Sam Abuelsamid  0:00  
Hello, I'm Sam Abuelsamid and welcome back to the guidehouse transportation insights Podcast. I'm a Principal Analyst here with guidehouse and I'm joined today by my colleagues Joe Jannotta, Ryan Citron and Sagie Evbanata. And we're going to talk about some of the things that have been going on in the transportation industry over the last couple of weeks. Why don't we start this week with Sagie?

Sagie Evbenata  0:22  
Good afternoon, so apologies for that. So I thought I talked to talk today about some some very local news here. So London has recently announced plans to significantly expand its low emission zone. So it'll be interesting topic, and there'll be obviously interesting implications from that. So the Mayor of London Sadiq Khan, so he, this past few days has announced a plan to enlarge the, what we call the Ulez, which is the Ultra Low Emission zone in the city. The existing low emission zone is already you know, the world's largest and there's enforcement for 24 hours a day and covers the entire of the inner London area, which is around 380 square kilometers, which is which is roughly 150 square miles and and houses a population of 4 million residents. However, the mayor was quoted various concerns already, he still thinks there's too many too many premature deaths and health complications were due to due to the poor air quality in a city. And I think many parts of the city already falling foul of it the World Health Organization's guidelines for nitrous oxides and particulates already. So they also quoted the cost to the economy around around 5.5 point 1 billion pounds, specifically for London, related to the health niche and congestion impacts of congestion. And I guess some background info. Yeah, traffic and congestion levels in the city already to already back at pre pandemic levels. So the plan is to expand the the Ultra Low Emission zone from from the inner London area to the entirety of Greater London, which is about four times larger and covers a population of probably nine, nine to 10 million people. And this is already in parallel with London's congestion charging zone. So at the moment that the US the low emission zone charges around 12 pounds 50. I think that's probably about $18, something like that. And in addition to that, there's the congestion charging zone, which is around 15 pounds a day, so around $20 a day. And for the congestion charging zone, only zero emission vehicles are exempt. Whereas for the low emission zone these rules need to meet Euro six emission standards and petrels. I think I believe 04. So, so yeah, so this this is quite rapid that it should be implemented next year. So it's going into a consultation phase. And the impacts are likely to further shift people away from the more polluting polluting older vehicles to either new newer, much newer vehicles, and in particular EVs and zero emission vehicles. Also possibly to public transport, which to be fair is already fairly well developed in the city, but also the bike market. The micro mobility, micro mobility will also benefit understandably and probably more as a is probably has more implications outside of the city because London tends to leave policies for for other UK cities. And I guess restrictions to vehicles for this just for the city alone impacts the wide yet the wider commuter belts and furthermore, European other major European cities are likely to follow suit. But this is like an intermediate step in terms of London's plan to manage congestion and emissions in the city. So the mayor has also mentioned that these are just stepping stones before a smart road usage scheme. road road uses charging scheme is implemented in the city so obviously it will take a few years to develop and implement but we can see that coming in the forthcoming future. And related to this, I think that the impacts on electric vehicle sales in the country so I think already know that the UK has recorded your record market share for EVs. So so for the month just gone February

battery electric vehicles reached 17.7% for passenger vehicles, and I think in total very much closer 26% for all plugin vehicles. And this is likely actually to rise continue strongly throughout this year. So some of the factors locally are the Tesla Model y has just been launched in the UK, right at the end of February. And that's already like the number four best selling vehicle in the in the UK. Furthermore, Hyundai's and Kias their new EVs are starting to increase volumes, as well as the new German OEMs offerings. And we're likely to see more of them being launched over the coming months. So, so yes, I thought it was an interesting impact for the UK and European market potentially.

Sam Abuelsamid  6:18  
Glad. Right. Okay.

Ryan Citron  6:20  
I was just going to ask. So this is an expansion of policies, it sounds like that are mostly already in play just in a smaller area. Yeah. Are there any? Are you aware of any sort of studies that have looked at the impact of the current policies? Like, is there any is there any data out there that kind of says, you know, the congestion charge or low emission zone has resulted in a, you know, 8%, whatever decrease in vehicle purchases or vehicle miles traveled and cars? And is there any sort of data on how it's maybe impacted other modes with public transit and Micromobility and EVS and stuff like that? Are you aware of any sort of studies that have that have analyzed that the impact of these policies? Yeah,

Sagie Evbenata  7:05  
good question. I think that there must be some studies on the the change in vehicle usage in terms of vehicle miles traveled, I think some of the data I've seen has been related to the impact on reduce on reduced emissions and improve air quality in within the city. So that's already been measured. I think also, it was mentioned has been mentioned that in the wider London area, so this is in parts of the city, which are not currently within the low emission zone. There's already at 2% compliance with a low emission standards, implying that those those people who are living in may not be living in areas which are controlled, or still change their vehicles to to allow them to drive into the inner parts of a city.

Ryan Citron  8:00  
Right, right. Well, so between congestion pricing, low emission zones, gas prices skyrocketing. And then are there Evie purchase incentives in the UK as well?

Sagie Evbenata  8:14  
There are the existing incentives. I'm trying to remember what the cutoff point is, I believe it's around. It could be around 40 to 45,000 pounds. Purchase Price. Above that. EVS don't get any additional incentive. However, it's the general trend is these purchase incentives for EVs have started to plateau and starts to tail off in the UK in particular. But, but yeah, but but but still, I still think they're very strong factors which will be driving people away from their especially their older ice vehicles.

Ryan Citron  8:57  
Yeah, it's a quick Google search looks like there's a maximum of 3000 pounds off for cost and electric car, as well as incentives for electric motorcycles like your bands, things like that as well. So yeah, lots of reasons to switch to an Eevee in the UK at this point.

Sagie Evbenata  9:14  
Yeah, man. And yeah, I think the supply will also increase although obviously impacted by the by Chip shortages, but I still think yeah, that the overwhelming movement will be towards EVs, but also bikes, public transport and, and the city general is trying to encourage people to have healthier lifestyles, so they're trying to encourage more walking and jogging and cycling.

Sam Abuelsamid  9:46  
So, sadly, I know the congestion zone was established, originally, some years before they started doing the low emission zones, does it if I'm not mistaken, the The original low emission zone was the same region as the congestion zone. Is that correct?

Sagie Evbenata  10:06  
Yes. So in London, we have what's called a low emission zone, which applies to like trucks, heavy duty trucks. And that covers the entire, the entire city boundary. But the Ultra Low Emission zone, which applies to passenger vehicles and vans, yeah, that that initially coincided with a congestion zone, congestion charging zone, which is just very much the central part of the city. So it's just the business and entertainment and shopping districts mainly,

Sam Abuelsamid  10:37  
is that is that ultra low emission zone, what's being part of what's being expanded now beyond the congestion zone, in addition to the low emission zone, so the two, the two emission zones are being both expanded.

Sagie Evbenata  10:50  
So the the one that applies to trucks, at the moment is just staying as it is the Ultra Low Emission zone for passenger vehicles and vans. So initially, that was the same as the congestion charging zone. And then last year, he got expanded to the whole of inner London. And now, they've now plan to expand that to the whole, the whole on the potentially the same as the the low emission zone, which applies to trucks and heavy duty. So how

Sam Abuelsamid  11:19  
is this enforced? And how does the 100 drivers make the payments? Obviously, you're not gonna fill the city with with toll booths or drivers required to carry transponders when the vehicle so when they go within a certain within a certain zone, it automatically charges them.

Sagie Evbenata  11:39  
No, not yes. So at the moment enforced by by ANPR cameras, so those cameras, which read the license plates, and checks whether you paid on their on their database, so if you don't pay you very quickly get a almost the incidents, you get your get a fine of about 120 pounds, I believe. And it's quite a comprehensive ring of cameras. And many people get accidentally caught if they they make a wrong turning.

Sam Abuelsamid  12:08  
So how how do they differentiate? I guess it would be, you know, to differentiate between vehicles that qualify as ultra low emissions, that would be based on the registration. So when I read your license plate, it knows what vehicle that that registration is tied to and charge accordingly. Okay, yes.

Sagie Evbenata  12:26  
So yeah, so they're aware of the of the emissions emissions standard that your vehicle meets.

Sam Abuelsamid  12:33  
Alright. Great. Thank you. All right. Now let's move on to Joe that.

Joe Jannotta  12:39  
Great. So last week I talked or last podcast, I talked about wireless charging and pilot program in Michigan. And Volvo actually announced a similar program in Swedish city of Gothenburg. They announced this yesterday. So their plan is to replace part of the taxi fleet in that city with the Volvo XC 40 battery electric vehicle. And they're going to be utilizing momentum dynamics inductive charging technology. So since it's part of the taxicab company, the vehicles will come with that charging pad. So there's not that big upfront cost that a consumer would have to pay if they wanted to utilize inductive charging down the road. So their plan right now is to place several chargers charger pad stations around the city, ideally, and I assume that they would be in areas where cabs are already idling in waiting for fares. They haven't released any of the data on the the charging efficiency, but this certainly seems like a more viable option, then what we're talking about last or two weeks ago, with just a mile long strip. In this instance, there is charge stations placed around the city. So the taxis can theoretically pull up on them for 20 to 30 minutes and receive enough charge to get through to the to the next fair. And I think it solves that problem of that big upfront cost of the charging pad attached to the bottom of the vehicles. And since it's a fleet order, they theoretically the price would be scaled down for that charging pad on the bottom of the vehicle.

Sam Abuelsamid  14:40  
Yeah, moment momentum dynamics is an American based company. I know they've done a number of pilots and a lot of their focus has been on heavy duty vehicles, particularly transit buses. And I know they've demonstrated 200 kilowatt charging capability with inductive charging on transit buses, have vulvar momentum given any indication of what the the charging rate is going to be on these on these vehicles and the XC 40 is not a particularly large

Joe Jannotta  15:12  
vehicle. No. So I tried to look around for those numbers for a little while, but it was a this was just announced a dare to go and most of the stuff seemed to be press releases with a little bit of little bit added on, but I couldn't find any exact numbers on that. All right.

Sagie Evbenata  15:30  
I tried, you know, if the, um, the XC 40 s s in this trial, is it? Is it that the hybrid model? I don't know what they call it now? No, I don't

Joe Jannotta  15:41  
know. It's, I believe it's just a battery electric vehicle. Hybrid. Okay, yeah, I

Sam Abuelsamid  15:48  
don't think Volvo has a hybrid version of the XC 40. Right now, they, they have well, they have a mild hybrid, which is the standard model and then the battery electric version. Yeah.

Joe Jannotta  15:58  
They, they're just using the battery electric version in this case. Okay.

Sam Abuelsamid  16:07  
Great. All right, Ryan, what have you got this week?

Ryan Citron  16:10  
Yeah, we got two exciting news items that have come out of Gogoro. The battery swapping in a scooter company based in Taiwan. So the first item is the company announced that they have manufactured their 1 million battery for its global battery swap network. So they're not 1 million batteries are either in deployed in their electric scooters or as part of the battery swapping network. And they released some updated stats on how their platform in Taiwan especially and generally is doing so 95% of all electric two wheelers in Taiwan are now powered by Google's battery swapping network. They support seven different vehicle brands there and accounted for over 25% of all two wheeler sales, including gas two wheelers sold in December 2021. In Taiwan, and when including all the countries, Gogoro is active in their platform host 10 different vehicle manufacturer models, which results in 47 Different CTD scooter models on the same battery swapping platform. So very interesting, kind of I'd say it's a lot of validation for the company and showing that they're kind of open and interoperable. battery swapping platform is reaching some some pretty good scale of success in Taiwan, and they're now having deployed I believe is about 100 stations so far in China, moving into India in the next few months as well. So lots happening there. The second piece of news they came out with is that they unveiled the world's first solid state swappable battery, they jointly developed this battery with Pro Logic technology. And the new solid state battery prototype integrates with GoPros existing vehicles and the swapping network so I'll be backwards compatible, as far as I understand. And in addition to being far less likely to catch fire, solid state batteries provide higher energy density and can deliver a greater range GoPros estimated that its solid state batteries will increase the capacity of your current lithium batteries by 140% or greater. So it will take the batteries from 1.7 kilowatt hours to 2.5 kilowatt hours, I did ask the company kind of how that capacity increase will affect range. And you know, at this point, it's not exactly clear, the answer I got is that they could be increasing the range per battery or they could be making smaller batteries that delivers the same range as they provide now and they're kind of researching into seeing what the best approach should be for the company. But either way it's it's you know it's still a few years away from commercializing it's it's a working prototype but it it does seem to be one of the first kind of demonstrations of solid state batteries for the Eevee industry broadly which is pretty exciting. I know Sam you're you're more up to date on what's happening on the automotive side. But but some pretty exciting developments coming out and go grow.

Sam Abuelsamid  19:13  
Does Gogoro make their own batteries? Or do they procure cells from another supplier and do integration and the wireless charging system? Yeah, the

Ryan Citron  19:24  
ladder so they get cells from other suppliers but their IP is a lot in the battery packaging and how they put it all together. And then obviously the swapping technology integrated the powertrain of the vehicles we have my understanding they do not make their own cells I think they use Panasonic cells.

Sam Abuelsamid  19:42  
Okay. And then what for for the solid state prototypes. They're using technology from Pro Logic presumably Pro Logic them is manufacturing the, the prototype cells for them that that grows integrating, I believe sorry. Okay, yeah, the on the on the automotive side. Right now a lot of companies are targeting the 2025 timeframe to start commercially launching some solid state cells into the marketplace. Toyota is one of the first to actually give a hard date, they've said that they want to launch solid state cells in 2025. But what they're doing is they're not actually launching those on battery electric vehicles, but rather on on their hybrids. So you're gonna have hybrid vehicles non plug in hybrid vehicles with solid state cells, because those use considerably smaller batteries than than battery electrics. And they're still trying to scale up production, which has been one of the big challenges for everybody with solid state. Doing the smaller batteries required for hybrids makes sense as a place to start proving out that technology. And so, you know, what micro mobility is probably another good use case, because your batteries are not very, not very large.

Ryan Citron  21:03  
Right? So starting small and then kind of building up as the scale can kind of increase and proof of concept works out. Yeah, no, 2025 sounds probably about similar to when you'd see maybe a little earlier commercial deployments for solid state and these two wheelers. So interesting. Are you familiar, Sam, kind of the increase in capacity, kind of how that relates to range, my understanding is not a one to one kind of increase, right. So if it's, if the capacity is increasing by 140%, it doesn't mean that range necessarily gonna increase by that much. That's,

Sam Abuelsamid  21:40  
yeah, it can, it's, it's, it's more related to the energy density, and a combination of energy density and capacity. So if you if you increase, if, if the battery weighs the same, but has 40% More energy capacity in it, you know, then you're going to get pretty close to 40% increase in range. If you are trading off some of that extra energy density, for, for extra for reducing the battery size, then you can maintain the same same range with a smaller battery physically and lighter, physically smaller and lighter battery, which in turn has a virtuous circle effect of you know, you make that battery smaller and lighter. That improves the overall efficiency of the vehicle, because you're not hauling as much mass around you don't have to move as much mass. So with the same amount of energy, you know, let's say, you know, in a vehicle, if you had a 60 kilowatt hour battery pack, and you went from a current current generation technology that might, you know, for a 60 kilowatt hour pack and might weigh 900 pounds. And you can reduce that by 40%. You know, you get down to, let's say, you know, five to 600 pounds, that 400 pounds you've just saved with the same capacity is actually going to give you more range from the same capacity. Because you're you don't have the battery doesn't have to do as much work. And, of course, the set, the opposite is also true. If you make the battery too large, and add a lot of mass there, then that's going to cut into your efficiency, which you can see from the the GMC Hummer, Evie, which that that truck weighs has a curb weight of over 9000 pounds, and the battery alone weighs over 2900 pounds for a 247 kilowatt hour battery pack. And it has about the worst energy efficiency of any Eevee on the market. I think it's it's rated at about 47 miles per gallon equivalent, which you know, for 9000 pound vehicles not bad, but it's nowhere near what you get from a Tesla or a Chevy Bolt or a lot of other smaller EVs. Alright, sticking with the the Eevee theme. Last week, Ford made a major announcement about a corporate reorganization. And a number of legacy automakers that have been making big moves into EVs over the last couple of years have also been getting a lot of pressure from Wall Street banks to actually spin off their Evie business as separate business units. The The rationale being that, you know, Tesla has such a much higher valuation relative to its revenues and profits than any other automaker that if you spin off the Evie business it should also be able to have a similar type of ratio was valuation to its revenues.

Most of the legacy automakers have decided that no that's that's not really a great idea. They would prefer instead to, to do some sort of reorganization keep the Eevee business internal, in part because the the current internal combustion business is very highly profitable. And it generates the cash flow necessary to fund the 10s of billions of dollars being invested on the Evie side of the business, which is not really making money yet for anybody. And so what Ford announced last week was that rather than doing a spin off of their Evie business, they're reorganizing their automotive business into two main divisions, two main business units that are still wholly owned. One is Ford blue, which is their traditional internal combustion business. So that's vehicles like their gas and diesel F series pickups, Mustangs, Broncos and, and other SUVs. And then there, they've created a new division called Ford Model II, which is their Evie business, that business will be responsible for designing and developing electric vehicles, but also responsible for the development of all the advanced software and architecture for all the vehicles across the Ford brand. Similarly, Ford blue, will be will retain responsibility for all the manufacturing, so there's not actually much overlap between the two. And each, each of the two business units will actually be providing things for the other business unit. So it's, you know, if you, if they were to actually replicate everything as an Eevee business, it would actually it would add substantially to their costs. So if they actually did a spin off, as financial analysts have recommended that that would actually create a whole bunch of new costs, because they would have to have their own manufacturing infrastructure, their own supply chains, their own retail network, and that that would, that would not necessarily be commercially viable for anybody. On the on the flip side, the way they're doing it, now, they are avoiding that replication within the company. So Ford blues said, well, we'll handle the manufacturing and supply chain even for Ford Model II leverage that that capability that they have, and that that group is going to be led by Kumar Go Hofstra, who previously has been president of Ford of the Americas and international markets. And the model e business will be primarily led by Doug field who joined Ford last fall from Apple, where he was leading their Project Titan their, their their car development, business unit that has yet to actually produce a product. And before that, he was a VP of Engineering at Tesla, where he led development of the model E or the start of the model three and the model Y and bring those vehicles to production. And Jim Farley who's the CEO of Ford of the whole company, will also be directly really overseeing the model e business. So kind of splitting the company into you know, kind of the past business in the future business and the past business, the the Ford blue, as they described, it will be the the cash generation engine that funds everything else that they're doing for the future, until that can become self sustaining. And over time, the fort fort blue will eventually shrink and start to fade away. But it'll still be a business still be part of the business for probably many years to come. And then at the as the Eevee business grows and becomes you know, gent starts to generate enough cash and profits to fund itself then it will be less dependent on the Ford blue side. Ford's already already started down this path last year with the establishment of Ford Pro which is their commercial vehicles business. And and now the they also had the smart they're smart mobility business unit which has now been rebranded as Ford drive.

And other automakers are have been slowly moving in similar directions. Volkswagen Group for example, established a couple of years ago their Tari ad division, which is consolidates all of their software development across all of the VW Group brands. So that includes everything from infotainment systems to batteries to body controls and everything else is all within this carry out group and they they provide software for all the group brands, General Motors Last year established bright drop as a separate business unit, which is focused entirely on electric commercial vehicles. And I expect other other automakers will make similar moves in similar directions to separate within within our organization start to create dedicated EV businesses that can still leverage their existing established business. One of the one of the interesting thing, aspects from the the briefing that they did when they made this announcement was around the dealer network. Unlike Tesla, and most of the other Evie startups like lucid and rivian, Ford remains committed, in part, at least because of legal issues, they remain committed to their franchised dealer system. But what come on Camargo hacia talked about was that they want to see, their dealers start to specialize more. And so especially dealers in rural areas, where they're not likely to sell very many EVs in the near future, they'll be really focused on the internal combustion vehicles. But in markets, where there is a lot of demand for EVs, they want to see more dealers specializing in EVs. And this is this is an interesting strategy, because one of the struggles that legacy automakers have had, the thing that a lot of consumers complain about, is going into a dealer looking for an Eevee, or a plug in hybrid. And having the the salespeople redirect them towards, towards an internal combustion vehicle. And, you know, part this is because there's less opportunity for after sales service revenue from an Eevee. And that, that, that, you know, tried and drives the salespeople to push people to buy a gas vehicle where they can, you know, sell them oil changes and other service over the life of the vehicle that generates a lot of revenue for dealerships. And go hacia wants more of the dealers to start focusing just on EVs. And this in the context of what's been going on over the past year with the the chip shortages, and disruptions in production vehicles and lack of inventory at dealerships. This all kind of works together in some interesting ways. Looking at Ford's sales reports, monthly sales reports over the last six to eight months. For the first time, they've actually started to mention in those reports, how many retail factory orders they've gotten from customers, and it's been growing steadily. Traditionally, here in the US for for many decades, the business model for selling vehicles has been that dealers tend to keep, you know, in some cases, hundreds or 1000s of vehicles in inventory on their on their watts. And consumers go in, they look around, pick out a vehicle and they buy the vehicle right out of the dealers inventory, and drive off with it. And they don't do factory orders, which is much more common in Europe. Custom ordering the vehicle that you want. The advantage for consumers is they get to, you know, get you know, instant gratification get a vehicle right away, they don't have to wait. And because the the dealers as soon as the truck roll, as soon as the car rolls off the transporter from the factory, the dealer has now purchased that vehicle from the manufacturer, and they have to pay financing charges on that. And there's a significant cost associated with that along with the real estate and everything else. And this is why, you know, you'll often have people going in and haggling over the price of a car has been sitting on the lot for a couple of months, you know, the dealer wants to move that metal, get it out of there. So they're not paying financing charges on it. And so they're more willing to negotiate on price.

With the lack of inventory, we've had the number of consumers that go in and do a factory order, you know, and wait six to eight weeks to get their vehicle has risen dramatically. And you know, that is much more like the model that you have with a Tesla or rivian or lucid, where you order your vehicle online. And so it appears that you know one of the things that Ford wants to do is start to move some of their dealers towards that kind of model, keep the dealer model but keep you know get get customers that are buying EVs to order their vehicles and have these Eevee specialist dealers scale down the size of their inventory. They want to have less inventory. So they're not they don't have to pay for that. It's easier for the manufacturer to manage, you know so they're not over producing so they don't have to do rebates and other other deals. And consumers can get exactly the vehicle they want. And then, you know, these, these specialist dealers, you know, might keep a couple of dozen vehicles in stock for test drives. And, and for people, you know, for some people that need to get a vehicle right away, if they've had their vehicles been in a crash or stolen or, or whatever it might be, if they need something right now they can they can buy, you know, from much smaller inventory, but not have. There's a local Ford dealer here in Ann Arbor, that prior to the chip shortage, they would normally stock about 12 to 1300 vehicles in their inventory. And now, you know, over the last year, it's been usually less than 100 vehicles that they have. And I think that's what, that's what Ford wants. And I think it'll be interesting to see how that plays out with dealers, you know, changing their business model over the coming years, if they don't, if they don't have to pay and finance, you know, hundreds or 1000s of vehicles, then that significantly reduces their upfront costs. And it offsets some of the lost revenue they have on the back end with service. And so they might be more willing to focus on selling EVs and really push the EVs more.

Sagie Evbenata  36:18  
Sam, why do you think that customers in the US are now prepared to wait longer to get their vehicles, as the as you said that in Europe, we were pretty much used to waiting ages for a car. And dealers will typically have barely anything, if at all in stock. So being able to buy something off the forecourt out, sounds awesome to me. So I'm just wondering why people are now suddenly prepared to wait,

Sam Abuelsamid  36:45  
mostly over the past years, because they have no choice. There's just, you know, we've had manufacturers having to cut production, you know, cancel shifts, because they just don't have the chips to build as many vehicles as they want. You know, last year in the US, I think, sold a little over 15 million vehicles, which is, you know, quite a bit less than 17 million that we sold in 2019, before the pandemic, they probably could have sold 17 million vehicles or more last year, but they just couldn't build them. And, you know, that means, you know, there was there was just no inventory to buy from, so they've had to, they've had customers have had no choice but to order vehicles. And I think now, you know, hopefully, as they start to get used to that approach, then we'll, you know, then they'll, you know, hopefully, just get accustomed to it. And that'll be the way it's done going forward. And if dealers just, you know, if more dealers just stopped carrying so much stock, then customers won't have an option. Except, you know, in case of they need something right now.

Ryan Citron  37:56  
So, question on the BV business split. So model in blue are kind of two separate business divisions. But Ford as a company is not splitting into two as far as its stock or anything like that. Is that right?

Sam Abuelsamid  38:10  
That's correct. So Ford, Ford will remain one company, have multiple business units, each of those business units starting in 2023, will report its own profit and loss statements. But it'll it'll all it'll they'll both of those units will still be 100%. Owned by Ford.

Ryan Citron  38:30  
Right. Do you have any more thoughts on kind of the advantages and disadvantages of that? Because I'm just thinking about some other companies that are kind of going the full separation route like Harley Davidson is going there live wire electric motorcycle business is going fully separate. And it's going to be listed on the New York Stock Exchange separately from the rest of the company. Do you have any other thoughts on kind of the benefits of doing it that route versus the Ford approach?

Sam Abuelsamid  38:57  
Yeah, you know, the, the challenge if you were to completely split off the Eevee business, would you know now that that Evie business would have to finance all of its manufacturing infrastructure on its own, it would have to do all the supply chain management. Everything that an automaker has to do would have to be done twice now by the legacy business and the new Evie business. And so there's a substantial cost associated with that. And you know, that you the Eevee business would have to raise a lot of capital and Ford has said, you know, they're planning on investing $35 billion by 2025 on the on the Evie business, and that, you know, that that money would have to come from somewhere. Today, that's coming from the profits and the cash flow that that they generate on the internal combustion sales. Same thing, same thing is true with General Motors and other automakers. With if they do spin off the the theory is that that Evie business would have a much higher market capitalization potentially than the legacy business and would be able to sell new shares it basically following the model that Tesla has taken over the last decade since Tesla went public, when, at that time in 2011, they went public in 2010. In 2011, Elon Musk declared that Tesla would never have to raise money again. Since that time, he's done 13 Capital raises raising about $24 billion to fund development of the model three in the model Y and just to keep the the business open. That, you know, the same thing would have to happen if Ford Model II was spun off as a separate business. But that to do that would presume you'd have to assume that, that cap that that capitalization, the market capitalization was there, and that the shares had enough value. Otherwise, you'd significantly dilute the the holdings of the shareholders. And if you suddenly add a bunch of new Evie companies in their part of the world, at least part of the reason why Tesla has been able to get the kind of capitalization they'd have, in addition to the myth of suddenly generating new revenues from Robo taxis is because they were really the only big Evie business, and companies and investors that wanted to invest in EVs. You know, that was really the only place that could go. And so that drove up the price. But if you suddenly have, you know, half a dozen new Evie companies added into the mix from GM and Ford and Volkswagen and others. Now you've started to dilute that market, and there's no guarantee that they're all going to get that same level of valuation. And raising that capital is going to be a lot more expensive for them. So doing it the way they're doing it. Now. They have access to the capital, they don't have to raise. They don't have to go to the financial markets to raise that money.

Ryan Citron  42:08  
Right, right. Yeah, that's really interesting to see the different approaches and interesting to talk to someone from Harley and see why they wanted to fully separate their electric motorcycle business just pulled up an article looks like the the deal was about $2 billion dollars, by taking that part of their business public. And then Harley's still retaining 74% equity interest in the Livewire brands, they're still staying pretty closely connected to it. But

Sam Abuelsamid  42:35  
yeah, I think, you know, in the case of a motorcycle manufacturer, you know, it's it's not going to be nearly as capital intensive, as it is for a full line automaker, you know, the amount of the amount of capital they'd have to raise and invest to get established is considerably, I think, would be considerably less for Livewire than it would be for Ford Model II. It's just it's a less expensive business to run.

Sagie Evbenata  43:05  
So another question on them. One of the other points that you made earlier, regarding dealers, in the past been somewhat reluctant to sell EVs due to the reduction in income from from servicing and maintenance. Do you see that going forward? Those dealer dealers who are selling EVs, or maybe the OEMs themselves? Will they do you see them retaining a greater a greater margin to try and compensate for that, that lack of income?

Sam Abuelsamid  43:36  
Yeah, you know, I think this is this is all part of that strategy of moving towards, towards a, an a factory order model, as opposed to selling from inventory, you know, when they're selling from inventory, because because the dealer has to pay that that's a cost center for them having that inventory. If they don't have that huge inventory of vehicles, that their financing sounds, you know, now, they don't have to negotiate on pricing as much. You know, one of the things that we've seen over the past year is something I think there was a report was put out, I think by Cox automotive a couple of weeks ago, in February 80%, of automaker of car buyers in the US paid over sticker price for the vehicles, only 20% paid under under MSRP. For their vehicles, which is a dramatic reversal, it's traditionally been the exact or even more, you know, been well over 90% pay less than sticker price. So by getting rid of that inventory moving to this low inventory model, they can definitely get higher margins there. You know, because they're not stocking it. They're reducing their costs. They're increasing their margins and I think they'll they'll be more more willing to really focus on pushing the EVS. Yeah, thanks. All right. Thanks, everybody, and we'll be back with you in two weeks. Good bye