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When you're running a small business, sometimes there are no words. But if you're looking to protect your small business, then there are definitely words that can help. Like a good neighbor, State Farm is there. And just like that, a State Farm agent can be there to help you choose the coverage that fits your needs. Whether your small business is growing or brand new, your State Farm agent is there to help. On the phone or in person. Like a good neighbor, State Farm is there.
Earlier this year, Patrick and I went down to the auto show in New York City. We do this every year. But this year, there was something different. From where it started to where it is now, I'm seeing electric everywhere. I'm seeing EVs everywhere. Ford's stall was all about its EVs, complete with an educational video. And as Avia starts her Saturday morning, she knows exactly how much charge her Mustang Mach-E has. And a test track.
Whole families were spilling out of the Mach-E after taking a spin. They looked sort of dazed, like they were getting off a roller coaster ride. Ford, GM, Hyundai, Volkswagen, all were showing their latest, coolest, most exciting EVs. I used to come just to look at the cars. Now I only look at electric cars. That's all.
Ten years ago, it did not look like this. The hype and sizzle around EVs was practically non-existent. But more than that, EV sales made up a tiny percentage of the market, so there would have been almost nothing to show. It's definitely a big change. So the car companies now? Clearly all in on EVs. There were other booths too. Energy utilities, charging companies, and even the state of New York had a booth, all focused on the sky-high possibilities of electric. ♪
But the consumers? They brought us back down to earth. Where I am is I'm still more comfortable with a hybrid.
We're not much of EV people. Oh yeah, strictly gas. Sorry about that everybody. The big questions I think would be how do you actually, you know, fit this into your daily life, right? Charging, charging at home, going to charging stations. They're nice, but are they economical? And then what kind of increased costs are we really looking at, right? So electric costs, right? Bills increasing. What types of bills would increase with that?
So, yeah, still lots of questions, concerns. And this is pretty representative of Americans in general. Turns out the electric future in the U.S. is still very much that, the future. But if you went to another car show that happened around the same time this year, it was a different story. The majority of cars sold in Shanghai are now electric, and that's reflected in the city's motor show. Local firms now lead in key segments.
They have been helped by the switch to electric vehicles, where Chinese firms now dominate. In the world's largest market for electric vehicles, this is a glimpse at the future. In China, nearly 30% of all car sales are EVs. In the U.S., it's just 7%. Another way to say that, China is kicking the U.S.'s ass when it comes to EV adoption, a crucial step in fighting climate change. How did this happen?
One big reason is that China had a hand from a company with cutting edge EV technology, a company that shared that tech with Chinese carmakers and suppliers, a company that set the gold standard for how good EVs could be and whipped up demand for them. Yeah, we're talking about Tesla. Five years ago, China needed Tesla to launch its own EV revolution and Tesla needed China to make money.
The company still needs that. China is the largest market for EV sales in the world. But the country has essentially outgrown Tesla. Homegrown automakers have a slew of great models that compete with Tesla's, which means Chinese consumers have a lot of great choices. American EV buyers, not so much, despite the fact that Tesla was born in the US and existed here for years longer. So how did China use Tesla to spark an EV revolution? And how did the US squander its advantage?
This is Land of the Giants. If you want to drive an EV, Shanghai is a great place to be these days. We had to get an EV. And that was my first ever EV. So that was a huge decision. Just ask James Schilling. He's from the United Kingdom but has lived in China for a few years. He never felt the need to own a car until COVID lockdowns hit.
At the time, we were experiencing China zero tolerance, and we had no way of getting out of the country. So we started to look at how could we still enjoy our lives and do things. A car meant a slice of freedom for him and his wife, and the government gave them some obvious reasons to break up with gasoline. In order to buy an internal combustion engine vehicle in Shanghai, you need to purchase the registration plate.
And they are very expensive. They're about $10,000 just for the plate. Whereas the EV vehicles, they are incentivized by the government and they are free. Free registration? Check. The government also exempts EV purchases from sales tax. And there are other perks too. Shanghai has about 100,000 public charging stations. By comparison, there are about half as many in the entire United States. It
It was a no-brainer for us. Schilling had a ton of options, too. At first, he assumed he'd choose a familiar brand, like a Tesla or maybe a Mercedes. And then we started to open our eyes to Chinese EBs. He ended up buying a NIO EC6, a stylish crossover coupe. It's in the upper tier of car brands like BMW or Audi, but NIO does luxury a bit differently. There's a concierge service that comes to you for a lot of maintenance needs. And then NIO offers something truly next level.
So battery swapping is probably their unique selling point. It was one of the things that sold us. That's right. Battery swapping. Here's how it works. Essentially, you arrive at a battery swapping station. Okay, I press a few buttons on my operating system and then suddenly it will reverse into the battery swapping station and then it will start swapping the battery with no delay.
human other than yourself. In case you didn't get that, instead of waiting hours for a charge, you can just swap out the entire battery. Full power. Later, suckers. And this is the perfect symbol for where China's EV brands are these days, offering great cars with science fiction level convenience to buyers today. When we purchased our NIO...
I was really worried that the quality would not be up to par. I was in the showroom lying down, checking under the vehicle to see what problems I could find. I was running my hand across the entire body and I just couldn't find anything. I compared it against the Mercedes and I just felt like there's no difference.
But this electric paradise didn't really exist a few years ago. Chinese brands were struggling to make cars anyone cared about or trusted. EV sales were growing, but nowhere near where they are today. And then Tesla arrived.
That cheering you hear is for Elon Musk. He's dancing on stage at the opening of Tesla's Chinese factory, Giga Shanghai, in 2020. His dance moves are a little awkward, but if you'd pulled off what Tesla just had, you'd be dancing too. Really want to thank the government officials that have been really helpful in making this happen. You guys achieved an incredible outcome.
In 2018, the company became the first ever foreign carmaker to be invited to set up a factory in China without having to answer to a Chinese partner. Carmakers with long-standing relationships with China have been thirsting over an opportunity like this for years. Here we are with this kick-ass factory, and it looks great. And if we can get this done, you know, what else can we do? It's going to be a very exciting future. So...
For decades, China required foreign carmakers to partner with local or state-owned companies. These joint ventures were intended to help China develop its domestic auto industry. But in 2018, Shanghai, with approval from national authorities, loosened up the usual rules for the first time. I think the Shanghai government believed if it allowed Tesla to make electric cars in China, there would be a few problems.
This is Crystal Chang, a lecturer at UC Berkeley. One is that it would bring down the cost of Tesla EVs in China. China wanted cheaper but higher quality EVs to sell to consumers. If the cars were made in the country, the price would presumably drop. Second, they hope that bringing in this foreign carmaker, even though it was going to be a wholly foreign-owned subsidiary, that there would be nonetheless a technological diffusion.
Right? That people working in those factories, the supply chain would become more sophisticated around the Tesla factory. That there would be some learning for the entire industry in China. And the third reason Chiang believes the Shanghai government gave Tesla unprecedented freedom? This might surprise a lot of people who think China has a state-run economy, is that they knew it would prompt competition.
Right. That the Chinese carmakers would now have to compete with the domestically produced Tesla and that that would be an extra incentive to make better EVs, to bring down the cost, etc.
Shanghai officials were sure they'd be getting a whole slew of benefits out of the Tesla agreement. And Tesla had evidence even early on that it was getting a good deal too. The government gave them a prime piece of land and had a lot of Chinese banks give them below market rates on loans. A lot of loans, like nearly $2 billion worth of loans to build this factory.
So there's a lot of preferential treatment. Despite this, there was concern among Tesla investors when Musk first announced plans to build a factory in Shanghai. Many were skeptical about the ship to China, the inherent risks. And at the time, it was viewed that Musk in particular was balancing too many things from a production perspective. This is Dan Ives, an analyst at Wedbush Securities and a long-term Tesla investor.
Back then, Tesla was not the runaway success it is today. It was still hemorrhaging money, struggling to make and deliver cars, and investors were losing patience. Moving across the world seemed like an insane bet to some, but not everyone. We've always viewed moving to China, doubling down, making that the production hub as probably the most strategic poker move that Musk has ever made.
I mean, I viewed it no different than Patriot drafting Brady, Yankees getting Jeter in terms of what they did here with China. Here's what he means by that. Early Tesla leapt forward every time it opened or retooled the new facility. But when Giga Shanghai kicked into high gear in 2020, it took things to a whole new level. It unlocked something Tesla never had before, massive volume. Giga Shanghai was huge, about twice as big as Fremont.
which meant Tesla could make a lot more cars and sell them to a lot more buyers all around the world. But getting close to the Chinese consumer was the most lucrative part of the deal. Once Giga Shanghai was delivering vehicles, Tesla sales shot up. Within one year, sales had nearly doubled. And that unlocked something huge for the company: yearly profits. The hearts and lungs of the Tesla growth story are in China. Because of the scale and scope of Giga Shanghai,
Because of the logistics. Every car Tesla built in Shanghai made a significantly higher profit than one made in Fremont. We estimate it's 25 to 30 percent more profitable for every car they sell in China. So yeah, China's been really good for Tesla. But how did the deal shake out for China?
The Chinese government had already been offering a lot of incentives. There's a huge subsidy to consumers of electric cars that existed prior to Tesla coming. But it didn't haven't really taken off in a big way. Then Tesla showed up with cars that people actually wanted to buy. You know, the year on year growth in the last four years has really improved.
and astonishing. The growth wasn't all Tesla. Even GM, partnered with a Chinese company, is now selling popular EVs in the country. But Chang and others point to the fact that, just as the Chinese government had hoped, Tesla kick-started competition there. It's called the catfish effect, when a large fish forces its smaller competitors to get stronger in order to keep up, which they have. And that has been world-changing.
China has now become the world's largest exporter of cars for the very first time. It has surpassed Japan as the world's largest car exporter, and a significant number of those are EVs. The U.S.? Not even in the top three. America has fallen behind in a lot of ways, despite being the birthplace of the company that helped launch China's EV industry to success. So what happened?
We should be under no illusion, for example, about why China has been moving so quickly and aggressively into the EV space. They want to capture the EV market. They want to be a step ahead. In some ways, they've gained an advantage by sprinting into it. But I believe at the end of the day, America is poised to win that competition. But can we actually win that competition? That's after the break.
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On September 28th, the Global Citizen Festival will gather thousands of people who took action to end extreme poverty. Watch Post Malone, Doja Cat, Lisa, Jelly Roll, and Raul Alejandro as they take the stage with world leaders and activists to defeat poverty, defend the planet, and demand equity. Download the Global Citizen app to watch live. Learn more at globalcitizen.org.com.
And let me tell you, that EV revolution is happening with or without us. It's definitely happening around the world. The question is, will it be led by, I don't know, China? Or will it be led by the United States? That's why we have to make these investments. U.S. Secretary of Transportation Pete Buttigieg has made it clear that he believes the future of cars is electric. But the U.S. spun its wheels on EVs for years. Not his fault, of course. But now it's on him and his boss, the president, to figure out how to catch up.
So I called him up and I put this to him first. Lots of countries are lapping the U.S. on EV adoption. 80% of new cars sold in Norway are EVs. Germany and France, also beating us. China, well, you heard about all that. So I asked Secretary Buttigieg this question. Does this feel a little bit embarrassing?
Well, we certainly want to be in the lead on anything we do as a country, and EV adoption shouldn't be an exception. On the other hand, it's been extraordinary to see the pace of EV adoption in the U.S. I believe the share of EV sales has tripled in a short amount of time. We're
Of course, taking a different approach than Norway, we're certainly taking a different approach than China, and I think that's a good thing. But we're working hard to make sure that we have not just the incentive and the affordability that's going to be needed for more and more Americans to choose to go electric, but also the infrastructure behind it. And that's been our focus. There's no question in...
my mind that the automotive sector as a whole around the world in the U.S. is going electric. The question is how to make sure that it happens at the pace that it needs to happen. And that won't take place unless we support it in the right way, which is why we've had such a focus in terms of our policies and in terms of our funding as an administration to make that a reality. Buttigieg acknowledges, though, that the U.S. is behind.
Well, you know, I think every country has a somewhat different approach, but it's really revealing to see that there's also a sense of urgency here, not just in terms of doing the right thing for the environment, but also as a matter of economic security. I think we should be under no illusion, for example, about why China has been moving so quickly and aggressively into the EV space. They want to capture the EV market. They want to be a step ahead.
In some ways, they've gained an advantage by sprinting into it. But I believe at the end of the day, America is poised to win that competition. Can you tell me what makes you think we are poised to win this race? Well, first of all, this is the country that delivered the automotive revolution in the first place. Yeah.
That's no guarantee of future success, but it means that we have something in our bones and maybe more relevantly in terms of our skills when it comes to the workforce and the business community that can really drive this. Whether we're talking about the automotive sector in general or whether we're talking about players like Tesla, most importantly, Tesla in terms of the early 60s.
stages of making EVs mainstream and demonstrating that EVs did not necessarily involve a trade-off with performance, but could actually be some of the best performing cars on the road. Secretary Buttigieg is right. The U.S. is the birthplace of Tesla. But a whole other country used the company to rocket to EV dominance. China. You know, the U.S.'s greatest global rival? What happened here?
Andrew Hawkins is going to help us out with that question and a few more about the future of EVs in the US and the future of Tesla. Hawkins is transportation editor at The Verge. I started with the big question: How did we lose the advantage of having Tesla first?
So I think a couple of things. First of all, Tesla wasn't really very successful for the vast majority of its history until the past few years. From the policymakers' perspective, they weren't sure whether or not it was going to become the giant that it eventually did. And I think that that's sort of reflected in how the government kind of reacted to the rise of Tesla.
During the Obama years, they had some, you know, policies towards incentivizing electric vehicle purchases. There are few breakthroughs as promising for increasing fuel efficiency and reducing our dependence on oil as electric vehicles. We've created incentives for Americans who want them to buy them. But nothing really around providing meaningful assistance towards the supply chain around electric vehicles and batteries in particular. And there was obviously emission standards as well.
than Trump was elected, and he relaxed a lot of those standards. We have ended the war on American energy, and we have ended the war on beautiful, clean coal. And seemed to imply that they were also going to get rid of electric vehicle tax credits as well. So that lack of consistency, I think,
was really kind of influential in the auto industry's broader kind of reluctance to get into the business of selling electric vehicles. And I think that that contrasts with China, which was a very consistent national policy towards incentivizing the electric vehicle sector and helping not only its domestic homegrown companies to grow, but also making sure that the companies that were coming in, the foreign companies that were coming in like Tesla,
or doing so in a way that would benefit their own sector. What are some of the reasons we can't do what China has already done so quickly? So China is a one-party country, the Communist Party. We are a two-party system, very different in terms of the structure of its government, authoritarian regime, can impose a lot of directives on its industrial sector, on its commercial sectors.
China is cracking down on some of its largest companies, with regulatory stings wiping hundreds of billions of dollars off their market value. And in the U.S., we have a very politically polarized environment. And I think you're seeing electric vehicles in particular becoming a very polarizing subject as well. Joe Biden is waging war on the U.S. auto industry with a series of crippling mandates designed to force Americans into expensive electric cars.
There's just not a bipartisan consensus in a lot of ways. So it's clearly a thorny subject, this whole area, when we look at policy on a state, federal level. But what really is the upshot of these weak policies and how has it impacted the auto industry?
I think it's given car companies, and especially the gas-powered side of their businesses, a much longer lease on life than they probably deserved to have. But as it stands now, these companies are spending a lot of money, and they are sort of saying the right things, I think, publicly about how they intend to phase out gas-powered vehicles and shift to electric. We want a lead in EVs, full stop. We're really starting to scale EVs. We're number two in the U.S.,
But that is being paid for almost exclusively through the revenues that they get from their gas-powered vehicles, since those are still the dominant type of vehicle that people buy. Clearly, one deterrent to EV sales is the cost of the average EV is still far more than what the average American spends on a new car. So
So how much of a deterrent is cost to the adoption rates? Yeah, I think the cost of electric vehicles is a huge deterrent to adoption. Most of the electric vehicles that we've seen introduced thus far are what I would say are probably in the premium or luxury segment as compared to China, which has prioritized lower cost, more affordable, more mass market vehicles from the very beginning.
Part of the problem? The battery is the most expensive part of an EV. The U.S. never invested in a way to make batteries here at home. Mines, factories, things like that. Guess which country did? China. But the U.S. is now attempting to build out that battery supply chain. And a lot of car companies are now talking about making cheaper EVs. Would it have helped to have more competition sooner? Why didn't that happen?
Yeah, I think it definitely would have helped to have a lot more competition sooner. And I think it would have probably made it more difficult for Tesla in particular to be so lax about its prices and its vehicle type offerings. Elon Musk has been talking about a $25,000 electric vehicle for a very long time. This has always been our dream from the beginning of the company. I even like wrote a blog piece about it. And has yet to give us any indication of when that's going to be coming around.
Secretary Buttigieg says we can actually win this race. What do you think? Are there signs we're getting on track? I think that there are some signs that we are going to be at least competitive in this race.
Thousands of jobs and a new manufacturing plant is coming to Kentucky, marking the second largest investment ever made in the state. More jobs are on the way to South Carolina thanks to an investment in electric batteries. So there's a new partnership bringing lithium batteries right to our backyards.
And I think that he's right that you can't count the U.S. auto industry out necessarily. It's interesting because in a lot of ways, when you hear politicians talk about the auto industry, it's almost as if they're talking about the U.S. economy at large, that the auto industry is somewhat of a stand-in for the U.S. economy because it is so important now.
in terms of jobs and revenue and sort of what it means for our sort of national spirit and like what we think of ourselves. If there's one thing that you can take to the bank when talking about Detroit is that Detroit always comes back. Osama bin Laden is dead and General Motors is alive.
The U.S. has more than nostalgia and stump speeches to fuel the future. We've got a meaty piece of legislation passed just last year. It's called the Inflation Reduction Act. All kinds of stuff in this thing, including a bunch of provisions that promote EVs, like incentives for companies to use American-sourced batteries and to build EVs here in the U.S. Signs point to all this making a positive impact so far. What does a strong EV market in the United States...
mean for Tesla? I think it means a lot more competition. And hopefully with a sort of more diverse market share, Tesla would need to evolve and change. And I think it'd be really interesting to see how that happens beyond just price cuts. We haven't really seen that rise in competition and the sort of the diversification in the market share have much effect on the company's strategies and the way that it's planning for its future.
I think it'll be interesting to see how a broader, more diverse electric vehicle market or even just an EV-only auto sector way further out into the future. What would Tesla look like in that kind of future and that kind of market is kind of interesting to think about. Here's the thing. We already kind of know what that would look like because it's happening in China. So Tesla's under fierce competition there.
Crystal Chang from Berkeley again. They don't sell well outside of the big cities. They're still much more expensive than the Chinese ones. So you don't see Teslas in second, third tier cities or in rural areas, right? Remember, James Schilling passed over a Tesla for a NIO. Tesla vehicles are looking dated now.
Chinese consumers have tons of options — high-end, low-end, in between. It's an arms race in China. Investor Dan Ives. And I think domestic competition continues to probably be the biggest worry for investors. Tesla's market share has already fallen by about a third in China. A bunch of tax breaks are about to expire as well. All of this is expected to eat into Tesla's profits.
But beyond the bottom line, these shifts say something bigger about Tesla's future. The company's Chinese adventure has been so successful that the country doesn't really need it anymore. So Tesla will just have to compete. To stay relevant, to keep making money, it will have to make cars people want to buy. That's the case in China. And more competition would be great for the U.S. as well, where Tesla has dominated the market, such as it is, for years. Where Tesla essentially created the market.
Tesla's shockwave started with a ripple. A couple of guys who wanted to make a fancy sports car that didn't kill the climate. But the company ended up being so much more than that. It pushed an entire industry to do things differently. From tech to batteries to performance to resetting what a car brand could even be. Tesla shifted the way the world thought about electric cars. Now, after catalyzing so much change, the company itself is at a turning point. The competition has arrived around the world.
and increasingly here at home. So maybe some tougher days ahead for Tesla, but better days too. For us. Because more choice in EVs means better EVs to choose from. Good news for the climate too. While EVs can't solve our climate emergency on their own, they can certainly help. A lot. And making the world a better place. Isn't that what Elon Musk and Tesla have been promising all along?
This episode included clips from Deutsche Welle, CNBC, The Wall Street Journal, MSNBC, C-SPAN, CNN, Yahoo, Reuters, Wave News, WSAZ, and WCNC. Land of the Giants, the Tesla shockwave is a Vox Media Podcast Network production in partnership with our colleagues at The Verge. Special thanks to Jillian Robbins, Art Chung, Brandon Santos, and Darian Mucha.
This episode was produced by Charlotte Silver, who is also our Seasons producer. Zach Mack is our showrunner and senior producer. Jolie Myers is our editor. Claire Cronin is our fact checker. Brendan McFarlane mixed and scored this episode. Andrew Hawkins is transportation editor at The Verge. Nishat Kurwa is our executive producer. I'm Tamara Warren. And I'm Patrick George. Thanks for listening to our season. If you liked this episode, give us a follow and tell a friend.
