In the last year, investors have become incredibly optimistic about electric vehicles. It's not just that the upstarts like Tesla have done well, but that the legacy automakers are getting a lot of credit for their early EV plays. But there’s more to this revolution than just tech. EVs will reshape major parts of society, across travel , employment, and culture. So to understand how, we spoke to Nat Bullard, the Chief Content Officer and BloombergNEF.
Joe Weisenthal:
Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.
Tracy Alloway:
And I'm Tracy Alloway.
Joe:
Tracy, you know, there's this, weird thing going on. There's always weird things going on.
Tracy:
Yeah, I was gonna say you have to narrow it down.
Joe:
I'm gonna, I'm gonna narrow it down. There's this weird thing going on right now where investors are really excited about car companies, even though car companies are like barely selling any cars these days cuz of the chip shortage.
Tracy:
Yeah. I have noticed this too, particularly by the way over in China, like there is just a massive amount of capital moving into cars at the moment, but it's concentrated in one particular type of car, which would be, you know, electric vehicles or um, some sort of, of hybrid plugin type things. Like we have seen so much money move into that space recently. And I think part of it is the enthusiasm for tech that we saw last year, right? People are looking for those big structural shifts and the idea of electric cars is is exciting.
Joe:
The weird thing though, too, and you know, I'll move it back to the US perspective for a second is like, okay, everyone knows like Tesla it's done sort of this way out was way out ahead of this space. And the legacy auto makers have, you know, are catching up and they're rolling out more and more electric vehicles, but like they're getting a lot of credit for it. At least recently Ford passed a hundred billion. It's not like these companies are like crushing it yet as far as I can tell on the EVs, but they're getting a lot of credit for it. And as you mentioned, sales exploding in China, it's just investors. Not only seem to really like be bullish on EVs, but really just think like there's a gotta be tons of winners in this space. It's, iit is a lot of optimism.
Tracy:
Well it kind of begs the question as well. Like how much does it take for an old school car company to convert itself into an electric vehicle manufacturer? And here I have to admit, I, I really don't know anything about the technical differences, building a gas powered car versus an electric car, but it seems to me like you cannot just flip a switch and suddenly go into, you know, procuring batteries and making EVs. So I'm very curious how much of this, this narrative about the old school auto companies suddenly becoming EV manufacturers, how much of that is hype versus reality? There's
Joe:
So many questions I have on that. Like you know, one of the themes that we've talked to on many episodes, especially with advanced manufacturing, is this idea of like, sort of like tacit knowledge. It's something Dan Wang talks a lot about, it's something we've talked a lot about on our semiconductor episodes. Like, do you just have the institutional knowledge to build these things? And then you're right. Like there are different processes. I remember we had a good story a couple years ago about the unions and Germany being very anxious about the EV transition because there are parts in, in theory that means fewer workers. So all kinds of huge questions about how this is going to work and what the EV transformation will look like. And like you, I really just like don't know much about this stuff, but it's happening so fast that I think we better, uh, we better catch up. Yeah, let's do it. Let's do it. I am very excited. For today's guest, we are going to be speaking to net Bullard. He is the chief content officer at Bloomberg NEF, and one of the most knowledgeable people here at Bloomberg about all types of things, EV energy transitions, energy tech cars, and all of it net. Thank you so much for joining
Nat Bullard:
Joe and Tracy. Thank you for having me, as they used to say in radio longtime listener, first time caller so, a treat to be here.
Joe:
Thank you so much. So to get it right off the bat, like the EV revolution is on, right? Like this is happening.
Nat:
That's right. I mean, we're right now at a position of let's see 10 years ago, less than a 10th of a percent sales of global cars were electric. And in the third quarter of last year, it was 10% globally. And there is of course, some regional difference within that, as you can imagine, um, China finished the year, in December at more than 20% EV and that's the world's biggest car market. That was 3.3 million EVs sold Europe was about 17 and a half percent is probably gonna end the year around 20%, the U.S. and the rest of north America, a little bit lagging, you know, about less than 4% in the, in the fourth quarter or third quarter, rather. But nonetheless, the trend clearly is the electric vehicle's friend in this case. I mean, this is something that looks like a very classic steep part of the curve in an exponential growth and it's happening much more rapidly than even a lot of people embedded in this space would've expected.
And so it's really a fascinating time. And just because, you know, a lot of units are being moved in cars, but because as you hinted at Joe, there are a lot of other industries adjacent to that. And I think, you know, we can have time to explore that maybe today that sure it's so much more than just the car in terms of adjacent industries, things that flow into and out of this and what it, for all kinds of stuff for the built environment for behaviors that customers have, and for new competitions probably emerging and new coalitions emerging between all of these different sectors that might previously not have had much of a connection.
Tracy:
So can I just ask, I suppose the most basic question here, and, and you mentioned that demand for electric vehicles is, has really taken off in, in recent years, what is driving those sales? Like what is the attraction of an electric vehicle to a normal buyer who's out there thinking of getting a new car?
Nat:
So there's, there's, there's probably three things to point you. One undoubtedly is policy. So policies that either put limits on the amount of emissions per kilometer or mile driven in some jurisdictions, or policies that incentivize buying an EV, which is a, a relatively common thing here in the United States, above the federal and the state level. Um, the other is this sort of industrial reorganization that some companies have done around this that just sort of made the decision that, you know, going towards things that are mechanically simpler maybe advantageous for their, for their future production. Hmm. Um, and then there's also, you know, the element that consumers, it turns out in many cases actually like the electric vehicle experience. And I think we should probably widen out what that experience means. Obviously driving wise, it's very different. Um, I, it's almost IM to find somebody who driven an EV for the first time.
It doesn't say, wow, that's a great driving experience. Yes. But it's also a buying experience. That's very different for many people. And you know, it it's something that, that falls into a, an interesting place. I think in our, the individual capital stack, like for most people of car is probably the second biggest thing that they acquire in their life after a house. But most people are probably acquiring more cars than they are houses over time. And there's all kinds of other stuff that goes with it. There's he the hedonic signaling of who you want people to think you are, what you are aligned to, you know, how do you drive technology? I mean, anybody can have an iPhone, not everybody can yet have an electric vehicle. You, but you, you can do a lot of signaling with it. And, and one thing that I think is unique in talking about this big sector that intersects all these other relatively stayed, things like electricity or oil and gas, is that there there's an element of personal choice here and style that that is a challenge for a lot of long term plan to think of because it's never really been a thing.
It hasn't, there hasn't been much of a power train choice in cars for like 120 years, really until really right now.
Joe:
So I strongly, I still have a regular, an old car internal combustion engine, but I think, you know, the next time I get a car, it's gonna be an EV. And I had that experience where I drove someone's and it was just like so smooth and nice. And then I went back to my car and it like, you know, did that thing where it like, sort of like coughs, so hiccups just start like, and it's like, God, and you know what it felt like, it felt like going from an iPhone back to like a flip phone.
Nat:
This analogy's not bad, actually, Joe, you you've gone back to candy bar keys and physical clicks, as opposed to yeah. A seamless kind of universal service experience.
Joe:
So you hinted at this and then you said something specific. You're like, okay, this is gonna hit so many different adjacent industries, cuz it's not just a technological change. It's gonna change everything. You said the buying experience is fundamentally different, which of course calls to mind. The power of the dealer networks of the legacy automaker is we know that dealers are politically powerful and you know, there's this whole or established way people go to a car and they haggle and they get $500 off and, you know, a year satellite radio, et cetera, what makes the buying experience unique for EVs? Why will that inevitably change?
Nat:
I should qualify that in a little bit, which is that it's it's for the pure play EV companies they're just doing direct sales. The challenge I think, is gonna come about for a GM or a Ford or a VW group that obviously has this huge, a dealer network that it works with that wants to sell things, you know, to get that, to get that undercoat, to get the formats thrown in, you know, you gotta maybe cut a deal on your, your service schedule or something like that. So you, you've got kind of two polls set up, which is one, we have a, we have a new product and if we're going to you stand up in a new market, why not just do it differently? I mean, the internet does exist for all of these companies. And, and if you can kind of force a lot of your energy and attention into the web interface, you can probably save on other things versus, you know, putting, putting the car into a new electric car, into a universe of other existing models wherein you're presenting a choice within a brand that may be kind of challenging.
And that itself implies all kinds of different stuff about how well does the sales staff know to sell an electric field? Do they know the, do they know the KPIs to talk about when they're pitching it? Do they know the specs? And also do they know what kind of experience sort of, they can promise down the line, but there's a wrinkle to that, which is that, you know, um, you handed F this in your introduction, you know, the engine in a BMW has got hundreds of moving parts. The motor in an electric vehicle has a few dozen, and the battery itself is something that much less complication to it in one sense, in terms of mechanical moving parts than the entire power train of an internal combustion engine vehicle. And that's a long way of saying that there's a huge amount of, of embedded attention and business in the maintenance schedule for keeping a bunch of hot contacting metal parts that lubrication and precision matching to work in the business.
Like that's a huge part of the business. In fact, the last time I got an internal combustion engine car, I have a Subaru Outback. I actually had to essentially sign a waiver to opt out of the maintenance schedule that they wanted to try to sell me because that re that's a big part of the recurring revenue relationship, that car, that car dealers have with individuals. So we we've, we've created this, this inherent tension between not only what you're selling, but how you're selling and also what people need to know and how they need to convey a that's selling experience and stuff like that. And yes, it's gotten a huge amount of pushback from the dealers. And as you, as you indicated, dealers are very, very powerful locally. I mean, pretty much every jurisdiction in the United States has got some kind of car dealer in it versus not every jurisdiction having say an auto manufacturer in, and even fewer that have purely electric manufacturer.
Tracy:
So just on a related note to the differences in the buying experience, could you maybe walk us through the difference in manufacturing, a traditional car versus an electric vehicle? And I guess one thing I'm curious about is whether or not something like building EVs act requires a different work culture, I guess, to building traditional vehicles. You know, people think of companies like Tesla as hardcore tech, you know, really innovating doing something new. And when people look at GM, they tend to think of an old school car company. It just seems like the there's a big cultural divide there.
Nat:
There's absolutely a big cultural divide. And, and I think we should sort of clarify a couple of things. So manufacturing the body of a car. If it's going to be stamped steel, you know, if it's going to have windshields and windscreens, if it's going to have wind wheels and tires and brakes, these things are largely coming from the same kind of supply chains and the same type of manufacturing, but it's kind of the core IP. And I would also say a lot of the corporate identity elements that are kind of in fundamental conflict as you move from internal combustion to EVs. And that's the replacement of this massively complex and massively precise set of things that had been optimized for like more than a hundred years to take things, take a fuel to aerosolize it exploded, turn that into, uh, momentum that then makes the vehicle move.
And that then also in the process, dissipates heat gets rid of gases and all these things, and in the process, of course, moves the vehicle, replacing it with a large sealed up more or less inert slab of electronics that is oftentimes integrated somewhere else. And then motors that may or may not be made in house by an auto company, and then put together in a packaged that looks the same on the surface. And that does the same job. It's still moving a car, but that definitely kind of changes the frontier of where companies see a lot of their identity. Like a great example here is that is that Hyundai and Korea has just closed its R&D center that develops new internal combustion engines. They've had this for 39 years. Like this was wow. A massive part of the company's identity to be stood up as an independent company was to do this, you know, the, the chief of R and D there said that, you know, it's an inevitable to convert into electrification and that our engine development is a great achievement, but we must change this system to create future innovation based on this great asset from the past.
So like, it's a, it's a big psychological moment. Like, you know, what, what battle are you fighting technically within the automobile? Is it for greater efficiency? Is it for more speed and power and torque? All of those things that used to run through, you know, hundreds of moving parts, being integrated into an engine and through a very sophisticated R&D apparatus are now having to rotate completely. And it is a really important question to ask, like how much of that can carry over from one place to another now assembling a car carries, but making, making a battery pack and a motor maybe does not.
Tracy:
So you actually just mentioned one question, um, that I wanted to ask, which is where do batteries actually come from for electric vehicles and, and do any EV manufacturers actually make their own batteries?
Nat:
Yeah. Tesla makes its own, for long term, of course, in partnership with Panasonic. There are a number of manufacturers not far from you in, in Southern China, C&TL and BYD There's an increasing interest in doing manufacturing in Europe and some here in the Americas as well. And again, this, this will be an intriguing question to see how it plays a out in terms of do companies have, are, are companies able to, I don't know, better leverage their supply chains by being diverse, having a number of suppliers, or are they better off taking everything in house? You know, on the motor side, the analogy would be that many automakers may do their R and D, but they have a third party tier one supplier that manufacturers motors. So it's, you know, it's a bit of, it's a bit of both at the moment. Um, but it, but again, it's very, very different and it's very highly concentrated at the moment, given, given the fact that so much of this capability, is it China and the rest of east Asia,
Joe:
God, you know, there are so many different avenues we could go down and I already feel like Tracy, we're gonna have to do like 10 episodes this year. Cause I'm pretty sure I could ask an hour's worth of questions necessarily like just on battery manufacturer. And then of course the chemicals and commodities that into battery manufacturer. So like it's already, like, my head is like spinning out different thoughts, but I wanna go back to this question of what becomes of a, of a, a, an automaker's identity in, in this sort of EV world and something I'm sort of like wondering about is, you know, in like the late nineties with the personal computer and suddenly it's like, okay, everyone just like puts the same operating system in the computer and everyone puts the same Intel chip in it. And suddenly all these like, computer makers more or less lose their identity. And, you know, we could sort of remember all the ones that fell by the wayside, like compact and so forth. Is there a risk that, that happens in autos where the tech sort of is really happening somewhere else? And they're sort of like assembling the same parts as everyone else, and don't really have any sort of unique purpose anymore. It's
Nat:
A really great question. And I actually like this analogy because I can put it right back into a question, which is, if we think back to the late nineties was a or anybody who came to you and was like, I'm a compact guy, sorry, you know, I'm a gateway, I'm a gateway man. My family has been a gateway man. That song I'm ever gonna use for my desktop PC,
Joe:
Like Dell almost did
Nat:
Got there. Dell almost got, Dude, you're getting a Dell, right?
Joe:
Yeah, yeah. That was the closest.
Nat:
Yeah, they almost got there. I would say Apple has definite carve that territory even for people who spent some sort of years in the technical wilderness with, with Apple, for sure. But I think the auto identity is not only deeper, but I mean, it is really like multigenerational. My family has F-50s. Not Fords. F-50 S and they've had F-50 S since my stepfather was buying them off construction sites, seventies, like that identity is as old as I am in a sense. And so there's a definitely a challenge for the big manufacturer, which is, you know, where, where does the, the kind of the, the loyalty lie within that, like is case in which people saying, like, I'm not the F150, but now that it's gone electric, I won't buy anything from Ford or on the other hand. And this is data from Ford last month.
Is it the case that by electrifying an iconic name plate, the, the Mach E and the F150 lightning, are you able to attract new people to your brand? Actually, like Ford's case is really instructive because they've got about 200,000 reservations for the F150 lightning and the F150 for those of you outside the us is the best selling car or vehicle in the United States. For more than four decades, they have 200,000 reservations of which 75% of the customers are new to Ford, which is pretty extraordinary. If you, if you think about it from a capture perspective, being able to capture market in doing that is pretty great. If you're hooking at this, as a manufacturer that said, there's always the risk of, I think the, kind of the EV one experience, which is also from the late nineties of delivering a subpar experience and not necessarily self sabotaging it, but underselling it.
And that could take the form of deliberately saying this is a compliance vehicle, and we're not really interested in it to kind of the soft pedal version, which is, people just don't know how to sell it. But I, but it seems to me that that with the electrification of the two best selling the F150 lighting and the Chevy Silverado full size truck, that you've got this, this sort of interment of new things into an old, not just brand, but an old name plate that people have a lot of loyalty to. So I think it's gonna be extremely interesting to see how this plays out, because at the same time, of course, you have companies building off of their own. You like what Elon Musk call first principles for EVs. And that's not just Tesla, but that's Rian, that's lucid. You know, the two trend of vehicles of a year, last year in the truck were the lucid air car and the R R ONET truck.
Tracy:
So with all this attention on electric vehicles, it investors getting very enthusiastic about the space. As Joe mentioned in the intro, lots of money flowing into it. Do we see any signs or, or should we be at all concerned about oversupply? And one of the reasons I ask is because I, in China, at least we have seen some EV companies that, you know, set themselves up, attracted a lot of initial investment and then seem to very quietly shut down. And I guess one follow up question. And it's related to your point about brand loyalty earlier, but what does being competitive in the EV space actually look like? And, and how do you differentiate between winners versus losers
Nat:
As far as like nots of brands popping up and then quietly going away? Well, that looks very much like the early days of the auto industry at large, you know, when we had hundreds of manufacturers in the United States and, you know, um, some of them lasted longer than others. There were Packers around and then our parents were born. Um, but you know, Stutz as a brand is no longer with us. , um, Detroit electric is no longer with us. There are, are, are more things that fall by the wayside than not. And actually maybe to go back to our sort of desktop computing analogy, it may be the same kind of thing. Lots of people are trying something similar differentiation will be determined, maybe more by the market than by anything else, but another wrinkle to this. And I hinted that I would Ford is that the fact that you, that a lot of these new models are kind of doing a determination of product market fit and product scale by asking for reservations is a way kind of size the market in event.
So for instance, Ford doubled and then doubled again, the planned production capacity for the F-150 lightning based on reservations. So rather, rather than like stuffing a lot with product that nobody wants to move. What they're working for here is, is a more supple and a more kind of bidirectional sense of demand and supply at the same. I'm not quite sure how that plays in the Chinese auto market, but it's definitely something that as, as companies are testing the thesis here in the aids, they're finding that the, the reservation method is an, is an interesting way to get things going. Um, and it's been, you know, it's also, let's be honest. It's also been part of a very nice story to tell the markets when Ford is able to go to the market and say it an investor day, Hey, look, we doubled our, we double production based on reservations. And then we're doubling it again based on reservations.
Joe:
You know, I was just gonna ask you, you know, you mentioned that the Ford F150, the electric version, it's had this extraordinary thing, new people are coming into it. What about your family or the old, the, the family of F150 loyalists who had one specific idea about what an F150 was? Are they excited? I don't mean your family specifically, although maybe you can answer, but are the generations of F150 owners showing enthusiasm for switching over to an electric version?
Nat:
I haven't seen that data yet, but I'm, I'm gonna sort of, I'm gonna game this now, which is first tailgate, and you're the dude who can run like a 1500 wat sound system logged in off of your car. Oh, that's cool. Right? You, you pop up in the front trunk and you've got your Yeti in there full of beer. And you're like, look, you know, this space to keep things cold. There's also, and this is definitely of the feature set for, for, for Ford. And for Rivian as well is using the vehicle as essentially a mobile hub for all the other electric activities that you may need to do when you're working. I mean, the fact that you can, the fact that you can charge, you can run a chop, saw you can run a Microsoft. You could probably run a, a table saw if you wanted, you can definitely only charge every other peripheral battery that you've got off of.
What's in the F150. That's definitely gonna get noticed. I handed them, my family always had F one 50 S but we, we got them as fleet cars. They were white F 50 S no crew cab with a, with a flat six. And then the, the Ford had been making for decades. Like they were just, they were work cars. Yeah. And so like, when you, when you put this into the work case, it's extra fuel, you don't need to buy it's all, all kinds of capabilities that I think people will find to have on the consumer level, a kind of gee whiz aspect.
Joe:
I hadn't thought about this at all, that like, this is the first time this occurred to me, or I realized this, that if you have like this powerful battery and unlike with an existing car battery, you know, like you're not drain it to zero. Right. You drain it out just by leaving the lights on for five minutes or whatever. Like, this is like a really powerful piece of equipment that you're carrying around with you.
Nat:
Yeah. I mean, like, I, I think, I think that, that we'll be, will be interested to see how the kind of peripheral use cases evolve around this. Like, if you look at like Rian's advertising, for instance, has got somebody set up, set up in the R one T in, in the woods at a camping site, but they're running, they're running like hundreds of feet of E D Edison ball, you know, basically setting up your Instagram ready camping site. But without being like, oh, I need to bring a generator for this, or I'm gonna train my battery in doing so.
Joe :
Oh, that's cool. Yeah.
Tracy:
So, I mean, we've been talking a lot about the, um, F150, and when I think about pickup trucks, I, I kind of think about people, you know, I don't know, the hinterlands of Texas or something somewhere out in the country, um, doing country things. And I know that's a stereotype and it's probably not really true anymore. And pickup trucks are very, very popular in the cities as well, but this sort of begs the question of, I, I guess, infrastructure and my understanding is that yeah, charging stations are still an issue outside of major cities. So I guess the question is how long is it gonna take to build out that infrastructure and how much does demand for EVs actually depend on that happening?
Nat:
So I have a different take on this, which is that actually, I think that the, the charging infrastructure is largely a bigger issue in cities than in the suburbs, right. Where it is an issue in, in the countryside is for long distance driving, where you want to be charging as quickly as possible. But the reason that I don't have an EV is that I don't have a garage. I park on the street and I have yet to sort of figure out exactly how I would negotiate charging. Now my neighbors down the street have two Teslas. I have no idea where they charge them, but obviously they do. And whether they're doing it at the office, whether they're doing it at, at whole foods or whether they're, they're going somewhere else and kind of finding a, a, a charging solution, I'm not really sure yet.
I think what's gonna be interesting is I'm like, yes, we're gonna need this massive build out of charging networks. And right now, like globally, we have about 1.5 million charging connectors worldwide of which 900,000 of them are in China. By the end of this year, that's probably gonna be like 2.7 million. So it's almost doubling in total size and it's going to solve a number of different potential needs. So one of them is the, is essentially replacing the in inner city gas station. So a place that, that you would normally go fill up and leave, but now you need to go and spend slightly more time. The other is in a place like a, a big box retailer, where you're, you are already going to be spending some time, and that kind of matches your, the amount of time you're gonna spend. Then there's the, the third case of like, well, we need to build a network for highway driving.
I'm gonna drive on I 95 from, from New York city to Miami. And I want to do it in my EV where am I gonna charge 'em on way. And then there's the other case, which is, you know, I have a home and I have a place to park, and maybe I will use that as my charging solution. I think it's going, it's a not to play for here, you know, are homeowners gonna find the need to charge their car in 20 minutes? Probably not. Um, are people on the highway going to be happy to spend two hours waiting for their vehicle to charge? Hmm. Also, probably not. And so I think what's, what's interesting to me is not just what gets built, but who owns it and what's the knock on business. And, and Joe, I always think about this in like, what's the Buc-ee's future. Yeah, yeah, yeah. For, for electric vehicles, for those of y'all who don't know Buckys, I don't know, Joe, you can probably tell better tell me better than, than, than I can with Buc-ees this night. Yeah.
Joe:
It's the best, you know, they have great bathrooms for one thing. So I have memories of like the best place to change a baby's diaper. If you're on the road is definitely a Buc-ees, but it's like this amazing sort of like Texas institution that has tons and tons of places to fill up your gas tank, but also like tons of gifts and barbecued side and tons of like dried smoke meats and t-shirts to try on and cowboy hats. And like, you just kinda wanna hang out there and they pay their staff really well. So they have a very good staff. It's very pleasant. Like I said, the bathrooms are extremely, clean. And so like, and I think, you know, our colleague Connor said and Bloomberg opinion wrote like a thing is like, if all gas stations were like, as enjoyable as Buc-ees, like, oh, 30 minutes to like charge or that's car. Yeah. I'm cool with that. But like obviously most gas stations nearly nice enough that you would wanna spend 30 minutes there
Nat:
But I think it's super important for us to consider what this is like, because like, you know, there's a time carve out to right. To charging. It's not as long as what a lot of people think, but it may not be that daunting. I mean, if you're, if you're on a road trip, you know, if let's say you had a 400 more I battery capacity, well, at that point, you're in a battle between battery capacity and bladder capacity. Like you gotta stop at some point. And when you, and when you do, maybe there's a charging is part of a sort of nexus of other attractions that, that take you to a place. Well, you have to stop to eat too. Especially if you have kids, if you have kids. Exactly. And you know, like I, it's funny cuz the pushback I've gotten on this when I, when I sort of point is that is reborn.
I'm like, yeah, I hit the road and I go, I was like, do you have children under five? Because you can't do that. like, right, right. You need to go somewhere. And you know, it'll be like, it'll be like driving perhaps in the early days of the interstate highway in which attractions pop up, you know, you know, it is it, is it the mystery spot? You know, is it wall drug? You know, what kind of thing is it that people plan their journey around. But I just wanna give some cons here, unlike how big this in this industry is in the United States that is going to eventually have to deal with this. There are 960,000 people working in gas stations in the United States. Most of those have a convenience store related to it. They're 150,000 convenience stores, 81% of them sell fuel and they sell about 80% of the motor fuel that's purchased in the us. But also like 60% of that, 150, about 90,000 of them are single operators. So like there's a huge set of questions to be answered here. That's not just buying like the BS and the flying Jays of the world, but by tens of thousands of sole proprietorships.
Tracy:
So I, I guess we've been talking about how electric vehicles might change things like the way we live this idea of, of using them as a center for all your electric activities or, you know, a transportable center for all your electric activities and the way they might change traditional car companies, garages and things like that. I wanted to ask I a, even more macro question, which is what is the impact on demand for oil. If everyone is suddenly driving EVs and do countries, you know, nowadays Saudi Arabia, United Arab Emirates, big oil producers, clearly you hold some geopolitical sway because of their oil reserves. And I guess my question is, does a country that has a bunch of lithium reserves suddenly become the new Saudi Arabia under a scenario where everyone is driving EVs and there's a need for a lot of batteries.
Nat:
So this is, this is one that's definitely worth part to sort of figure out what's the same and what's different in the, the resource inputs for these cars. So yes, I definitely there's, there's, there's potential on the lithium side, on the nickel side for some short term shortages. And you can definitely see that in, in pricing mean, the price of lithium really went really skyrocketed last year by a factor of, about at five over the course of the year. Um, we do expect that to, to sort of moderate over time as more capacity comes online. So, you know, it definitely within that domain kind of shifts the, the locus of control to like a few places at, at a period in time. The one thing you can say about materials, in battery, the battery metals is that they can be and will be recycled.
We hear oftentimes people saying, well, nobody recycles 'em I'm like, well, they're still on the road. Like nobody recycles 'em in the way that they're not recycling a lot of iPhone 13 maxes. Like it's just not, you know, they're not rolled off the market yet. And also, um, I think that we will see a pretty sophisticated apparatus to decide what to do with batteries at the end of their life, but to take it back to the oil producers. The interesting thing here is that is that we think should think about this kind of marginal cost curve. If, if, if demand goes is down, then you start chopping off with the margin, which is always, you know, the highest price. And oftentimes sometimes the smallest units of supply that are in the market. And, you know, my colleagues would expect it by the middle of the century.
We've got tens of millions of barrels a day, less demand for road transport fuel. Now that doesn't mean that it crams all oil demand down and that it starts to moves negative. But it's definitely entirely possible. But when that happens, what it's probably going to do is follow very kind of classical economics, which is users with the most flexible supply. And with the lowest price are probably the ones that will be pumping the remaining barrels boil over time. And so what it probably does is what the, the powerful position back in the hands of big producers, lots of capacity and with low cost. And those are the producers in the Persian Gulf, Saudi Arabia, the UAE it's Russia. Um, you know, definitely the, the impetus there is that these companies will, or these countries rather will almost certainly be pumping the very last barrels of oil that come out of the ground because they're the ones able to withstand this change on the margin, the bigger challenges for marginal small producers, for producers that have a very inherent, fundamental cost, and, and things like that. So, you know, it's, it, it may actually embed the strength of some of today's biggest oil producers.
Joe:
That's really interesting. And I hadn't, I hadn't thought about that at all. I wanna like talk more about some of these like deep structural, I, I don't wanna say oppositional, but maybe oppositional like forces, you mentioned something is going to happen with all of the gas stations and how many people, that employs and all of the convenience stores associated. Like there's gonna be, that's going to be turned up somehow. We don't know. Maybe they'll all be like, Buc-ee’s or I'm excited about roadside attractions, like random, like dinosaur museums in the middle of nowhere. I wanna go back to that. We talked about the beginning, the labor intensity of EV manufacturer, and obviously mention, you know, they're, they're simpler if you're moving parts in theory, if you're moving parts need means fewer workers on a shop floor, what can we look at when we look at the labor intensity of a pure EV player like a Tesla versus a GM or a Ford, and what does that tell, what are the things that are going to arise for the legacy automaker, even if they have popular products can solve that part in terms of the stresses on their own workforce.
Nat:
I think, I think where the, the stress actually in, in, in the first instance is going to come in in the, in the tier one and lower supplier network, you know, Toyota has Toyota city and it's made up of hundreds of suppliers that make very specific things. They may a specific kind of seal. They make specific types of valve. They make specific types of solenoids or connectors and all, all the different things that flow into, into making an, an automobile engine have got their own supply chain, of small companies that produce very precisely made and very precisely planned product. Um, it's the same in Germany, obviously, where you have similar value chains, but even more than that is like, there's another layer back from that, which is there's the capital, the capital equipment manufacturer. So the companies that make the tools that make those valves that go go into a BMW engine, or that go into a Toyota powertrain, we're gonna start to see it resonate, resonate out further there.
I mean, like in the big auto businesses or assembly businesses, for the most part, there are, you know, there are still some companies that do full integration of things that they're making, but there, you know, the, the biggest part of the role in a plant is integration of pieces that have come from these very diverse supply chain. And it's the change in the supply chain. That's gonna be that big of a deal. I mean, if you think that, like, if you think, you know, this is, this is not exactly precise, but basically every part, one way or another is probably a company. And every company itself buys things from other companies that go into it. It's gonna be this huge compression of along the way. Now, if I'm an automaker, I may not necessarily find this, all that problematic, having a more consolidated network of suppliers, maybe one that I can plan longer term with maybe maybe advantageous, but politically it puts it, it, it puts a kind of schism within what we think of as the auto industry, you know, like a tires and brakes may still be in line with EVs. And in fact, tire manufacturers make a whole new set of products just for EVs, but auto assembly and making of engines and making of FLAS and valves and solenoids and fittings, is probably gonna have a little bit of a crackup in time.
Tracy:
So just on this note, I mean, we're basically talking about everyone who currently has a traditional car going out and buying a new car, which would obviously entail a lot of spending, um, and the possibility of making a lot of money for companies that produce EVs. I, I guess my question is to what degree does this new industry spark a sort of follow on boom in manufacturing and the parts that you were just discussing? Like, is there a possibility that in places like the us as big car makers start to switch to EV that we do start seeing, I guess, more battery making or, you know, tire making or specific EV parts being made in the us and, and that industry expanding.
Nat:
I mean, it's, it's possible, it's possible. We see these new industries popping up and expanding, but, but another, another possibility is that, you know, so much of this essentially becomes part of, the semiconductor value chain, which as we know right now is pretty complicated. You know, my colleagues estimate that, you know, the semiconductor bill of vehicle bill of materials is a percentage of the vehicle. Bill, bill of materials is like about 4% and 2019, and it's probably gonna be about 20% and 2030. So if you think about replacing, you think about replacing all these good pieces that manage the flow of liquids gases than the portion of heat, and then the in lubrication of moving parts with things that maintain flow of electrons and do heat heat control, and dos the maintenance within a battery, those are, those are much more chronic than they are man.
And so, you know, it's gonna be really interesting to see where that doesn't create new, new value chains popping up. I mean, there's an intriguing kind of thing happening here for Ferrari where in the new CEO of Ferrari be, has come from TMI electronics, which is a major apple supplier. And he in turn brought with him two executives from St. Micro electronics that have come over. And it's just a sort of like very in our face kind of, example of maybe the, the, the new kind of core IP you need to fold into thinking about electrification and the needing us to say, I think Ferrari has quite a bit of pride in the, in the engines that it makes.
Joe:
I mean, you know, this sort of idea that all of these industries are tech, semiconductors, et cetera, bleeding over into each other. I remember a few years ago, there was a lot of hype about the Silicon. The FANG is the Silicon valley giants making some play auto and Google had a thing. I think they're a little bit more focused on the autonomous side. And every once in a while, there's a story about maybe there will be an apple car one day, are they playing in this space? Is it sort of like, actually, maybe there is not some connection between the search engine and a car, like where are they in all this?
Nat:
Yeah. I mean, it's like, like the question, I guess, is what does electrification that have moved the abstraction layer of, of cars in a way that a tech company could get in and play? And we, we can kind of, we can kind of start carving this off. Like, do they want a business of stamping metal? probably not, probably not like, are they want, are they in the business of doing an operating system maybe, but do you want to be in the doing in entertainment system as well as that? And also what's the value capture that you get and what's the model. Are you able to create AUR an annual recurring revenue relationship within the car that has software like margins? Or are you gonna be doing auto industry margins for making physical stuff? I mean, it will be very interesting to see if apple brings a product to market is and what it, what it views as the, the relationship, but also like where does the technology point of control flow in a way that is important for a technology company to get into this? I mean, like in a, in a sense apple and Google are in all of our cars. Every time we plug in our phone and use that for mapping and for music, um, you know, they have, have actually they've taken away market share from like in, in, in not market share, but kind of presence and brand presence from companies own self-developed entertainment systems or from navigation systems as well.
Tracy:
I really hope we don't have to start paying monthly subscriptions for like our operating system in an EV or the entertainment system. Um,
Nat:
I know, but, but Tracy, the way to think about it is that like, I, I, as I, as I mentioned at the beginning, I had to opt out of the equivalent service agreement when I got my new car. So auto companies are, will definitely do their best to try to steer you in that direction to, to a services agreement. I do think that like, like companies will, will try to do that and want to do it. The question is, you know, it, it does an automaker know everything about me just because I, I go get the tires rotated once a quarter, not exactly in the same way that a technology company might. Right.
Joe:
you mentioned, okay. Of course, like the semiconductor intensity or the chip intensity of these new cars is going to be much higher than they were. We know that there's a shortage of chips for the legacy cars, but a lot of them are at the low end. So it's kind of the, the chips are at the low end. It's kind of a different story than the longer term, but, you know, like, I'm also wondering about the sort of like the mechanics community, the used car parts community, the O'Reillys of the world, the pet boys of the world, the AutoZones of the world. This had been an issue for a while that like, cars are getting more like computers and you hear, it's like, oh, you can't repair your own car anymore. And, you know, it's just, it's not the same. So this is not strictly an EV thing like this sort of like phenomenon has been going on for a while. And there's been anxiety about that. Is that gonna accelerate the, the stress or are, is that whole industry going to find a way to adapt as it has for some time, even as our cars already become more like computers?
Nat:
I mean, it's, it's a really important thing. I mean, what's the Pep Boys or Napa Auto Parts business when there are hundreds of fewer moving parts in yeah. In the part of the vehicle that wears out the quickest that needs the most maintenance. And there are for the record, there are just under 2 million people who work in dealerships and parts wow. In the us, like it's a, it, it's a pretty big business and it's recovered almost completely from, or from diving during the pandemic. So that's a good question. Like, would you, would you go to Pep Boys for what, like what's the job to be done? Are you gonna go there to jailbreak your vehicle software? Well, you know, Tesla will do that. Doesn't obviously jail break it, but Tesla will allow you to do over the year updates that happen automatically and improve performance or safety and other automaker are, are moving in the same direction.
So it is a big challenge for them as far as repairs. I mean, body work and things like that are the same, but you've got new things to be aware of. Um, I re I remember Porsche has to do training for its mechanics around the, the, the battery pack and the new TA, because, you know, you could, you could burn yourself by touching hot metal in an internal promotion engine, but you can absolutely electrocute yourself. So, you know, like, like where's the specialization within that. And it's just not a big enough market probably yet for that to have emerged. Most of that still flows back through dealers. Not only that, like these places occupy a lot of physical real estate, like what happens to the, what happens to the bid, the big box parts store and the people who work there, there, there's a lot of things that are in play here that we're where I think only just beginning to kind of think ahead about, you know, and I imagine that there are strokes within all of these companies that are starting to ask these questions, but, you know, we're, we're not yet there volume metrically for this to really make a difference, but it, it will
Joe:
That, I mean, that was amazing. I do feel like, you know, in my mind, there's like 10 more hours at least of episodes.
Nat:
There's so much more, each one of these things itself yeah. Is like a multi-trillion dollar inquiry with tons of open questions. You know, what's the brand, the loyalty to brand name play the way the car moves, the business model, all kinds of stuff's gonna gonna be in play. And it's gonna be really interesting. I mean, I think that we'll see some incumbents that make it, they're all, they've all even Toyota has now sort of come around to the fact that they probably need to do this, but there is a place for new entrants and, you know, it's gonna be, it's gonna be interesting to see. And I do look forward to going to Buc-ees sometimes
Joe:
Soon. Yeah, you gotta go. This was great. I think, you know, we really need to do a lot more, and this was like a great starting point for what I think will be many odd, lots on related topics. So net thank you so much for coming on the
Nat:
Show. Thanks Joe. Thanks, Tracy. Thanks
Joe:
Tracy, we gotta do a battery episode, obviously like the battery supply chain, right? Yeah.
Tracy:
Lithium probably
Joe:
Oil as well. Oil lithium. What else? Um, the future of gas stations, that's its own like future
Tracy:
Of, I, I guess car repair shops,
Joe:
Future of car repair shops. Um, probably like unions and automaker labor either at the OEMs or the part suppliers and how they're going to navigate that. So many I'm so excited. I feel like the, we have like 10, what
Tracy:
Future of roadside attractions. Yes. I'd be interested in that one.
Joe:
One, the future of like the American road trip is like, it's what I'm super excited about. Right?
Tracy:
So I, I do feel like this is going to end up being a semiconductor series redux where every time we record an episode on EVs, it just leads to five more episodes. It already feels like that. But on the other hand, the notion of everyone in the world, you know, maybe not immediately, but over the course of a few decades, switching to a new type of car, that is a really compelling argument that it it's going to have to have some knock on effects.
Joe:
Oh yeah. And you, you know, just the sheer number of like employees in this space, you know, we're talking like, oh, a million here, a million there, like in the us, like obviously cars are a huge deal in the us specifically, but there's so many, like there's millions of millions of different, uh, industries. No, not millions of different industries, numerous different industries with millions of employees that are going to be affected by this. And look, there's gonna be, it's also gonna create tons of new jobs in ways that we don't expect. But yeah, it's going to, I think like NA's thesis that regardless of who wins, this is going to change so many different aspects of the economy in life is one that I find to be, uh, quite convincing and quite compelling.
Tracy:
Right. And I mean, if you think about cars specifically in America, they they're so entwined with society and culture, the way cities and suburbs are planned and actually work, it feels like once you start changing the actual thing that drives that, oh, pun, um, once you start changing actual cars, it just, it feels like it has the potential to impact all of society and, and the way we live. And I think that made a really compelling argument for that.
Joe:
You know, I was like, kind of like wondering, is like, oh, are people going to like, like, what is the cultural pushback going to be when someone shows up at a job site or a football game with an electric F-150, but I really like that. So compelling it's like, just like run all the machines and all the saws and all the equipment, right. From the car, like run an awesome, like sort of like tailgate operation with like a working refrigerator and a stove and all that right. From the car. Like that's awesome. People are gonna love that. So I'm like totally sold. Yeah. You'd
Tracy:
Be the cool guy at like, with the best pre-game right.
Joe:
A great sound system, probably a TV, like a huge TV or screen that you could set up. It's it's it sounds awesome. So I'm super excited about seeing them all over the place now.