The Chinese Challenge: BYD vs Legacy Automakers

[Transcript]

[00:00:08] Jan Griffiths: Welcome to the Automotive Leaders Podcast, where we help you prepare for the future by sharing stories, insights, and skills from leading voices in the automotive world. With a mission to transform this industry together. I'm your host, Jan Griffiths, that passionate, rebellious farmer's daughter from Wales with over 35 years of experience in our beloved auto industry and a commitment to empowering fellow leaders to be their best authentic selves. Stay true to yourself, be you, and lead with Gravitas, the hallmark of authentic leadership. Let's dive in.

[00:00:58] Jan Griffiths: This episode is brought to you by Lockton. Lockton redefines business insurance and people solutions with a personal touch. Their global team of 11,000 is driven by independence not quarters, to tailor success for your business. Discover the Lockton difference where your goals become their mission. Independence is not just how you think, but how you act.

The Chinese are coming. There's fear in the air. I sense it. I feel it. Could it be true that the Chinese OEM will take the place of our beloved legacy automakers, such as Ford, General Motors, Volkswagen, and Toyota? I decided to ask somebody who knows how to answer that question. Today, you're going to meet Tu Le. Tu is the founder and managing director of Sino Auto Insights. He has a wealth of experience working both in high-tech and automotive sectors. He's worked for Ford, General Motors, he's worked for Apple, he's worked in the tech space. He has lived and worked in Detroit, in Silicon Valley, and in China. So, I could think of nobody better qualified to answer these questions. He is passionate about helping companies that want to be difference-makers in the mobility space, and that's what his business is all about. In this episode, we talk about, is BYD going to take over the automotive landscape? What is the DNA of an EV OEM leader for the future? What are some of the things that are slowing us back from a legacy automotive culture perspective? Let's dive in. Tu Le, welcome to the show.

[00:02:53] Tu Le: Jan, thanks for having me.

[00:02:57] Jan Griffiths: Is it true? That a Chinese OEM could take over the global automotive landscape as we know it today.

[00:03:06] Tu Le: I think we're starting to see that in the China market. Even before that, we started to see it with Tesla. And some background, some context: The China market is the number one market in the world. It has been since 2009. Last year, passenger vehicles is around 24 million units. The United States was around 15 million. So, we're talking a significant Delta between the first and second-place markets. Europe is around 12, 13 million units at best. Up until last year, the Volkswagen brand has been the number-one brand in China. It was overtaken by BYD. BYD only sells hybrids and battery-electric vehicles. Volkswagen sells a ton of ICEs and a small proportion of Battery Electric Vehicles. And another example is General Motors; as late as 2017, they were selling 4 million units in China. In 2023, that went down to 2.1 million. So, almost 50 percent sales losses in the China market in less than six years.

[00:04:17] Jan Griffiths: There's a lot of people that are thinking that this is going to become a reality. I know that Sandy Munro spoke to this on his predictions for 2024, but it seems as if our friend at Tesla, Elon Musk also has some concerns that without the tariffs and barriers that the Chinese OEMs would simply take over.

[00:04:38] Tu Le: You're referring to his statement during his earnings call a couple of days ago. I've been ringing this bell since as early as 2018. For a little bit of background, I lived in China with the exception of the last 15, 16 months for almost 13 years. I started a consultancy called Sino Auto Insights, and we help companies in the mobility space develop and market and product position their products and services. I was doing freelance consulting in Beijing where the German OEMs are all regionally headquartered, and they were talking about Tesla in 2015, 2016, like it was some nuisance. And now, we see it's eating everybody's lunch with the exception of BYD, of course. I saw this early that the automotive guys had their blinders on. They weren't open to how things were digitizing in China, and all of a sudden, they were caught flat-footed. So, if we want to understand the China market a little bit better, in 2021, the NEVs— to define NEV, new energy vehicle— what we would call plug-in hybrids plus battery electric plus hydrogen. The NEV market in China in 2020 was one and a half million; in 2021, it went to three and a half million; in 2022, it went to six and a half million. And last year, it got to almost 9 million units on a base of 24 million vehicles. And so, the take rates represent, so even the mighty Tesla, is playing catch-up with some of the competitors in the China market. His comment about without trade barriers or any protectionism, these Chinese EV companies would demolish most other automakers or global automakers. I think there is some validity to that for sure.

[00:06:31] Jan Griffiths: I hear recently BYD talking about putting a plant in Mexico to come to take over the U.S. Market through the back door, through Mexico and putting a plant in Hungary to dominate the European market. They've got a strategy; they've got a plan. But what is it about the DNA of a company? And I'm talking about the leadership and culture of a company like BYD that allows them to be in this position where we're all running scared.

[00:06:59] Tu Le: It starts and ends with Wang Chuanfu, who was the founder and CEO of BYD. And again, we have to look to the Oracle of Omaha, Warren Buffet, early on investing $200 million into the company, he saw something. Wang Chuanfu actually cut his teeth on supplying batteries to companies like Apple and being an Apple alum; I was a global supply manager. So, I managed sourcing for chips. As most high-tech people know, Apple is a very, very difficult customer to supply to. Steve would make decisions willy-nilly and change direction, change course on strategy of products, which would trickle down to the commodity side. If you're cutting your teeth on supplying the Apple, the automotive sector, I'm sorry. It is very cutthroat, but if you have scars from the high-tech sector, you're going to do okay in the automotive space. They also then moved into silicon and chips. Whereas 30 years ago, the Toyotas with the lean manufacturing wanted to outsource everything and only design and manufacture certain things themselves and pushed down suppliers. Wang Chuanfu was bringing everything together. He acquired a failing Chinese car company in mid-2009, I want to say. And so, the first time I visited or moved to Beijing, I got into a BYD on the first week I was there. And it was terrible, Jan. If you remember those Daewoos that were shipped out as Pontiac LeMans in the United States years and years ago, where the doors were paper thin, you could hear the outside. That was a BYD in 2009. I visited BYD in April of last year, right after the Shanghai Auto Show, drove six, seven cars and, they could compete today with the best of what German legacy has, Italian legacy has, United States and Japan legacy, and Korea legacy. So, this is what's so concerning for legacy automakers because they control costs because they make their own chips and their own batteries. And you know what the most important thing about the automotive space or one of the most important things from operation side is scale. So, they've been able to grow double-digit percent, 20, 30, 40 percent year over year. And they have a flavor for every consumer, whether it's a hybrid or a battery-electric vehicle, and most of their products are priced under $40,000.

[00:09:47] Jan Griffiths: Here's a question for you, a vertical integration strategy is one thing. It's the rate by which they have been able to learn, fail, innovate, and scale. If you think about General Motors, I interviewed Alisyn Malek on this podcast a few months ago. And she worked at General Motors on their first serious EV back in 2008. Now, GM is still struggling to get product on the road that makes money. Yet BYD, as you said, started with something that really wasn't that great in 2009, and now we're talking about world domination. How? What's the culture that allows them to operate with such speed?

[00:10:37] Tu Le: If we're talking about leadership and management, let me qualify this Jan, because my father, 27 and a half years at General Motors, retired, my sister, her husband, both over 35 years at General Motors, I'm a Homer, I want GM to win. And it's super frustrating to see some of the missteps that they made. If you look at OnStar, if you look at EV1, they were there. But I think finance, they really, really do make all of the decisions. The challenge for legacy auto, and you slot in GM, slot in Ford, is that we're living in a digital world. It's transitioning over to, from analog to digital. And up until this point, even if you look at the OTM, even if you look at F-150 Lightning, the legacies are bringing analog toys to a digital party. If we look at Tesla, they're probably 80 percent software engineers and 20 percent traditional engineers. And legacies are likely flip flop, probably a 90-10 traditional engineers to software engineers. And this is the crazy thing: for 120 years, legacies have convinced us that we should spend 30, 40, 50, 60, 70, 80, 90 thousand dollars on a product we use 5 percent of the time. And so, if we think about the Teslas, this is their penance because they stopped innovating. They refuse to acknowledge Tesla. Part of the challenge is when you live in an analog world, you have five-year product life cycles and you have two-year product development, three-year product development cycle. If we look at Apple, a new iPhone comes out every 10 months and there's always software that upgrades. And so, the intersection is the Tesla; okay, they can flash their software on every vehicle in the world. And then all of a sudden the braking distance on your vehicle shortens by 10 feet. Traditionally has been such a capital-intensive industry. The decision-making needed to have dozens of approvals. I wrote an op-ed in the AmCham Beijing, American Chamber of Commerce, Beijing magazine called the Driverless Duel. And I compared high-tech, which I worked in for Silicon Valley for almost seven years, and then the automotive space, which is in my blood; you'll resonate with this because, in an automotive world, everything's driven by CapEx, right? How can we amortize this billion-dollar investment over five years? On the Apple side, everything is an operating expense, number one, because they contract manufacture most of their manufacturing out. And so, any expense incurred is recognized in the period that it's incurred. And so how you make decisions is a lot different. From a leadership standpoint, with the legacies, they have to deal with that and change the processes and policies so that it becomes more frictionless. And I think that's really the challenge because you might have a ton of people at the executive management, executive director level with great automotive experience, but that's not going to help you on direct-to-consumer on customer-facing user experience challenges because if we look at the sales process, traditionally in the United States and Europe, the OEMs are actually wholesalers. They don't actually touch the customer. The sales people, the marketing people, they're all about promotion and were direct-to-consumer. Now, you're the face of your brand, as opposed to these thousands of dealers. You look at it as a challenge, but you also should look at it as a huge opportunity. As a leader, you got to get everybody rowing in the same direction, and I think those are some of the challenges. And one of the reasons I started the consultancy was because the tech guys were talking their language and the car guys were talking their language and there was no translator.

[00:14:53] Jan Griffiths: You're exactly right. They are two different worlds. But let's talk about this timing. I see two parts to timing. You mentioned an Apple iPhone comes out every 10 months. So, there's this idea of product iteration, having to refresh product on a far more frequent basis than we're used to. That's one thing. But the other thing is the long-term vision and strategy for these companies. Toyota is known to talk about a 100-year vision. I can't imagine a US-based or Western OEM talking about a hundred-year vision. What about the Chinese? What about a company like BYD? I get the sense that they have more of this long-term vision. Is that true?

[00:15:38] Tu Le: They do. But this is new to them, too. Because the factors that come into play when it comes to China EV Inc. becoming a major exporter. China became the number one exporter of passenger vehicles, overtaking Japan in 2023. There was a lot of first for the Japanese automotive brands. Four and a half million vehicles were exported; about 25 percent of those were 1.2, 1.1 were NEVs or new energy vehicles. The threat is there. They're not there yet. And what we'll likely see is that in the emerging markets, the Southeast Asia's, the Latin America's, the South America's, the Africa's, we'll see, because a lot is driven by price, probably a decent amount of penetration quickly into those markets. In Europe and the United States, specifically because in the US, there's the Inflation Reduction Act. In Europe, there isn't anything like that yet. We'll likely see a pretty significant increase in exports to Europe from China. But if we're being objective. We should look at the brands that are being exported, 'cause it's not just Chinese brands. Tesla was the number one export for any EVs from China. And you probably remember MG. Yeah, you smile, which is now..

[00:17:06] Jan Griffiths: I had an MG. I had an MG when I was 17. That was just hell on wheels driving around the Welsh countryside in that little converter. Yeah, go ahead.

[00:17:15] Tu Le: That is now owned by SAIC, which happens to be GM's joint venture partner in China. And MG has been a major exporter as well. And I should add that Volkswagen, Nissan, Ford have all announced that they'll be shipping passenger vehicles from the Chinese manufacturing sites to the US and Europe. Okay, so if we look at this, we can't blanketly say it's these Chinese brands. What we're likely going to see is a reconfiguration from all of the automakers from a manufacturing strategy standpoint. The center of the world in the automotive space is clearly China. What Mary and Tavares, Luca de Mao aren't telling you is that their global strategy hinges on either stopping the bleeding in the China market or continuing to grow that market. Because they cannot execute their US Strategy, their European strategy without still having significant sales in the China market. Think about this, Jan, I'd mentioned earlier that GM lost 2 million sales. If we're looking at factories that have capacities around 300,000 units. That's seven factories that they've lost sales on, right? If you can't quickly adjust plant closures and things like that, which is very difficult to do in Europe and the United States, you're going to be strapped with these huge expenses that make it very difficult on a per-vehicle basis to become profitable.

[00:18:54] Jan Griffiths: What's holding us back with the legacy OEMs? Why can't we get there fast enough? A lot of people are asking these questions. I've heard you say, so far, you talked about the pressure of the financials and bureaucracy— every decision has to go through 15 layers. And Wall Street is a major driver in terms of behavior and culture because most of the OEMs are focused on Wall Street. What are our numbers? What's our stock price? What are we doing? What did we tell the market? And then, they will make decisions to support that to make sure that they meet the market expectations, and that can drive short-term behavior. That's one factor, what else?

[00:19:38] Tu Le: So, having moved back here 15 months ago, the thing that I noticed with the rank and file, I have brothers and sisters that primarily work in the automotive space, and they live really great lives. And they have, because of the automotive sector, we have. I've grown up, we started with nothing as a refugee from Vietnam, and I've become, been able to do a lot of things because of the automotive space. But if we look at a Tesla in, I think it's an oversimplification to say that an EV is a smartphone on wheels because smartphones can't kill you. I think that's totally wrong. I also think that saying software-defined is a terrible acronym because that it's a user experience to find. Software enables a great, compelling user experience. It doesn't drive it. So, saying software-defined is a terrible term. We're talking about car guys who really know nothing about software development, trying to stay relevant to their analysts, to their customers, and creating these acronyms that actually don't make a ton of sense. We are very conservative. We don't swing for fences here because we're happy with singles and doubles because a lot of people have cottages. A lot of people go up north on the weekend, and that's because they've had a 25-year run in the automotive space. And I had a great living. I don't begrudge that. What is frustrating to me is that they can't see the forest from the trees. Silicon Valley has this huge tidal wave. If we look at Apple, we look at Uber, we look at Waymo and Google, and then China has this huge wave. And it's coming for sure. We can point out all these ancillary reasons that the automotive space can't keep up, but at the end of the day, it's a competition.

That whole notion that the Chinese government has subsidized the EV space. I mean, we're writing a 50 billion check in the United States. And that's just to say that at the end of the day, great products, compelling products are going to really solve the legacy auto with the recent slowdown in EV adoption in Europe, in the United States, I think there's this false sense of, "Oh, the legacy automakers can reconcile their product strategy and slow down this EV transition." Elon said by 2025, they're going to sell, build and sell a $25,000 electric vehicle. Think what you want about Elon. Think what you want about Tesla. And I would love your thoughts on this, Jan. Do you think a $25,000 electric vehicle that has digital features that are better than anything in the market, can go over 200 miles, will sell like hotcakes in the United States, in Europe, and in China? I'd love your take on that. So, if they slow down their product rollout on electric vehicles, guess who's coming for that? And they'll never get that market share back. They'll never get that market share.

[00:22:57] Jan Griffiths: If I personally had a $25,000 EV option available to me right now. Under the Tesla brand, I would take it. I don't know that I trust the Chinese brand yet. The only thing I've seen with BYD is I see the BYD buses every time I go to Amsterdam through Schiphol to get to Wales. But other than that, the brand doesn't resonate with me yet, but Tesla has established a brand that is clearly at the forefront of the EV space. So yes, would I do that? Absolutely. And I'm sure there are a lot of people that would feel the same way, right?

[00:23:32] Tu Le: And you make a great point. The Chinese EV companies, which generally speaking, I talk to fairly regularly. They know that it's a long commitment and long haul for the European and American consumers to really create that awareness and build that trust. They're ready and willing to make those commitments. Because again, we're talking 15 million vehicles, talking 11 and a half million, 12 million vehicles. And so, they see, and they realize that they need to create that awareness and build that trust. In the short term in the United States, because we're going to elect a US President this year, I think they're wait and see on that. But that's not to say that they're not doing anything because you see them entering Mexico. This not fear-mongering; this is reality. Now, what do we do? This is what leaders do. And it pains me because I get pushed back, X CEO, because I won't name particular CEOs, but X CEO or Y CEO, you can't blame them for this or that; they get paid tons of money. It's their responsibility to see around corners. The team that got you in the mess, Wall Street, shareholders believe they can get you out of the mess? I'm not saying there needs to be wholesale changes on all these OEM and Tier One management teams, but if we're going to go direct to consumer, who's leading that? People to have no experience because, again, the rank and file, hiring a bunch of software developers at the staff level, analysts, associate, senior dev level, they're not decision-makers.

[00:25:07] Jan Griffiths: I was thinking about this hiring software engineers and I'm picturing resumes going through the typical process in automotive and then going through the salary banding structure. And let's say you might have a genius software engineer in California, genius. And the kid's 22, right? And then going through HR and they're going, "Oh no, they've got to have five years experience before we can move them to this band," and the kid in the meantime is like, "See ya, I'm off to some other industry," and he gets paid a half a million dollars. I could just see that happening.

[00:25:42] Tu Le: That's the crazy thing, Jan. It's a bit ironic that you bring that up because there are some people that I know, men, women, ninjas at what I do: data analysis, software development. So, we have three core beliefs at Sino Auto Insights. All companies are becoming software companies. Innovation is not moving east to west. Think about your kids and TikTok and DJI drones; any drone you fly is probably what you need. And so, the final core belief we have is you're not moving fast. And I don't care how good your plan is. If you don't move faster, if the automotive sector in Germany, Japan, Italy, France, Korea, South Korea, or the United States does not move faster, I won't say it's game over for them all because there will be some survivors. My forecast is by 2035 of the top 10 mobility companies, right? Cause it's not going to be automotive anymore. I think automotive is a backward-looking term; I think transportation and mobility are forward-looking terms. If you think about it, Amazon is probably one of the best logistics companies in the world because of their delivery stuff. And we need to think about the Ubers. And I heard yesterday that Tesla logs over 2 million miles a day from their full self-driving feature. If we believe that robo-taxi's autonomous driving is about the algo, but more so about the data. They are head and shoulders ahead of everyone else.

[00:27:33] Jan Griffiths: If you had to describe the traits of a leader. That you would like to see at a major OEM in the West. How would you describe those traits? Somebody who can handle this rapid transformation into the world of EV and autonomous.

[00:27:56] Tu Le: Leadership traits. I think that there are decisive. They also hire people on their teams that are smarter than they are. So, they don't have that typical ego of a CEO. I think it's important to be very confident and decisive because the automotive sector is not going to be the high-tech space. It'll become this individually distinct new sector that has elements of manufacturing and elements of customer engagement service. You have to have a really diverse understanding of how the world works. The traditional automakers, in general, still have this buy-sell mentality. And if you think about it, Jan, they have a transaction every seven years with their customer. Whereas Apple, I'm engaging you on a monthly basis, and I'm keeping interest; we could call it stickiness. We can call it whatever you want. In order to be really successful on the service side, you need to be a ninja on the operations side, but you also need to really have a feel for what's going on in China. What's going on in Southeast Asia, because guess what? In the United States, and specifically in Michigan, when we think of transportation and mobility, it comes with an engine and four wheels.

[00:29:20] Jan Griffiths: What I'm hearing you say is that they have to be a bit of a futurist. In other words, they have to look beyond the P&L and the balance sheet, and the numbers for Wall Street. They really have to get their head out in front and paint a picture or a vision for this company that is inclusive of what's happening in the world. You can't have a strategy meeting in some awful hotel conference room with your direct reports and put a global strategy together. You've really got to have the intel out there as to what the consumer actually wants and needs in all these geographic regions. And you've got to be able to paint that vision and that picture for your team.

[00:30:01] Tu Le: That vision to me, is in 15 years, let's say EVTOL or Electric Vertical Takeoff and Landing and autonomous robo-taxis are the premium services, the two services that bring you most of that revenue. But if we look at the Ubers, if we look at all of these mobility companies, they also now provide delivery. They also offer micro-mobility. They also do grocery shopping and food delivery and restaurant delivery because that increases their install base and it creates more opportunity to keep you on the platform, their platform. So, GM, Ford, they're all going to create mobility platforms without question. Whether they make or buy is still uncertain, but that's going to depend on how much capital they have, how profitable they still are on the ICE side and how much of a hit they're taking in the China market. The reality is, Jan, and you know this, Ford is effectively a single-market automaker. Eighty to 90% percent of the profits come from one product, and it's primarily only sold in North America. If we don't allow these automakers to remain global, we're in danger of them becoming regional as well. So, you hit the nail on the head. They need to be able to see around corners, inspire, change cultures because the automotive culture is a very distinct type of culture. And I would argue that the automotive sector in general has never been customer focused.

[00:31:46] Jan Griffiths: You said change culture, change what in the culture? What are some of the things that stand out to you in legacy culture that need to change?

[00:31:54] Tu Le: There needs to be faster decision-making and looking at risk in a different way. The state of Michigan is really trying to reinvent itself as well, right? We're trying to become a mobility center as opposed to an automotive center where how we define transportation needs to change. How we think of transportation, again, in India, in Thailand, in Vietnam, mobility to them, transportation to them starts on two wheels.

[00:32:26] Jan Griffiths: It's more of this ecosystem thinking. I interviewed Wendy Bauer. She heads up the automotive division for Amazon Cloud Services. We talked a lot about the different languages between tech and automotive, but she talks about the ecosystem that's vastly different than what it used to be because it used to be the OEMs bought from the Tier Ones, the Tier Ones bought from the Tier twos, very linear. "I'm the buyer; I tell you what to do; you're the supplier. Go away, shut up, and do it." That's not going to work anymore because now you've got Tier Ones working together, Tier Twos in the mix, you need to have these integrators that work on the software. It's a whole different way of doing business. You need somebody who's ready to take on that culture change. Right now, we see people that still are operating under command and control, still driving fear into the organizations. And if we have fear, we are not going to have innovation, are we?

[00:33:23] Tu Le: If we think about a Volkswagen group, their software division CARIAD, they've gone through three iterations and reorganizations, and it's because of that command control centrally commanded out of Wolfsburg, they didn't allow for the decision-making to be regionalized, and they're paying for it. Each individual OEM or Tier One has specific challenges that have their own characteristics. I think we're in agreement at this level that, you know, culture needs to evolve or change. When I say evolves, I don't actually think we have enough time to evolve. It just needs to stop and then restart.

[00:34:03] Jan Griffiths: I would completely agree with you. And even John McElroy, in my 100th episode, he said, it's now. The time is right now. There is no, "Oh yeah, we'll work on that." It's, no, now. Stop. Stop the madness. Do something different right now.

[00:34:21] Tu Le: I bring back the speed thing. Jan, I worked in Silicon Valley. I worked in China. China's faster than Silicon Valley. Very simply, we need to stop and get out of our heads that China is this copycat country once and for all. If you don't believe me, believe Elon. He said in the future of the top 10 automakers, nine of them will probably be Chinese. That's what he said. And Jim Farley also said last year, it takes 40 percent or 30 percent less labor to build the electric vehicle. So, the reality is things are going to change because they have to. If GM and Ford want to remain competitive, that's the reality. I love having these conversations, but you're never going to tell me I'm wrong because guess what? I've lived in the automotive space. I'd argue that's where my heart is.

[00:35:17] Jan Griffiths: You and I both share this passion and this mission to improve what I often refer to as our beloved automotive industry. Let's bring it down a notch from the OEM discussion to the tiers, to Tier Ones. So, you're a Tier One leader right now. You don't know what the heck to think. You put in all this capital investment, EVs are coming, the volumes are there, and then, oh, no, they're not. And we all know how the OEM terms and conditions work. You as a supplier, you're hanging out there with that capital, wondering what to do. Two, based on all of your experience around the globe, what advice would you give to a Tier One leader out there right now, grappling with what's happening in the industry and this massive transformation to EV and autonomous?

[00:36:06] Tu Le: Let me impact that we are a small consultancy. We avoid OEM and Tier One work because we've had several meetings in China, Europe, and the United States about doing work with them. But I didn't need some 35-year-old veteran to auto-explain the automotive space to me. I don't want to deal with that. We're small on purpose. If you want to get something done, let's work together. If you want to rationalize why you missed this boat, I don't have time for that. If I'm a Tier One leader, I'm looking at that next opportunity because now I can move upmarket. Look at Magna Steyr; they're becoming a contract manufacturer. The next step is actually building their own car. Look at Foxconn. Again, we're creating a lot of opportunities, and maybe this is the time where we, you and I, Jan, are also looking at these emerging startups that could be the next step of Tier Ones. One of the reasons Apple has not entered the EV space yet is because they're smart. They've never been first to enter a market, never. They just do it better. I've never known Apple being decisive, and they are with this. That's the interesting part. And that should give people pause. But you and I, Jan, could start an EV company tomorrow. We could outsource manufacturing to Magna Steyr. Oh, don't get me wrong. I'm oversimplifying this because we'd need probably at least $5 billion. As a Tier One, we also start looking at the macroeconomics of the global economy. London has had a congestion tax since 2000 or since 2009, no earlier than that, right? For 30 years. Barcelona or Paris limiting private passenger vehicles into city center. So private passenger vehicle in large cities is going away, and the trend is much smaller vehicles. If these Tier Ones, look at that, you know what? We need to right size. We need to diversify out of an OEM, legacy OEM being 60 percent of our business. Okay? And it's going to be painful. Has to be painful for the legacy and the OEMs. If they're going to right size and be built for the future, because if it's a kumbaya moment for the next 10 years, it's lights out for them. Pain comes now, but it needs to come now.

[00:38:46] Jan Griffiths: I want to make sure that I understood what you just said to a leader of a Tier One. Your message is don't be so dependent on the OEMs because right now Tier Ones are totally dependent on the OEMs. What I hear you say is look broader than the traditional OEM landscape. Look at some of these startups, start to diversify your product portfolio, and you could think about other products that are still in the automotive mobility space but not follow that traditional dependency on the OEM.

[00:39:24] Tu Le: There will be some legacy automakers, and they'll mostly survive. They're going to look a lot different than they do currently 10 years from now. There's going to be some European brands, American brands that you and I are familiar with that we grew up with that are going to go the way of Saturn and Oldsmobile. If you look at Peugeot and Citroen, French brands are doing well in France but not so much in other places. If we believe what Jim Farley said, simple math says that these companies need to get a lot smaller to be competitive in the EV space. What Tier One leaders need is to assess how small do they have to get while also investing heavily in the talent and the opportunities that they see in the future. It's going to be driven by software. The giga casting that Tesla uses for the rear of their Model 3, that took up 400 parts. If you're a supplier of one of those parts, the legacies are going to eventually go to that. Look at your forecast in a penny pinch, but then go to Europe, and go to Northern Europe, Southern Europe, because how they drive and how they get around is a lot different. Go to India. Right now, there's a huge EV revolution in India because the pollution is so bad in a lot of these Indian cities. And so, if Modi wants to stay in power, he's going to have to clean up those guys and it's going to have to happen really fast.

[00:41:06] Jan Griffiths: We have a lot of work to do, but I will tell you this too. You and I are definitely in this. We are going to do everything in our power to help this industry transform into the future. And I cannot thank you enough for being on the show today and for sharing your insights. Thank you.

[00:41:24] Tu Le: Jan, thank you for having me. And we should do this again very soon because I think it was a great conversation.

[00:41:35] Jan Griffiths: Thank you for listening to the Automotive Leaders Podcast. Click the listen link in the show notes to subscribe for free on your platform of choice. And don't forget to download the 21 Traits of Authentic Leadership PDF by clicking on the link below. And remember, stay true to yourself, be you, and lead with Gravitas, the hallmark of authentic leadership.