Embark on an enlightening ride with Michael Dunn, an automotive sage with an Asian tenure spanning over a quarter of a century. As we cruise through the landscape of change in the auto industry, Michael steers us through the night terrors haunting today's executives: the rise of software-defined vehicles, the electric vehicle revolution, and the looming shadow of Asian, particularly Chinese, dominance in the market. From his Detroit roots to the bustling streets of Bangkok, Michael's journey is a testament to the impact of a positive and adventurous upbringing and the pivotal choices that drive a career forward.
Navigating through the fog of Chinese business culture, our conversation uncovers the enigmatic ways of the East and how it shapes Western engagement. The opaque yet rapid evolution of China's auto industry unravels before us, revealing tales of joint ventures and the Communist Party's stealthy hand in the electric vehicle race. Witness how China's meticulous strategy transformed it into a global powerhouse, sparking a debate on intellectual property sharing and the unyielding influence of political powers within and outside the Party's ranks.
As we gaze into the crystal ball of global collaboration, the winds of change suggest a shift from China to other Asian nations, pondering the future tapestry of investments. With Michael Dunn in the passenger seat, "Driving with Dunn" offers not just a podcast episode, but a journey through the heart of the automotive transformation, where every turn promises new insights and the road ahead is anything but certain.
Embark on an enlightening ride with Michael Dunn, an automotive sage with an Asian tenure spanning over a quarter of a century. As we cruise through the landscape of change in the auto industry, Michael steers us through the night terrors haunting today's executives: the rise of software-defined vehicles, the electric vehicle revolution, and the looming shadow of Asian, particularly Chinese, dominance in the market. From his Detroit roots to the bustling streets of Bangkok, Michael's journey is a testament to the impact of a positive and adventurous upbringing and the pivotal choices that drive a career forward.
Navigating through the fog of Chinese business culture, our conversation uncovers the enigmatic ways of the East and how it shapes Western engagement. The opaque yet rapid evolution of China's auto industry unravels before us, revealing tales of joint ventures and the Communist Party's stealthy hand in the electric vehicle race. Witness how China's meticulous strategy transformed it into a global powerhouse, sparking a debate on intellectual property sharing and the unyielding influence of political powers within and outside the Party's ranks.
As we gaze into the crystal ball of global collaboration, the winds of change suggest a shift from China to other Asian nations, pondering the future tapestry of investments. With Michael Dunn in the passenger seat, "Driving with Dunn" offers not just a podcast episode, but a journey through the heart of the automotive transformation, where every turn promises new insights and the road ahead is anything but certain.
Hello and welcome to the Electric and Eclectic podcast show with Roger Atkins and some truly smart and amazingly interesting guests.
Speaker 2:After graduating, one week after handing in my MBA and that MA thesis, I boarded a plane with, I remember there's, $3,000 in an Apple computer, and just got on a plane and flew, not to China but to a place called Bangkok, Thailand. This was 1990. What keeps executives today up at night so they say, oh, software-defined vehicle. That's a nightmare for me. I've been manufacturing pistons all my life. What's a software-defined vehicle? Oh, charging state for electric. Oh no, I don't know too much. Autonomous vehicle, ADAS. We got to figure out all these new technologies. And then lurking on the horizon is this Godzilla of an industry that conceivably could do what to the auto industry, what China did to the solar panel industry, and that is completely overwhelm all markets with its lower cost products. And then you look around and say why would we buy any other anything but Chinese cars? Are you sitting comfortably? Then we'll begin.
Speaker 3:I hope you're going to enjoy this as much as I am, because this is turning the tables. I regularly listen, I listen avidly to Driving With Dun, a podcast that brings together extraordinary insights from people in the automotive industry, in and around the automotive industry, from an individual I've come to admire, who has spent so much of his life I think a quarter of a century in Asia and, given the influence of Asia now not just China on the automotive industry, coupling together that journey that Michael Dunn's been on in his career and life, together with the extraordinary guests that he's had and you can look it up anytime on Driving With Dun. It's all there as an amazing living library of conversation, insight, ideas that can help you understand and chart your way, chart your course if you're an industry manager, if you're there trying to shape the future of your particular part of the auto industry. So, without any further ado, michael Dunn, welcome to the Electric and Eclectic podcast.
Speaker 2:Roger, thank you so much for having me. I've been looking forward to this opportunity to engage with you, the one and only Roger Atkins.
Speaker 3:Well, you know, let's not have a love fest, but the feeling is absolutely mutual, I can assure you. You sent me some notes because, yes, I know who you are and, like I said, I've gotten to know you quite well, I think, by listening to your broadcast, your lovely podcast. But what I didn't really know was just how long you'd spent in Asia. Let me just read what you sent me. You know China Asia is my wheelhouse 25 years across China, Vietnam, Indonesia and Thailand. So can you give the listener a sense of how did you find yourself there and give us just a kind of inkling of some of what that's about? I'll try and shut up for 10 minutes because I just want to listen to you and then I'll pick up on some points that you reference about that journey. So yeah, opening question how come you found yourself in China for a quarter of a century, Asia for a quarter of a century?
Speaker 2:So we go back to Detroit. I'm from Detroit originally. My dad was an automotive editor at Popular Mechanics and his side job was to be a spy photographer. In fact, jim Dunn is a legend, at least in Detroit, most of North America. He was the guy who would get the next generation Corvette or Mustang or Jaguar before anyone else would, and he would use photos and sell them to magazine. They'd be splashed across it.
Speaker 2:What was my role as a teenager? How was the getaway car driver? So he'd have his long lens Nikon out the side window trying to capture these cars with a zoom lens In an instant. Get it, you make several hundred, several thousand dollars, miss it, you go home empty-handed. So a lot of pressure on me as a teenager to go and get the job done as a driver. Don't go too fast, don't go too slow.
Speaker 2:So but grew up around cars with him, got to test drive most every make and model and he always encouraged me to say wherever everyone else is going, make sure to go a different direction. So I took his advice to heart and when I went to school at the University of Michigan, I studied Chinese intensively for four years. The class size was, on average, about three people and the teachers were extremely demanding. Off as nails. You didn't dare walk into a classroom without knowing your Chinese.
Speaker 2:That really paid off, so that when I graduated I looked around, most of my, most of my friends were getting jobs at Ford, gm and Chrysler. That's what you did. And so I had offers from all three companies and I went to my dad and I said which one looks good? And he said none of the above. Go and do something completely different and radical. Go East, go to Asia. You've been studying Chinese, just go. And so, after graduating, one week after handing in my MBA and MA thesis, I boarded a plane with, I remember, there's $3,000 in an Apple computer, and just got on a plane and flew, not to China, but to a place called Bangkok, thailand. This was 1990. Right, okay, so, setting the scene a little bit, I had studied Thai, I had studied Chinese, I knew cars and I had a sense that Asia was the future. Don't ask me, I don't know why, but just had this sort of intuitive sense that Asia was coming up.
Speaker 3:Wow.
Speaker 2:Yeah, so, wow, okay, so we get into Bangkok. Thailand. Why Thailand? What happened there? Briefly, thailand at the time was booming as an economy and it welcomed foreign direct investment from automakers and suppliers. Most other Asian countries did not, so my first jobs were with Chrysler, ford and GM. Imagine they go to Thailand and they think, oh, different language, different culture, industry, competition, regulators. There's this guy from Detroit and he speaks Thai and he's whoa yeah, so it was a nice fit. That was where things started in 1990.
Speaker 3:Yeah, wow, look, I mean, that's a great illustration of not just listening to your dad. He does a smart guy, clearly, I mean, and as you say, and many people listening to this will know, he is a legend, absolutely. And I think language, that ability to learn a language, doesn't come easily to most people, but it's about wanting to communicate with people from different cultures and many other things. So it isn't just I want to learn languages because I want to be clever or get this job or that job. It's a kind of a key to the door, isn't it? It's a key to the door of many other cultures which clearly then you went on. So the 25 years we're talking about, were you out there for all that time or did you come back in between for periods? What happened after Bangkok, thailand then? Yes, how were you there and what happened?
Speaker 2:on that first country.
Speaker 2:Yeah, great question. So as life happens, Roger, I'm looking around as an entrepreneur trying to find business and traction and people are asking me who do you know here? No one. How long have you been here at three weeks? How big is your company? You want me around in the nearest one? Yeah, so it was rough going at the beginning, but I had checked in with 4GM in Christ, so I said I'll be out in Asia if you need any help. And lo and behold, one day, out of the blue completely, I get a call from a manager, a senior manager executive, at Beijing Jeep up in Beijing, you know, five hour flight away.
Speaker 3:Right.
Speaker 2:He said urgent request. You said you can get stuff done here in Asia. Here's the deal we agreed by contract to export Jeeps from China with our joint venture partner. We need to export Jeep Cherokees from China to somewhere. Keep in mind, this is 1991. Who's going to buy Jeeps out of China? Can you help us find customers for these Jeeps? Because if we don't sell the Jeeps and get some foreign currency, the joint venture partner is saying we're going to stop production, no more sales in China. So it's the first instance of the Chinese using their leverage. And so I thought oh my goodness. He said our alternative is to put it on his ship and then dump it in the Pacific Ocean because we can't find a buyer.
Speaker 2:Wow, by chance I had a good friend named Kevin Whitcraft, trading company American based in Bangkok. He was doing a lot of work with the UN in Cambodia. He said maybe I can make this happen. And I couldn't believe it, but he did. He convinced the UN forces in Cambodia to buy Jeeps, probably at rock bottom prices, from China. So that made me a hero with Chrysler at the time.
Speaker 2:But my goodness, even though it was a small deal, but they were able to solve a problem and that was a big lesson for me. Oh, just help companies solve problems and solve problems and it'll be good to go. So that's a lead up to that took me back to China. Chrysler then said we have bigger plans for China, Come on up here. So the company expanded from Bangkok base to Shanghai and then to Beijing and I moved up pretty much. Yeah, the entire 25 years I was either in Thailand or Indonesia or China. Didn't go home. Yeah, Now coming into the call, I wanted to share a very early experience in China that actually predates my graduation. As a graduate student, I went to China, to the southern city of Chongqing, China's World War Two capital as a grad student.
Speaker 2:Yeah, yeah, it's very, very big these days, big big 30 million people that most Americans, at least, would say. I've never heard of this city. But so I find myself at this university in Chongqing and I want to tell this story because at this juncture we're at Roger. With the Chinese automotive industry emerging as this, like modern Godzilla that threatens to steamroll, overwhelm Western automakers, how do we begin to understand this place called China and how it works? Yeah, so, way back in 1987, I find myself on a train traveling during spring festival from Chongqing to a southern province of Yunnan where the sun shines all the time in the blue sky. So between those two provinces is Guizhou province, lots of mountains, and I'm on an old train with four Americans and it's chugging along, not like the maglev train that goes 300 miles an hour. This thing was like 32 miles an hour. And in the middle of the night the train suddenly lurches to a stop. It's pitch dark, we're in a very small station and nothing happens and we don't know what to do. And minutes go by, long minutes go by. Is this train stuck? Is it moving? What's going to happen? And so I see, oh, some Chinese passengers are leaving the train. But no one's really clear and I said, hey, I'll handle this. You know I speak Chinese. Watch this, I'll take care of it. I'll figure out what the hell's going on.
Speaker 2:So my three American friends stayed put on the train and I wander off onto the platform and I see one light with one window and, sure as hell, at three in the morning, here's this young woman in her late 20s minding the store and I got, oh boy, this is going to be terrific. I'm going to use my best Chinese and really blow her away. So, in Chinese, I asked her could you give us an update on the train? Is it going to start moving again soon? Is a new train coming in? What can we expect?
Speaker 2:So she looked at me for long seconds and then she said不清楚. And what's that? Not clear. Okay, I go. Not clear Bu means not clear Bu. So then I rephrase my question. I said what's not clear? The train schedule is not clear, or you're not clear, or my Chinese is not clear. Then she came back with the same answer Wu Qingchul, not clear. I asked again. She gave the same response not clear. Now, this served me so well, roger, for the rest of my time in China, because things are never really clear in China. She may have not known. She may not have wanted to give me an answer. She may have said here's a foreigner I don't want to deal with, but the default reality in China is that things are always ambiguous, unclear, gray, not black and white, and as Westerners that drives us nuts. We want to understand. What exactly is this beast called China? How does it work? Lay it out for us.
Speaker 3:Yeah, yeah. Sorry I'm interrupting, but I'm really intrigued by what you've just said and that kind of statement, because this is a 5,000 year old civilization. Are you telling me and the listener that that's always been the way it is and it works perfectly fine?
Speaker 2:Yes, exactly. So take for example the question and on everybody's mind today is Taiwan. Even the Chinese don't my best Chinese friends. They don't know. Everything is always up in the air and in flux, and that makes cultures like the Japanese or the Germans or many Americans feel very unsettled. Are they going to attack Taiwan or not? We frame it in that way and they're like well, there's lots of possibilities and none of them are really clear until something happens. So what does that have to do with how we prepare for the China? I think we have to sort of get begin to see things from the Chinese mindset, because they are in, they're in the driver's seat. They're the largest manufacturer of cars, the largest exporter of cars. They dominate the EV industry, the battery industry. How do they think? What are their priorities? What are their values? How do they negotiate? How is it different from what we understand? I think that's going to be key to our ability to compete.
Speaker 3:Yeah, Now tell us a bit more about life living in China, then, because you're going back there to the early 90s. Now I've been out there I don't know not many half a dozen times, and it was probably around 2014,. I think I went out first of all, and in between that first time I went and the most recent time, which was no, it must have been about 2013. But then by 2019, so much had changed in that six years. How much had it changed during the 90s?
Speaker 3:And I've got to tell you, Michael, I spent 10 years at the Volkswagen Group, that decade at the Volkswagen Group in various roles, working for Audi, and I thought my life was exciting and I was doing interesting things and being bold and brave. I now realize I was a lazy ass. I should have gotten on a plane and gone to China. I mean, man, seriously, this is so much to your credit that you've done this, but how did you get on living in China like finding somewhere to live, getting paid, all the basic things that we all do in life how did that work?
Speaker 2:Well, there's a reference. People talk about an expat package. You're hired from the home country and sent over to China with glorious accommodations. You have a beautiful home and a driver and a cook and a cleaner and you don't have to worry about anything. You make a big chunk of money and you live in these gorgeous homes in suburban American like suburban residential developments. And then you have me, who's kind of like OK, I'm here trying to find my way.
Speaker 2:Now, early days of the 1990s, what I could afford was what they called Chinese housing Apartments in the city, where all of my neighbors were Chinese and I was staying in a place, probably illegally, because they didn't want what's this Lao-Wai, this foreigner, doing, residing among the Chinese. So that's what I could afford in the early days, very much bootstrapping things. As I've opened up offices and hired people, I just lived a Chinese life, let's just say so. I'm grateful for that, because I always felt like my feet are on the ground and I understood China in ways that maybe if you're coasting in and have a two-year assignment in China and get out, you wouldn't be able to appreciate. So that's sort of how I got started.
Speaker 2:Those customers were Beijing Jeep, and then GM and Ford came looking for partners, and how do they get into this most promising market, I think for our listeners? Roger, I kind of divide my time in China into two big chapters. Let's just say the 90s and the 2000s were an era when China decided that the way they were going to develop their auto industry is by forming joint ventures with global automakers, learning from those joint venture partners and eventually be able to do it themselves, not unlike the examples out of Japan and Korea previously.
Speaker 3:Yeah, yeah, very, very similar, yeah, exactly.
Speaker 2:So one big difference was that I remember in 2009, I attended a conference in Beijing hosted by Minister Wang Gang, who's we now know as the Wow he was the science minister then yeah, yeah, exactly.
Speaker 2:He was the godfather of China's EV industry and that day, at the conference, he gave a talk. Who else was there? Henrik Fisker was there? A guy named Daniel Sperling who was a PhD professor at UC Davis was there? Not a big conference, but in any case, wang Gang had a message that day. He said look, 25 years ago we set out to form partnerships with global automakers in order that we could learn how to build an auto industry. Good news today we surpassed the United States. We're now the largest automaker in the world. Wow, fantastic. Bad news as I look around the streets of Beijing, shanghai, guangzhou, I don't see any Chinese brands. All Volkswagen's and Buick's and Hyundai's and Toyota's. Where the hell are the Chinese cars? And he said there's only one thing we can do here we will never catch up with the West on internal combustion engines. It's a game of forever catching. They're innovating, we're catching up. We need to pivot to electrics and we will make battery electric vehicles our own game, one in which we can lead in.
Speaker 3:Wow.
Speaker 2:That's 2009.
Speaker 3:That's some meeting, that's some gathering. Just out of interest, is there a gentleman there called Professor CC Chen? Does he ring any bells?
Speaker 2:That name is familiar. I don't remember that he spoke, but definitely I felt like Roger, it was a. It wasn't a sense. You didn't have the sense that, oh, china's at a turning point, they figured this out, they're going to go electric and they're going to win. No, it was much, very much on the fringe. We're happy, we're big, but we're frustrated that we're behind on the technology. So 2009,? They sort of put that out there, but nothing really happened. Yeah, and what?
Speaker 3:are you doing at that time? Then yeah. Like you just mentioned various roles. What is your role at this time? How and why were you at that meeting?
Speaker 2:Okay, Great. So roll the back of the camera a little bit. I had founded a company called Automotive Resources Asia. We're advising automakers, suppliers and investors on how to enter and compete in China and other Asian car markets. So your conventional consultancy, business development, how do we get into this market and sell our products to this massive, massive potential market? So my clients were, our clients were automakers, suppliers and investors.
Speaker 2:Eventually, yeah, in the mid 2000s, I met JD Power, the founder of JD Power, and Associates. Wow, yeah. And we struck, made it. How do you say? We became fast friends immediately, Just felt like I knew him forever. And he said we have ambitions to enter this market. You have great network, you have relationships with the. You know the consumer. Let's merge our companies and we'd like you to run JD Power in China. So that happened around 2006. And during that time, as manager, director of JD Power, I would visit all of the Chinese manufacturers because they're interested. How do we improve our quality and customer satisfaction? It's in that role that I was invited to this exclusive meeting with the minister to try to shape where, where to from here for the industry.
Speaker 3:Yeah, and of course perhaps the listener doesn't know, but he had been who we're talking about here, a senior manager at, or certainly a manager of some repute at, audi in Germany. Yes, he did, yes he was.
Speaker 3:So so, and how then does, for example, that play in your mind for how people perceive China about? Well, they just copy stuff. They look at what we do, copy what we do. That's it. There's no original thought, there's no kind of anything like this, because this is beginning to sound absolutely like original thought. Let's not just iterate internal combustion engines anymore. And we're on Euro three, you know, and they're all on Euro four and we're chasing along here. The leapfrog thing is a huge thing of imagination. Nothing at all to do with copying. It's so from one man's imagination. How did this then spawn policy and much more of the momentum that we're now seeing? The fruits of today? Now talk us through that 2009, 2010, 11, 12 kind of period then.
Speaker 2:Yes, yes, so to confirm, wang Gang was trained in Germany, worked at Audi, highly respected. He was not a Communist Party member, but they recognize just his intellect and said this is a guy we want to bank our future on.
Speaker 3:So just stop on that for a moment, because I, if I'm really honest, don't really understand the difference. What's the difference between a Communist Party member and someone else then? Because a lot of people in the West probably think everyone's a Communist Party member. What's the distinction then?
Speaker 2:I think the easiest way to understand it again, trying to figure out this place called China not clear is that the party leads everything. So one day, for example, I was at a meeting with the president of JD Power. At the time had come to visit and we're sitting across from the president of First Auto Works and a party member. Party member keeps a low profile but is very powerful. They control things, they shape outcomes. So we're at this lunch and I said hey, by the way, across the table, Mr President and Mr Party Member, this I'd like to introduce you to the President for JD Power. He's a big shot. Back in the United States the two guys looked at me like their ex-wife just showed up. Why are you bothering us with? He has some title. He's a conventional business man. There's lots of those. We're a party member, I'm a member of the party, so the party members are the source of power in China.
Speaker 2:Most people who are accomplished in China sooner or later do join the party, not so much because they're believers in communism, but they're members of the club, an elite club of leaders with influence. Here's a guy saying I don't need that, I don't need that extra label, I'm happy as a scientist and intellectual. For people who don't join the party, the party would say well, what's the problem here? Why aren't you member of the party? So he was strong enough to hold his own and say I don't need that extra layer, I'll just be a regular guy. So the important point is to understand very rare in China have this happen Right At this high level of power. So back to your question how did it shape policy? This is where we get back to the not clear For the next five years.
Speaker 2:Roger China started to put in this important policy where they said all right, you join venture partners who've been benefiting enormously from the access to our China market. We now mandate that you must set up parallel joint ventures that are devoted exclusively to designing, developing, manufacturing electric vehicles. And guess what? In those new joint ventures, all intellectual property introduced to those joint ventures immediately belongs to the Chinese partner. So this freaked out your Volkswagen's and Toyotas and GM's. Wait a second, we're going to instant. We can't license it. That's our intellectual property, that's our no whoa. So what happened? They talked to their Chinese partners and said this doesn't look attractive to us. By the way, chinese consumers don't want electric cars, by the way. The range is short, the expense is high, the batteries don't last, there's safety issues. Let's form these parallel joint ventures, but then just sit on it. We'll continue to bake your Buicks and Toyotas and Volkswagen. We, as joint venture partners, will be happy because we're making profits. We can appease the people in Beijing, like Wang Gang, but we're not really going to go after electrics.
Speaker 2:Wow, you got it. You see, was it like? Oh, top down, wang Gang's has a great idea. All forces moved in that direction. No, you got this sort of up in the air ambiguity. And for the next five years, roger, if you look at the numbers, electric vehicle sales in China just kind of trickled along at very small numbers, like thousands of units a year. Okay Now, so how do we get to where we are today? Next date, very important date, 2014,. August. Xi Jinping, chairman Communist Party in charge, takes his top lieutenants to a seaside resort in August of 2014. And there they begin the work of this blueprint called Made in China 2025. That's neat, yes, which you've heard of?
Speaker 3:yeah, I have indeed heard of. I know it quite well, but not as well as you, I'm sure.
Speaker 2:So he's there and he's saying well, there's only one way to really get this done we, as a nation, want to lead in next generation technologies electrics, autonomous AI, semi-conductors. How are we going to do that? We are going to be not only suggesting or recommending, but we are going to mandate and put billions of dollars behind this effort to invest in batteries, battery supply chains, electrification, charging stations, the grid. It's real. We're going to put huge money behind it, plus incentives for people to buy cars, plus incentives for people to manufacture cars. And that was another pivotal moment 2014, when this blueprint comes out, says this is the ambition by 2025, we want to be global leaders in these technologies. Yeah, right.
Speaker 3:Right Now. Here's the bit that I'm starting to not get confused about, but just don't understand. So that wasn't some kind of sinister plot to take over the world. It was an industrial strategy that was put into the public domain. I vaguely recall at the time, various countries around the world saying well, hang on a second, where does this sit with World Trade Organization arrangements? You're right, it sit with this, that and the other, a few other things, but essentially what it was and I'm trying to be non-partisan I'm British, I'm a European, I'm a citizen of the world.
Speaker 3:I'm not pro or anti-China, but nonetheless, what strikes me about this is this is a government, a responsible government taking a long-term industrial strategy 10 years, 2025, made in China, 2025, from that late 2014, 2015 place and say how are we going to help build our country? What do we think are going to be the key technologies and the things to make it happen? How will we have a supply chain? How will we help our industries? Well, tell me if I'm wrong here, but isn't that what government's supposed to do in any country, isn't it?
Speaker 2:It absolutely is. They had a vision, they committed to it. They put the money behind it. Where it gets a little bit delicate or sensitive is how much money are they putting into it and what kind of cost advantage? Yeah, for it. How much money are they putting in so they'll support this thing in such a way that, yeah, they can dump their cars all over the world at very low cost? Then you say, hey, great policy, but now you're killing our industry. So hold on. And this is what the EU is looking at right now with their anti-subsidy probe. So no problem with the policy, it's ambitious, any country would do the same. It's just that when it comes to the point today where China's exporting 5 million cars globally and rolling into markets like we haven't seen before, people start to say, hey, how come your costs are 30% lower than ours? Is that innovation or what's scale, or is there something else going on?
Speaker 3:Yeah, yeah. Well, we both know what it is. Please tell the listener, because here's the thing again I think I know, but I know you know. So how is it that they can do this and make very impressive vehicles now at a price that we can't get close to?
Speaker 2:Part of it is scale. And then you take not all Chinese companies are the same, so let's take the leader out of China. That's BYD hands down the most powerful auto maker out of China today. They delivered 3 million cars last year. They'll probably deliver 5 million by 2026. What's their secret superpower? So number one is years of vertical integration. Byd, first and foremost a battery manufacturer that's evolved into a formidable car maker. They have for years been not only building batteries but also the cells and also doing the processing and have interest in the mines. So they're controlling their costs, their supply chain, from the mine all the way to the manufacturer of the battery, to the design of the battery and then into the car. So that's a huge, like Tesla.
Speaker 3:I was gonna say we know someone else is doing that.
Speaker 2:Yeah, tesla. So that would be the number one differentiator. The second one would be BYD is notorious in China for being extremely tough on costs. So when they do go outside to suppliers, they beat them up like suppliers. Tell me we long for the days of Volkswagen or GM or Nissan. We haven't seen this kind of brutal the irony. Yeah, yeah, okay, that's number two, they're really tough on costs.
Speaker 2:And number three to be candid, there's no question that BYD has secured benefits from the local and national governments in the form of incentives, land leases that are discounted, energy for their factories that are discounted All kinds of imaginative ways to put to set up BYD for success. So the puzzle for us here in the West is how do we separate those out? Because the Chinese will say all day long no, we're just more competitive than you guys, you guys aren't working hard enough, you're not smart enough. And we say is that really the whole picture or is there other things going on? And this is where we come back to trying to unravel what exactly is going on. What's their cost advantage and how much of it through innovation and scale and how much of it is because it's this, like all of nation effort to make BYD and other automakers successful.
Speaker 3:Wow, yeah, listen, like I say, I was at the Volkswagen Group for 10 years and I did some other stuff, but a moment I just want to briefly allude to was late 2010,. I worked at Modec, which was a little startup electric van company. We used LFP batteries, we sold a handful of vehicles to FedEx and UPS and the company called Tesco and some others. It was an extraordinary adventure. It was my first taste and sense of proper engineering and manufacturing, because it was a small factory and all of this stuff. Anyway, cut a long story short, we're a couple of years into the recession, the global economic meltdown. Everyone was in it and we weren't in a good way, like probably everybody else. Nonetheless, we've been invited. The company had been invited to go and meet the Chinese ambassador, madame Fu Ying. Without going into all the details, no one else is going to go I volunteered and I said I'd love to go. I'd love to meet Madame Ambassador. I did no word of a lie. This is what happened.
Speaker 3:I tried out some of my Chinese, by the way, I only knew a few things and I just thought, at a courtesy, I should be able to say my name. I said Washer Roger Atkins. Then he said this is going to sound bad to you. Then I said what was it? Why ying ying by or lie Birmingham? Because it was a meeting in Birmingham. Then, when we were doing the lineup with the ambassador introducing ourselves, I was the only one trying to do some Chinese. Then Madame Ambassador said oh, mr Atkins, you speak Chinese. Anything else? I said I hope I get this right. How, how she? Is she a Tian Tian Shan Shan? She said oh, you're quoting Mao. I said yeah, because because through education comes progress. That sounds like you know wisdom. That sounds like a smart, smart thing for someone to say yes. So anyway, we got on well.
Speaker 2:We had the dinner, some other things happened I bet she's smiling and her shoulders are relaxed and said here's a guy who took time to think about the world as I see it and to communicate with me in my own language.
Speaker 3:Well, it went more than that. Yeah, thank you for that, michael, because I think she did. But then I explained my wife had worked in the foreign office in on the Hong Kong agreement in the mid 1980s. And then she explained to me she'd been one of several translators for Dong Chaoping. And when I said I said yeah, I kind of I know that journey, I know the story of the 18 farmers. And she looked to me and she said you know the story of the 18 farmers. I said yes. She said, mr Atkins, in my role as an ambassador, I have met two other Westerners who know that story and about that moment. So I said Okay, well, no, I just looked it up. I thought it was out of courtesy. You know you're, you're a person of significance. I just wanted to make sure you know. If we did talk like this, we can have an interesting conversation. Here's then where the really interesting bit. She said this is late 2010.
Speaker 3:Mr Atkins, why don't you bring your company modec to China? We have grand ambition and big plans for what we call new energy vehicles. We could help a company like yours, and you know we could. We could do things together. I'm sure life is difficult for you. It is for many companies around the world. We know that, but we would like to help you.
Speaker 3:So, anyway, I hotfoot it back to the company and explain all this, and but sadly, then the thought is well, what do we want to go to China for? They're just going to copy what we do. And of course they would have done that, but they would have also and you know this, like they probably would have worked closely with us, we would have been given courtesy and respect and somewhere along the line, the guy that put all the money into modec, he would have got all his money back and some, and okay that we would have survived in that fashion, and who knows what would have happened. But sadly and I think it was a it's an illustration to me at the time of the cultural lack of awareness of what China is as a nation, and I think that was a pity. But, but, but there you are.
Speaker 3:So let's come right back to where we are now. You've alluded to various things that are happening this lack of a level playing field. We can't find. We can't suddenly find the 10 years that we've lost, if you like, so to speak, that that that made in China 2025 period. We can't snap our fingers and have all these supply chains suddenly emerge. I'm going to ask you a big question now, mike. What should we do?
Speaker 2:First and foremost and this is going to be an unpopular opinion, but just realistically we need to put in place tariffs for three to five years to buy ourselves time. Okay, without those. Look the Chinese. Why are they exporting like crazy right now? Part of this story is their domestic market economy has slowed dramatically. They're sitting on massive capacity over capacity upwards of 15 million units of over capacity. There's enormous pressure on all of these automakers to go out and find new markets and find profits.
Speaker 3:Right.
Speaker 2:So they're not sort of thinking, oh, it'd be nice to also sell abroad. They're thinking this is our lifeline, we need global, okay. So they're full steam ahead and we on our side in the West are totally unprepared. How do we match their prices? We can't, nobody can. So short term, unpopular opinion no one likes terrorists. But I would put in place tariffs and say we have three years to sort of race to get more competitive. The second thing I would do would be what the Chinese themselves did and then said if you want to come in and get our market access, then we're going to ask you to set up electric vehicle joint ventures with us. Nice, I know it's odd and awkward, but it's right from the Chinese playbook and we could learn a lot by sort of sharing in the yep. You get market access, but we get to learn more quickly by partnering with you. That's an option.
Speaker 3:That's very much an echo of a previous guest. I've had Bill Russo where and his turn of phrase was, I'm sure you know, bill, flip the script, and I think he's right. But didn't your former pre on wary of politics now? But didn't your former president basically put in the tariff situation to stop the Chinese export onslaught, if you like? We haven't done that in Europe and some other places, albeit the BYD buses, I think so, in considerable number in the United States. So we have to be careful with politics, I know. So we're recording this at the end of January in 2024. If come the elections in the United States in November, the next president and administration let's just say TBA to TBC either carries on with those, those tariffs, or maybe even makes them harsher, harder. More Is are you kind of sensing that's where we're going to go? Is that going to happen? And should we now do this in Europe then? Is that is?
Speaker 2:that what you're saying, mike? Yes, and the United States, regardless of who wins the next presidential election, are confident, based on my conversation with people in DC, that those terrorists will be where they are, or higher, not lower. So that's US. And then China looks at the world and says well, like water, let's find the path of least resistance.
Speaker 2:Europe looks attractive, in particular Europe. Well, wait a second. There's some countries in Europe that don't have homegrown auto industry Spain, sweden, you know, arguably Sweden, uk, you know, those are the areas they'd have a tougher time in Germany, france and Italy, but they definitely are targeting Europe first for the reasons you mentioned, because the terrorists aren't there.
Speaker 3:Yeah Well, I mean, your point's well made. I mean I'm not going to go through the exact number because I can't remember what it is, but essentially more than half of the European member states have got nothing to do with the auto industry directly. They don't manufacture. Some of them have got tier ones and supplies in them for sure they have, but nonetheless they're not there. But and I don't want this to sound too emotive but the tentacles of Chinese enterprise are already all over the place. You know you're seeing battery factories being built in Hungary. You're seeing you know all sorts. Well, g Lee is a case in point of an extraordinary way in which and I'm a big admirer of Lee Shufu because I think the way he's managed companies like Volvo essentially left him alone really just said do what your best at and we'll help you. But you know you've got to do a good job, you've got to show up, you've got to work hard.
Speaker 2:But yeah, it is track record. Volvo Polestar Lotus.
Speaker 3:Yeah, yeah, wow yeah, exactly so. So how do we put the genie back in the bottle? I suppose like is one, one way of looking at it.
Speaker 2:I'm not sure we can, roger. I'm not sure we can. Like you know, it's enough. What keeps executives today up at night? So they say, oh, software defined vehicle, that's a nightmare for me. I've been manufacturing pistons all my life. What's a software defined vehicle? Oh, charging state for electric. Oh no, I don't know too much. Autonomous vehicle, adas we got to figure out all these new technologies and then lurking on the horizon is this, yeah, godzilla of an industry that conceivably could do what to the auto industry, what China did to the solar panel industry, and that is completely overwhelm all markets with its lower cost products. And then you look around and say why would we buy any other, anything but Chinese cars? I don't know how we put the genie back in the Baba. I really don't.
Speaker 3:Right Another thought. You kindly shared that journey, amazing journey, quarter of a century going out there as a young man, bold and brave, not doing the traditional thing of the expat life and whatever huge admirer of your approach to that really get into the culture, be in the country, be one of them. I think that's massively to your personal credit. But the other side of your life and your journey and I mentioned at the beginning the podcast you've spoken to an extraordinary array of people from all around the world. How is that all kind of? How does it all shake down in your mind then around what we're doing and where we are, and what do you do with that other than you've got this amazing living library of conversations with people. How can that get tapped into? If you like I don't want to use the word exploited, but how would you see both yourself and others using that, because I think it's so useful hearing all the voices that you talk to?
Speaker 2:Here's something I did learn along the way in China there's a lot to learn from Asian cultures, including Chinese cultures. Early on, I remember my friends in China saying we have a saying in Chinese that says you can always learn at least one thing new from somebody else, whether you like them or not. Your kindred souls are not. There's something to learn from another individual. So I thought, okay. At first I thought, well, that's kind of naive to say what are you sure you know? Maybe not.
Speaker 2:But as time went on I began to appreciate oh, every individual professional is focused on something, and often deeply focused on it, and knows stuff that the rest of us don't know. So when I have a podcast conversation, I really look forward to try to unearth, unearth. What is that secret superpower or knowledge that that person has? What can I learn that's new and different? So that's one big motivation for having the conversations. The second one is it's sort of a reality check on where we are as an industry globally and my big takeaway after 126, 27 episodes now is that we are genuinely in the midst of revolution, as you've said many times, roger, and like the Chinese with their Bu Qing Chu, they're unclear, not clear. I feel like people are still searching and finding and trying to figure it out. Rare do I have a guest on that says I nailed it, I know exactly what's next and I can see the future. A lot of it is tentative and searching and that, in a way, is reassuring to me. Okay, yeah, we're all having a narrative, but that narrative may shift because we're genuinely at the frontier of things. We're exploring, we're uncovering, we're discovering and that's helpful to me professionally to stay grounded and say where are we? To bring it back to a specific example, let's take autonomous vehicles.
Speaker 2:One of my guests, riley Brennan on the podcast great guy out of San Francisco runs a VC called Trucks. He said look, how quickly do things change. Summer last year, cruise, with us at the top of its game, got special rights from the state of California. Go and valuation was like is it 100 billion? 100 billion? What's the valuation? And then, only a few months later, everything came crashing down. So what's the takeaway there? Nobody has it figured out. Everyone's still chipping away, and so that's, I think, enormously beneficial to me and to my clients who are investors and automation suppliers. When I talk to them, I say, hey, it is, don't spend too much time looking left and right. Just keep focusing on innovating for your own business, because nobody out there really has the secrets. You're not missing a memo that would put you on the right track.
Speaker 3:Yeah. And the other thing I genuinely like how you do it is when you do you have a nice intro and you have a nice outro, and when you have that outro you kindly summarize the salient points out of it for people, which of course most of us. We think we've done a bit of that ourselves anyway, but then it nicely just reorientates you at that moment. So I really do enjoy the way that you shape it and deliver it. But look, one of the questions I asked, I mentioned Bill Russo. You do know Bill, don't you? I'm sure you do, of course. Yeah, bill, yeah, 100%. Yeah, that didn't take you for granted. But and it sort of works around some of what we've talked about Do we need to collaborate more with China than just have this confrontation? And I don't just mean that that's what tariffs are, because I don't think they are necessarily. I think they're part of business and you know they are tricky and clumsy.
Speaker 3:People can argue, but given that the advancement of mankind now is predicated on tackling climate change and that the twin imperatives of electric vehicles, you could argue, are both tackling air quality which was a big one in China back in the day, still is and around the world and indeed reducing CO2. How do we avoid almost like seeing climate change? All these challenges fall in the gap between what Asia's trying to do and what the rest of the world is trying to do, and I suppose we'll especially keep talking about China. But how do we avoid the law of what's it called unintended consequences, that in this kind of geopolitical you know, tectonic plate shift, this epoch moment for the auto industry, that we don't lose a lot of stuff down the back of the armchair that we really can't afford to lose?
Speaker 2:I love your imagery of the tectonic plates because it really speaks to the realities between the United States and the West and China. In a way, there's an asymmetry going on here, roger, where in developed West we want oh God, we have a great thing going on here and we want to preserve this, and climate is number one for us, for many people. Let's just don't destroy the planet. Asia, china included, is still building their economies and their incomes and they say, yes, climate's important to us, but so is income and growth and GDP. And oh, by the way, communist Party, I need to keep growing the economy to stay in power. So there's an asymmetry there. The priorities are not the same. They're not the same, let's just be honest. So nobody's fault, no judgment, it's just different. Different. So that's one.
Speaker 2:Second thing is, I feel as though the West, in particular United States, did make a mistake of putting virtually all of their eggs in the China basket in the 1990s and 2000,. Not China's fault, but sort of got lazy intellectually and said well, everyone else is going into China, we should go in there too. And to the neglect of the rest of Asia and I see a wave forward in the next 10 to 20 years, where the West re-orients itself and begins to distribute its investments in places not called China. We're already seeing that, with Apple and others going into Vietnam, into India. Keep in mind Southeast Asia 600 million people, india, more than a billion people, with investment and infrastructure, those economies will be the ones that blossom in the next 10 years, I believe. And even the Chinese companies are racing into Southeast Asia.
Speaker 2:So I see a sort of a reset. Let's not just have it bipolar US China zero sum game as the West. Let's engage more of Asia and spread out our bets so we're not so heavily dependent on China. We got ourselves into this position of becoming overly dependent on China. Then we would blame China. Oh my God, you guys are locked up, all of our supply chains. Well, who did this?
Speaker 3:Yeah, yeah, yeah, and indeed you could argue, wall Street exported a lot of the jobs out of America, absolutely For the bottom line of shareholders. They didn't come and steal a bunch of jobs in the middle of the night. That's the irony. Your point here is we've done this to ourselves. But you also mentioned there are a few big things around numbers, population.
Speaker 3:As I understand it now, for the first time in a long while, china is not the most populous nation on Earth, it's India, and we see the growth of, I think, the top 30 countries in the world with population growth, because lots of them are in decline, of course, birth rate, et cetera. Of the top 30 countries, 26 of them, or 25 of them, are in Africa. So when we look at, if you like, the structural shift in the human population, the demographics, the aging population in the Western countries like Japan and so on and so forth, I guess that sits underneath, as an undercurrent, around a lot of this policy shift and a lot of this ebb and flow of what technology you're doing, why you're doing it, how you're trying to develop your economy. I guess that sits underneath it all as well. Would you agree? Or am I imagining that and making it up in my mind.
Speaker 2:Absolutely. From one perspective, china has very grave demographic issues. They're going to get old in a hurry, many people say, before they get rich. So that's a little bit panicky for the leadership in China. How do we fight this gravity called demographic change?
Speaker 2:Two, china's economy has slowed dramatically and at the same time let's be honest Western companies are less welcome than they were before, whether it's the auto industry or other industries. There's definitely a nationalistic thread there, a sentiment More and more Chinese customers are buying Chinese. So these are all incentives for our inventive and forward-looking Western companies to say hey, that was a great run in China. Let's look at the next. Let's look at the frontier, and to me the frontier would be places like Indonesia fourth largest population in the world Vietnam, india, thailand and then, as you mentioned, africa. So let's use our imagination to say that was a phenomenal run in China. It's probably flattening. It'll still be a very important market, but in terms of growth opportunities, the West needs to probably look elsewhere, in addition to the all-important thing about national security and supply chains. So I don't think that we can anticipate that the US and China are going to kiss and make up anytime soon.
Speaker 2:I think the relationship is like is what do they say? Like? What's the old Bob Seeger song? I know you love music. There's that song called what's the name. You'll know the title, but I used her, she used me. Neither one cared. We were getting our share. Night moves, yeah. Sometimes, when I step back and reflect on the US-China commercial relationship in the last 25 years, they were getting theirs and we were getting ours. It was good for a while. Maybe it's time to move to the next chapter.
Speaker 3:Well, moving to the next chapter, concluding this conversation, which I've loved and I hope our listeners love too. You mentioned my love of music. Well, I think just listen to the lyrics, read the lyrics of the times. They are changing. Bob Dylan, I think.
Speaker 3:One of the lines in it is today, the person today that's last, will tomorrow be first. There's that switch around, switch around kind of thing, which is that that's what life is. Nothing good or nothing bad lasts forever. We are all in a constant state of flux. If you like, and I think, if you see the world in that way, your life in that way, your own life, don't take anything for granted. Don't give up. Always be positive and reflective and be the young Michael Dynan and strike forth and go out to those places and see what happens. So look, michael. We could talk about so many other things, but I think we've had an hour or so, maybe just under. But thank you so much for your invaluable time. I'm 100% positive. The listener now really knows you and if they haven't already, if you haven't already and you're listening to this, please listen to Driving With Dunn. You'll be enriched with it. There is so much there. Go back into the library as well as just picking up the regular ones when they come out.
Speaker 2:So any final thoughts, mike, before we go, I'd like to have a prediction from you.
Speaker 3:Oh OK. My prediction is that the electric vehicle revolution isn't the big one. The big one is going to be autonomous vehicles. That ownership of vehicles will be a thing of the past sometime over the next decade or two, maybe even sooner than we think. And I say that because the most inefficient part of a motor car isn't anything to do with the mechanics, electronics or anything else, it's the utilization of this incredible asset. So my prediction is mass adoption of electric vehicles will never happen, because it doesn't need to, because something else is coming.
Speaker 2:Phenomenal? Ok, I love that. Can I ask for a second prediction?
Speaker 3:Oh, that's when I won one from you. Come on.
Speaker 2:Presidential. Who's going to be the next US president? I love to ask people who aren't American.
Speaker 3:OK, well, look from what we see over here, unless he has to go to prison or anything like that, it's going to be Donald Trump, without a shadow of a doubt.
Speaker 3:And again, without lifting the lid, you know, and the whole can of worms of all of that, much of what Donald Trump. No, let me rephrase that Some of what Donald Trump said and did has been proven right and I think it's far too simplistic to just say, oh, he's not very, you know he's clumsy, he's like he's, you know he's like a bull in a china shop, all these sort of things. Personally speaking, I don't like him, but but he's not the idiot Some people portray him to be. He absolutely is not, and I think people who just see the world too much like that, you know they just everything about him is wrong. That's just foolish, you know. Maybe most of them is wrong, but some of what he's done and said, and who he is and the people that he surrounds him with his party, they're right on many things, you know. So that's my observation from from over here.
Speaker 2:From afar. Yeah, I totally agree. For example, just a couple of examples one on China. He was the first president to say hang on, wait a second. What is the nature of our relationship with China? Who's benefiting and who's losing? No, we don't want to do this anymore. And I'm going to put terrorists on and everybody goes oh, terrorists are terrible. No one loves terror. But he was sending a message Enough is enough, we don't want to do this anymore. And had he not put the terrorists on Chinese cars at that time? Which was what's? What's the terror from Chinese? There's no Chinese cars coming in anyway. No, no, it was very, very prescient. Yeah, yeah, full site. Yeah, the risks, he saw the risks. So I agree with you.
Speaker 2:In many ways his personality and his personal behavior is way out of bounds. But on the other hand, you know China. On China he's been very good. And on other things, like the border that I live in California here it's almost ridiculous the border situation where just thousands of people coming across the border, every what is going on, and then they're being shipped from Texas up to Chicago and Boston. It's a circus. What nation would have such poor as?
Speaker 3:borders. Yeah, that's another kind of worms. It really is probably best not go there on this one. No, look, mike. Thanks again. I look forward to the next driving with done podcast. Just listen to the one about the lovely car the fellow up in Sweden you were talking to up in Stockholm. So so, yeah, that's great. And thanks again, and I hope to meet up with you soon, sometime, maybe, maybe in China, maybe in the States, wherever but for now, michael Dunn, driving with done ledge, you're a legend, my friend. Thank you and good evening.
Speaker 2:Roger, thank you so much for having me. Let's do this again soon.
Speaker 1:Thanks for listening to the show and make sure you follow Roger on LinkedIn, where you'll discover almost all there is to know about the spectacular electric vehicle revolution.