when you make them into EVs. So, I put the Ford Mach-E in that category. It’s kind of this SUV crossover that is very popular with families. You know, Hyundai and Kia together have made a lot of vehicles, a lot of electric vehicles that have sold very well. And they’ve basically made three or four different variants on an SUV crossover form. I think what car companies anticipated as they got into this is that more heavy-duty vehicles might sell better like the Ford F-150 Lightning. I think also the other thing that happened is that as car companies, you know, especially as Ford, GM, the big three, set forth on their EV journey they wanted to signal to consumers that they were really serious about this. And so, they took some of their most iconic brands and made EV versions of them, right? They made the F-150 Lightning. GM made an electric Hummer, which has sold in the hundreds of vehicles. These were like signaling cars, right? These were meant to signal that these automakers were extremely serious about the electric vehicle transition. Have they sold? Well, not entirely, but it was like.

Kimberly Adams

It just sounds like an oxymoron.

Robinson Meyer

The only electric hummer I’ve ever seen in person was completely unused sitting in the middle of like a big concrete plaza at the UN climate conference in Dubai. Like spackled with the logo for the police, specifically created to police’s climate conference. And I was like that is who buys the EV Hummer, you know Emirati climate cops.

Kai Ryssdal 

We should probably pause here for a manufacturing moment, right? When you take like an F-150, the most popular selling vehicle in this country by miles or the Mach-E, which was like, it’s got the Mustang branding, but whatever, right? It’s not just a matter of taking the internal combustion engine out slapping a battery on and going right? It’s a huge investment for these car companies to do it, which helps explain why they’re a little leery.

Robinson Meyer 

That’s right. It just requires totally different heart tooling and the factories and the whole supply chain is really different, right? Instead of pulling up lots and lots of small components that ultimately go into the internal combustion powertrain and whole internal combustion, internal combustion vehicle, right? The main assets that you need to kind of organize across the production chain become minerals, become battery chemistries, become putting together these very chemically complex batteries, and then putting them in the vehicles. Electric vehicles are actually not as complicated machines as an internal combustion vehicle is. I’ve heard people argue that this is one reason that China has been able to get as far as it has with EVs specifically is that, you know, if we were still in an internal combustion world, China would have had a lot more trouble, you know, equaling or beating what’s coming out of Western or legacy carmakers. It’s because EVs are so much simpler. And also, because China is so good at making electronics that they’ve been able to leapfrog what’s happening in the US. And I think that story is kind of happening across the board too. But that means that ramping up EVs becomes this very delicate supply demand question for automakers because they don’t want to get into a position where they’ve spent billions of dollars on a factory retooling a factory, setting up a new factory, and then there’s no demand for the cars that they’re producing.

Kimberly Adams 

Well, on that demand point, the Biden administration has been rolling out all these tax credits and incentives to try to spur EV growth in the US, get more people to buy them. How is all that working so far?

Robinson Meyer 

It’s working well. I think there are so many tax credits coming out of the, that have come out of the Biden administration, and so many tax credits were set up by the Inflation Reduction Act that it’s really like a policy-by-policy story. I think, you know, the Mach-E policy we often hear about is this tax credit for individual Americans to buy electric vehicles that they’re going to use as private passenger vehicles. You know, sedans, SUVs, crossovers, whatever. That is quite complicated. It’s quite a complicated tax credit, and it’s becoming more complicated over time. And that’s because, you know, it’s divided in two. You get about half of this $7,500 if you make a battery in North America. You get another half of the $7,500 if you mine or process the critical minerals that go into the factory in North America or the United States or like a Free Trade Agreement country. It’s a very complicated tax credit. Intentionally so because, you know, Senator Joe Manchin, other moderate Democrats who negotiated that policy really wanted the goal of that policy to be to bring in EV manufacturing to the United States and to North America to create a, you know, EV manufacturing complex here. But there’s a lot of other tax credits in the IRA and the Inflation Reduction Act that we never hear about and one of them is, or we rarely hear about, you know. One of them is this commercial vehicle tax credit. And that says that if you are a company and you are purchasing an EV for any commercial purpose, then you get $7,500 back, you know, off the cost of that EV. Now, a lot of, one of the specified purposes in the law is leasing out a vehicle. So, if you’re say a bank or dealerships, you know, lending authority and you’re buying a vehicle, and then leasing it out to an American who’s going to drive it. You can just pass along that full $7,500 discount. And we see a lot of manufacturers doing that now. And so, some of the best EV deals you see out there are actually for leasing vehicles. You know, Hyundai is now advertising its ionic vehicles for about $3000 down and then $220, $230 a month, which is a really good deal compared to what else is out there on the market. There’s a whole third set of tax credits all for manufacturing EVs and manufacturing batteries. And the funny thing is, we like never, never hear about those policies. But they are actually the most important from a manufacturer perspective is as Ford, as GM, as Hyundai set up their EV plant in the United States.

Kai Ryssdal 

The gap in manufacturing both the cars themselves and the batteries and the rest of the infrastructure between what we produce in this country, and what say the Chinese producer or what the Europeans produce is huge. And I guess my question is, do you think all of this is enough to close the gap?

Robinson Meyer 

I think it’s too early to say. I think it’s too early. I mean, I think a lot of China got where it is on EVs by doing a lot of the policies that the US is doing now. I mean, if you look at the IRA, there’s a ton of stuff that we’ve basically borrowed from the Chinese policy playbook. And I should say, China borrowed those policies from our policy playbook back in the 70s and 60s and 50s. You know, there’s kind of a set of policies you can do. You can pull demand. You can push supply. You can do a lot of different things across the supply chain to build up a new industry. There’s only so many policies, and China has gotten good at doing them in the 20 teens, but there’s no reason the US couldn’t get good at doing them again. We used to do them, especially in the defense sector all the time. Do I think this is enough? I think it’s really hard to say, and I think the key question I have about the US. America’s ability to compete with China and the American economy’s ability to compete with China on EVs is around demand. So, the Chinese automakers, they’ve gotten a lot of headlines in the past month because they’re making these incredible vehicles. They’re making BYD, just unveiled a $9,500 electric hatchback. That’s basically comparable to a Chevy Bolt, which like, right goes for about double that price when we’re making it. And we’re not even making it right now. One reason that BYD can sell a $9,500 EV is because not only are there so many subsidies in China because China has, you know, aggressively paid and passed policy to set up an extremely advanced vehicle ecosystem, you know, manufacturing ecosystem domestically in China. But also, just because the Chinese market is huge, and a lot of people are buying their first car. And a lot of Chinese automakers have gotten really good at selling to those, you know, low margin high volume vehicles to the very bottom of the Chinese market. And if you’ve never had a car before, a $9,500 EV sounds pretty great. And guess what? BYD has gotten really good at making inexpensive cars, because it’s catered to the bottom of the Chinese market for so long. In the US, you know, most of us have cars. And there’s not like a rapid an upwardly mobile class here that is buying, you know, the first car that anyone in their family has had in a generation. And that means that cars have to be of higher quality. People expect more out of them. And that means there’s not this kind of lower segment that brands can experiment in, and brands can sell a very cheap vehicle in that then brings down costs across their manufacturing operation. I think the key question I have all of these IRA policies is that, you know, unless we build more chargers in across the country and make it easier for people to have an EV. You know, the infrastructure we have right now already exists really favors gas cars. And without boosting the EV infrastructure, there’s just not going to be the demand that automakers will need in order to produce cars here.

Kimberly Adams 

Since we’re talking about BYD. BYD briefly dethroned Tesla as the world’s leading EV seller. And it’s funny because I thought this conversation was going to focus a lot more about Tesla, but this other stuff is way more interesting. So, I mean, just like passing reference to it. How important is Tesla in the future of EVs?

Robinson Meyer 

Yeah, well, I mean, I think what we can say is that Tesla’s an extremely important American company in the future of EVs. And up until last quarter, we would have said that, you know, Tesla was one of the, or up until the past few quarters, we would have said Tesla is the dominant global EV maker. You know that you could look past all these new Chinese entrants, Tesla’s still making more EVs and selling more EVs than anyone else. That stopped being true in the fourth quarter of last year. It’s kind of has briefly become true again in the first quarter of this year. We’ll see what happens in the second quarter. The key thing, though, is that Tesla has real corporate problems in a way that is starting to become apparent. And I actually don’t mean.

Kai Ryssdal 

Wink wink.

Robinson Meyer 

Before you talk about Elon Musk. Like let’s put Elon Musk to the side. Even with no Elon, you’d still say, “boy, Tesla is a company in trouble,” because they have the Model S, the Model 3, the Model X and the Model Y, right? Well, three out of the four of those vehicles are really no longer segment leaders, and all of them are getting pretty old. So, you have, you know, the model Y was unveiled in 2019. Now, it took a little while for them to start selling it. But it actually, model Y was only unveiled six months before the Cybertruck was unveiled. And Reuters reported last week that Tesla has canceled the production of the next vehicle in its lineup. The vehicle that people were really excited about, which is this $25,000 car that they say you know, we can have economies of scale work even better for us. Never mind the Model 3 of the Model Y, which kind of both sell in the high 30s. We can make a $25,000 car and that was going to be like, not only Tesla, but kind of, you know, the American automaking sectors answer to BYD and these Chinese electric vehicles. But Reuters reported last week, as I just said that they have canceled it. Tesla, I should say disputes that report. But Reuters had a lot of substantiation and Tesla really hasn’t substantiated much. And a lot of the, you know, disputation has come from Elon’s Twitter account without really any more detail. Tesla says, it’s going to unveil this robotaxi, which has previously been described as a $25,000 car, but without a steering wheel that will rely entirely on Tesla’s full self-driving software in August. But there’s a lot of bugs and problems around Tesla’s full self-driving software. In fact, Tesla doesn’t even refer to it as being full self-driving software anymore. If you look at says like, full self-driving.

Kimberly Adams

They’re not allowed to, are they?

Robinson Meyer

No, they’re not allowed to. They have to say. They say it’s supervised. So, the actual name of this of this software now is full self-driving (supervised), which is like kind of an oxymoron, right? So, I think the big thing for Tesla is that Tesla’s lineup is getting really old. And if this $25,000 car has been cancelled, then they have been working. What have they been working on for the past three to four years? It’s crazy to think about a car company that just doesn’t seem to have a product pipeline at all, which is where Tesla seems to be. Maybe they have this robotaxi, but there’s seems like there’s big problems with it. And so, when, but Tesla has historically made up more than half of the US EV market and while its share is dwindling by the quarter, it is still an extremely important part of the US EV, you know, supply picture, and the EVs that are available to consumers. And as their vehicle quality continues to deteriorate against what else is available in the market, I think we’re going to continue to see them, you know, their sales share and just their vehicle deliveries deteriorate as well.

Kimberly Adams 

Robbinson Meyer, founding executive editor of Heatmap. That was a lot of good info on that. Thank you.

Kai Ryssdal

Thanks Robinson. Appreciate it.

Robinson Meyer 

Thank you for having me.

Kimberly Adams 

I guess the next couple of quarters are really going to tell the story of the future the EV market. I didn’t realize we were quite kind of in this pivot moment almost, it seems.

Kai Ryssdal 

Yeah, I think that’s exactly right. And the idea that Tesla ain’t the world leader anymore. You know, it’s the rise of the rest, right? The Chinese, the Europeans, they’re all doing this. And you know, Elon Musk tried to change the world all by himself. And then everybody caught on and said, well, we can make money doing this. And here they are, you know,

Kimberly Adams 

Yeah, yeah. I would be curious to hear from folks. I know you have an EV, Kai. But especially the people who’ve been sort of like on the fence about it, what the last year or so, with the mix of the tax credits and everything going on with Tesla. How your thinking has changed about it, if at all? And the folks who’ve had EVs for a while now, how are you feeling about it? Anyhow. Tell us about it. 508-827-6278, also known as 508-U-B-SMART. We will be right back.

Kai Ryssdal 

All right, news. Kimberly Adams, go.

Kimberly Adams 

Yes. Speaking of technology and automation, I saw this really interesting story in The Wall Street Journal about the robots slicing your barbecue ribs, and how.

Kai Ryssdal

Sorry. Okay.

Kimberly Adams

It says, “meet the robot slicing your barbecue.” And it’s got images and videos of exactly that. Very high-tech robots sort of slicing the ribs. And, you know, apologies to all the vegans and animal rights folks on here. But lots of people eat meat and the jobs in the meatpacking industry are incredibly dangerous for the people who do that work. And it’s often not the best wages. It’s often done by very people in some of the most vulnerable communities. And they can get some really terrible, terrible injuries. And for that reason, among others, they have had really bad labor shortages in the meat industry. COVID was a big part of that. And so, I’m just going to read here from the Journal, “Meat packers are increasingly looking to robots for help. Smithfield, the largest US pork processor began rolling out automated rib pullers at its pork plant several years ago, which company officials said helps leave less wasted meat on the bone and relieves workers from some of the industry’s most physically demanding jobs, allowing workers to be reassigned from pulling loins or ribs to food quality inspection jobs.” And frankly, that is what I would rather humans be doing. I would much rather have the humans being the ones checking to make sure that the food is safe and doesn’t have like weird stuff in it than you know, wielding the knives and doing the super dangerous work of the meatpacking industry. And so, I am here for the robots.

Kai Ryssdal 

I did a story many, many years ago out of Sioux Falls, South Dakota. There is a port processing plant there bought by the Chinese about five years ago. Anyway, I interviewed a young 25-year-old Bhutanese refugee immigrant who had a job they’re doing whatever it was, but it was such repetitive motion over so many long hours. He had a callus on his thumb that was, I kid you not, the size of a quarter. It was wild. And he was telling stories about being in this pork processing plant. So yeah, I’m here for the robots. Totally, totally, totally, totally. Wild. That’s wild.

Kimberly Adams 

And it’s so interesting because these types of jobs, the narrative around robots taking over these jobs is so different than the narrative of robots taking over, say, the assembly line at a car plant, right? And those are also repetitive motion jobs, but they were typically paid better and done by different types of people. And I’m curious, like how this is going to progress moving forward, you know.

Kai Ryssdal 

Yeah, So, to our previous conversation about EVs, and more broadly, new energy and cleaner energy in this economy. Story in The New York Times that I saw this morning, knowing we were going to have this conversation, which becomes my news item. Headline in the Times: “The US urgently needs a bigger grid,” that is to say, electric grid, “here’s a fast solution.” So, there are papers out today, research reports out today, talking about this thing called advanced re-conducting. And what it means is replacing all those high-tension power lines, the lines literally themselves, which are currently mostly steel cores, surrounded by aluminum with new materials, carbon fiber among them, which gets you a huge boost in transmission capacity. And as we know, one of the big problems with clean energy, like you have to get all that wind power from the middle of you know, I don’t know, Texas, where the wind blows a lot to places like I don’t know, California, Chicago, Dallas, where they need a lot of power. And this can really help do it. Here’s the catch. It’s being used in many other parts of the country. Here’s the catch, though, in the United States, we are not doing it because, and this is a quote, “many US utilities have been slow to embrace it,” advanced re-conducting, “because of their unfamiliarity with the technology.” Okay, fine. “As well as regulatory and bureaucratic hurdles the researchers found.” So, we have to get out of our own way.

Kimberly Adams 

Yeah, yeah. When I went to do some reporting on sort of the shortage of electricians, as we try to electrify America, the people who own these sort of electrician companies, they’re like, yes, we need more electricians, we’re happy to invest in training these kids, so that we can hire them. But that’s not going to help us when the grid can’t handle it. And everybody wants, you know, all of these new all electric things in to charge their cars. But if there’s not enough grid support, none of us can do anything. So, this is a problem that does need solving.

Kai Ryssdal

For sure.

Kimberly Adams

All right, so that is it for the news. Let’s do the mailbag.

Mailbag

Hi Kai and Kimberly. This is Godfrey from San Francisco. Jessie from Charleston, South Carolina. And I have a follow up question. It has me thinking and feeling a lot of things.

Kimberly Adams 

During our last deep dive, we talked with Sarah McCammon, about the exvangelical movement, which is that term for folks who have left the evangelical Christian church, particularly she was talking about white evangelical Christians. And we asked if any of you consider yourself a part of the exvangelical group, and we got this.

Michael

Hi, this is Michael from Denver, Colorado. I would consider myself an exvangelical. Basically realized there were issues with kind of the intellectual side of the evangelical community, political side of the evangelical community. But with that said, now that I’m 43, and I have three little kids, I am finding myself drawn back into the evangelical community a little bit. Maybe not as much as I was before just because of the good stuff that Kimberly mentioned: the community, the kind of the heartfulness of wanting to do good. All that kind of stuff.

Kai Ryssdal 

Interesting.

Kimberly Adams 

I really do think that the sense of community that people get from religious spaces is really challenging to replicate in other formats. Because I mean, I think about when I went to church as a kid, it was Sunday school where the kids were hanging out. It was the broader church where kids and adults were hanging out. You had social activities, like your choir and your plays and your liturgical dance or whatever, and outreach in the community. I would go out with my dad on Sunday afternoons because he was a deacon, and we would do what’s called, you know, ministering to the sick and shut in when we would literally go and visit older people or sick people who couldn’t come to church and just kind of talk to them, give communion, and things like that. And without that framework of the church, a lot of those things fall by the wayside, and I think people really longed for that.

Kai Ryssdal 

Yeah. And as we know, you know, community is not a small part of what is lacking in this society today and research shows that, so wherever you can find it. Alright, one more. A little while ago, a couple of weeks maybe, we talked about a study finding dogs can associate some words with objects. We got this from Theodore in Colorado.

Theodore

My dog Lucy and I do a thing where she has to wait for her dinner or breakfast. And the word free, lets you know she can be released. Part of the game is that all say a whole bunch of related similar words like peas, tee, flee, and she still waits even when those wrong words are given. So, she definitely understands.

Kai Ryssdal 

That is a smart dog. Are you kidding me?

Kimberly Adams 

Wow. Did you go ahead and test that out with Willow?

Kai Ryssdal 

I did. And she’s goofy. And she’ll like, you’re standing in the closet, and she goes to take the food, so words don’t help.

Kimberly Adams 

Yeah, what about Bonzai?

Kai Ryssdal 

Yeah. Well, Bonz is old and cranky, so I don’t know if she’s a valid test subject actually. Also, she’s got like, digestion issues. So, you know, food is not her friend right now. More than you need to know about my dog perhaps. But anyway.

Kimberly Adams 

Well, we do have a very cute photo that Theodore sent us of his very smart dog, Lucy, who is a very good girl. Just putting it out there.

Kai Ryssdal

Great picture. Great picture.

Kimberly Adams

And I imagine we’ll put it on the show notes.

Kai Ryssdal 

Alright, on the way out this week’s answer as we always do to the Make Me Smart question. What is something you thought you knew, but later found out you’re wrong about? This one comes from Kevin Lewis, professor of Earth and Planetary Sciences at Johns Hopkins because yesterday’s eclipse. Here we go.

Kevin Lewis

I used to think a lot more that we could discount the possibility of low probability events. One of the weird things about our planet is that we have a large moon that appears the same size of the Sun in the sky. Now the Sun is 400 times larger than the moon, but the distance to the moon is just right to appear the same size, and it’s totally a random coincidence. In graduate school, I was working on the possibility of another problem related to the moon and had concluded that it didn’t happen because the likelihood came out to only being a 10% chance. My professor just replied, “Well, 10% events happen 10% of the time.” Of course, in some sense, that’s obvious. But the unlikely match of the sizes of the Sun and the moon in our sky, which we saw spectacularly during the eclipse. So, it’s that sometimes low probability events do occur.

Kai Ryssdal 

Piece in The New York Times today, pointing out that in some very long period of time, billions of years, the moon will have moved far enough away from the Earth that we’re not going to be able to have total solar eclipses anymore.

Kimberly Adams 

Wow.

Kai Ryssdal

Yeah. Yeah.

Kimberly Adams

I did not think about this before reading this earlier from you know, when I was looking at prepping for the show, how random it is that the Sun and moon appear the same size. But as someone who consumes large volumes of science fiction and fantasy, often in the imagery associated with it, you do have like giant moons or teeny tiny moons and those would not give eclipses in the same way. That’s so interesting to think about. All right. That is it for us today. We want to hear your answer to the Make Me Smart question. What is something you thought you knew that you later found out you’re wrong about? Our number is 508-827-6278, also known as 508-U-B-SMART.

Kai Ryssdal 

Make Me Smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Today’s program was engineered by Jesson Duller. Mingxin Quigan is going to mix it down later. Thalia Menchaca is our intern.

Kimberly Adams 

Ben Tolliday and Daniel Ramirez composed our theme music. Our senior producer is Marissa Cabrera. Bridget Bodnar is the director of podcasts. Francesca Levy is the executive director of Digital. And Marketplace’s Vice President and General Manager is Neal Scarbrough.

Kai Ryssdal

There we go. There we go.