Bloomberg Audio Studios podcasts radio

news.

>> I'm Hannah Elliot

>> and I'm Matt Miller. This is Hot

Pursuit.

>> Coming up on today's podcast, we've got

Kevin Tinen, the director of research

for the Prescidio Group. Now, we know

Kevin as the head of automotive

intelligence for Bloomberg. how we have

met him and known him for years, but he

is such a great analyst and communicator

of what's actually happening in the

automotive market. So, I'm very happy to

have Kevin on

>> and a massive gear head. I mean, he has

an amazing garage in uh New Jersey with

so it's packed with guitars hanging from

the wall. You've seen it, right? And

like amplifiers everywhere. And then

he's got like uh Mercedes V12.

>> I actually haven't seen it. I don't

think I've seen it.

>> Oh, it's insane. It is so good.

>> Um it's like I don't For some reason I I

think of like if Jean Simmons was a

gearhead and built his own garage, it

would look like this. So um I'm looking

forward to that conversation as well.

We're going to dig into the big problems

that especially German automakers are

facing in the face of Chinese

competition and high cost production.

Um, but I want to focus in with you for

a moment, Hannah, on German automakers

because you and I have both been driving

a lot of BMWs. I recently bought uh one

and you've had um specifically a string

of M cars that would make uh you know a

teenage road and track subscriber drool.

Uh what have you been driving?

>> So as you know I was in the M2 CS and

then the M4 and last week or actually

this week I should say I've been in the

M5 Touring which is of course the wagon.

The one I had was in this amazing green

color. Somebody said it looked like a

green slug, which is kind of cool. It's

like this olive green.

>> Yeah, I thought it looked like an olive

pretty much.

>> Yeah. S love the spec. Uh, of course,

it's a 4.4 L V8

um 8speed. Starts at about $122,000,

so kind of the same price as the M4. Um,

and I loved it. Now, I know we're going

to have a little conversation about this

because coming out of the M4 going into

the M5, the M5 felt instantly more

adult, more powerful,

more uh just more of a serious car. As

you know, I thought that the M4 to me is

a little bit just soft.

>> So, I this actually felt great to get

into.

>> I take the other side of that bet. Um

because I a couple of weeks ago also was

driving the M5 wagon. Mine was in an

amazing purple, like a plum purple

color. And

>> they're nailing it in terms of their

their paints.

>> Yes, they are.

>> Um and normally I'm a massive fan of the

wagon. Like I adore a station wagon. My

first car that I ever bought myself was

an Audi A4 Avant. And I mean, I would

never option uh a sedan when I could

have a wagon, but to me, um the M5,

wagon or not, I've driven both versions

of this generation. It's just like too

good. It's so good that it's boring. A

lot like a 911 GTS. I just can't really

feel the gear changes. It does have

those like teenage pops on del, which

I'm very much over. And

it's just so big. Um,

>> it's big. It is long. It feels long for

sure. It's a sled.

>> And I don't really love the way it looks

either. Like I I think the M4 is more

much more attractive and more resolved

design. And I also recently drove the

M2CS, which is much more raw and

exciting and, you know, a visceral

experience, everything that we want. Um,

even without the stick. I loved the M2

CS. So, for me, I'd say

the M5 is the is my third choice of

those three.

>> Wow. I am really, really shocked. Re I I

am very shocked to because

with this M5, for instance, okay, it's

got that urban green. The factory color

is urban green. It's a $5,000 option,

but also the It was like 20 and 21 inch

uh dual spoke by wheels that were super

cool. It's got all of it's got the the

glow package on the kidney grill. It's

got all of these extra like black roof

and shadow line lights and like

obviously red red brake calipers and

like all of these things that all the

Beamer Bros love.

And I I kind of get it. Maybe I wouldn't

buy it for my personal car if I only had

one, but I'm very surprised because

>> this to me was more brutalist and like

structurally interesting than the M4,

which again, the M4 to me was just like

a little bit of a

>> version of the M2 with all the edge

rounded and off. It just felt a little

bit soft, a little bit bloated. result.

>> No, you're right. I get it. I get what

you're saying. And I think you're not

wrong. Like the M2 and the M5 are both

>> um

>> much more severe designs,

>> right? And the M4 looks a lot more like

every other BMW. Like you wouldn't be

able to tell if that's really an M4 or

an M6 or an M8 when you look at it. And

>> but that's why I'm surprised you like

it. But but but uh I think it's so the

M2 I love that it's so in yourrface and

rockus. Um and it it drives that way as

well which is what I love. Um the M4 I

just think is a more attractive vehicle

like objectively it's it's finished the

way you would expect. The M5 to me it's

just nothing can hide how big and heavy

it is. It's just and I and I just for

some reason don't dig the way it looks.

I Yes, the wheels are cool. Um, black

roof. I've never understood why you

would want unless it's, you know, just

the carbon fiber look. Like, why do you

want a heat sink on your roof and on

your hood? I've never understood why

people do black roof and hood. If you're

going to do anything different than do

white roof and hood, you know?

>> There's a look.

>> Well, not not for the look, right? so

that you don't have the sun boiling you

on the inside. I I don't know the to me.

>> Let me ask you this.

>> It's so fast and it's so and it's so

good that it's like boring and it still

has the big sharp screen on the inside

that I can't get along with.

>> Find that screen that I know we've

talked about this. For some reason that

didn't get me. Let me ask you this. How

much does your 7 series weigh?

The 7 series um must weigh more. I don't

actually know how much 7 series or the

M5. I wouldn't be I wouldn't be

surprised if they're about the same. But

the thing is, so I had the M5 wagon the

fir same week that I got the 7 series or

a week later.

>> Yes. And one of the problems for me with

the M5 is I would walk out to my

driveway, look at this new fangled

high-tech M5, and it's fast and it's

precise, and then I would look at my big

boat of a 760, and it's like uh driving

a diesel locomotive. I I chose the 760

more often than I chose the M5.

Part of that is probably because I just

got it. It's mine and it's new. New to

me.

>> Well, that that's totally fair. That's

totally fair.

>> But I just if I if if I were gonna order

M cars, I think I would put the M5 like

last. I would rather have an M2. I would

rather have the new M3 CS Han shelter. I

would rather have an M4. I would rather

have they don't make the M6 anymore, I

don't think, but I'd rather have the M8.

Um

>> even as long, you know,

>> a great car.

>> Yeah. So, all of those for me would

would trump

um the big wagon, which is interesting

because I'm such a wagon guy.

>> Yeah, I'm I'm surprised. It's good to

know. Um yeah, I mean, I'm not Does a

wagon fit a child seat in the in the

>> No, none of those cars except for the 7

series will fit a large rear-facing

child seat behind a driver who is pushed

all the way back. Like, that doesn't

work in a Range Rover. Um, unless it's

the long wheelbase. That's why I like

these big German limousines because it

does work in the A8 L. It does work in

the 7 series, the L versions, which

almost all Americans ones are. And it

does work in the S-Class. That's for a

dad. That's a huge bonus. By the way, I

want to um just pivot to Mercedes before

we get to Kevin. And we'll talk with him

about Mercedes a lot because he owns so

many and he's a big fan. and we're going

to focus on German cars, but there has

been so much hate for uh AMG online and

there's always I mean online is where

hate lives, so I guess that's to be

expected. But

>> I've been driving the uh AMG GT63 that

you and I both love. You picked it for

your car of the year last year.

>> Love it.

>> And but I've been driving like the pro

version. So, they make this big beefy uh

hybrid, the SE performance version with

800 horsepower, 1000 pound feet of

torque. That's to me the AMG GT version

of the 911 Turbo S, right? And they make

now this uh GT63 Pro version, which I'm

going to call their GT3 Touring. It's

like a 911 GT3 touring because it's it

takes away the hybrid components. So,

it's just the motor. Okay. It's not

naturally aspirated, but it's a big V8

with

>> it can't have everything

>> with turbos and and you can't get a

stick um with the AMG GT either in any

form or even a DCT. They have their own

>> wow

>> uh transmission, but it's like lighter,

500 lb lighter. Um, it it's a lot more

nimble as a result and some of the

luxury

like sound deadening is stripped out.

Um, but it's just an amazing car and for

all of the for all of the shade that AMG

gets for going down to four cylinders or

even no cylinders, I think these AMG GTs

are just amazing vehicles. Granted, they

cost a ton of money.

>> They cost a ton of money, but I have to

say, and I was just with Mercedes

earlier this week in Beverly Hills, they

had an opening for their new Maybach

Itilier, and they unveiled um a new

Mercedes Maybach SUV, the GLS 680. And I

had some time talking with some of their

board members and executives uh this

week. And

this is going to sound very

oversimplified, but they are so smart

and they are so good. They know what

they're doing and they are able to

articulate exactly why they're doing

things in a way that is not common among

every other automaker. And I I always

say the products indicate what's

happening at the company. Again, maybe

this is an oversimplified thing, but it

remains true. The products indicate what

is really going on. And there is a lag

time between product and where the

company is, but that has that has always

been true in my experience. And the

products at Mercedes continue to be

good. some better than others, but to

your point, Matt, um they understand

that that there is a very strong

appetite among certain people like us

who appre appreciate and love that car

and really need that car to exist. I

mean, they get they understand that.

>> But I mean, I just wish it wasn't so

expensive. Like this one starts at I

think 215 or 220,000. If you want the SE

performance, you're paying, you know,

that plus.

>> Yeah.

>> So, it's like it's unaffordable for

almost anyone, right? Um unless SpaceX

unless you had SpaceX shares.

>> Yeah. And that and that reflects

the fact that these things are becoming

scarce, which makes them uh luxury

objects.

>> Yeah. But I but I also think that it can

hold its own against obviously a 911 is

a slightly different use case, but

definitely they're priced that way too

when you get to the turbo and the GT3,

it can hold its own in my opinion

against the Lamborghini Tamario, which I

drove uh last week. And although it took

me a while to fall in love with it, I

did. It feels like more of an Audi than

a Lamborghini, but it's twice the price

of this GT60 AMG GT63 Pro. And the AMG

sounds better. The AMG is more

comfortable and maybe in some circles

also more socially acceptable. Um, I I

feel like it's a supercar. It's a legit

supercar. These AMG GT car for sure.

>> They're so powerful. Um, I'd rather have

a Corvette than either one, but

>> Oh, wow.

>> Well, because I save so much money that

way, right?

>> Oh, wow. Yeah.

>> The new C8 Corvette has a 6.8 L

naturally aspirated V8 and it starts at

like $75,000.

That's insane.

>> I know. I think you you lose something

on the fit and finish components inside,

but

>> Yeah, maybe. But something that an

extra, you know,$150 to $300,000

would make up for

>> maybe. Yeah, you could buy two of them.

>> Um, by the way, quick just my quick take

on the GLS, right? Maybach or not.

>> Yes.

>> Um, and Mercedes or not. In my opinion,

any three row SUV that it's not a

bodyonframe truck,

>> forget about it. Like we have a GLS.

>> I know you do. And you

>> I wish I had a Tahoe. You know, a friend

of mine has an X7. Uh he wishes he had a

Yukon. Um the same is true when Audi

comes out with the Q9. Like if it's not

a body onframe truck and it's not like

uh Kia EV9. Like it's for me it's a

miss.

>> It's just too big for a unibody vehicle.

>> And you're saying that because of Oh,

sorry. You can I don't know if you can

hear that horn or not. You're saying

that because of the way the car behaves

in motion?

>> No. No. Because they get beat to hell on

American roads and the suspension just

cannot handle it. They're just not heavy

duty enough to drive around the

northeast of

>> uh the decrepit United States of America

highway system. And that for that you

need a Tahoe or a Yukon or an Expedition

if you're willing to forego a V8, which

I don't know why you would be in that

size vehicle. Although, you know, I love

the Nissan Armada. By the way, quick

note on audio. Um, throughout this

interview with Kevin Tynan, you're going

to hear um some grunting, maybe some

whining, a little

>> It's not Are you saying that wasn't you?

>> Yeah. No. Uh, I'm holding my 27day old

baby because, uh, my wife, who's been up

all night feeding him, is now recovering

some sleep, and I am on daddy duty. I'm

actually on paternity leave for the next

like five months. So,

>> we're so happy for you. And

>> Freddy is joining the conversation

today.

>> Yeah, this is Freddy's first appear

appearance, not his last by any means.

>> And he's been he's added some wonderful

grunts.

>> He's been he's couping a little bit. Uh,

all right. Without any further ado,

let's get to Kevin Tinen, formerly of

Bloomberg Intelligence, now at the

Presidio Group. that the reason Kevin

that that Hannah and I both were

thinking about having you is because

we're hearing about so much upheaval in

the automotive industry and specifically

because I've lived in Germany for 10

years. I'm getting so many messages from

friends who are terrified about the

state of the industry and the economy

there. Volkswagen wanted to fire 50,000

people. Now maybe it's a 100,000 people

that they want to fire. They're talking

about closing down factories all over

the country and it's harder for them

obviously because they have so much

union control and so much government

control. But how bad is it especially

for Volkswagen?

>> Well, look, I you know, if you ask me, I

I think Europe has a China problem,

right? If you're if you're going to just

import Chinese vehicles,

um this is what you get, right? It's for

manufacturers that's a zero sum game.

And not only are you now uh unable to

sell, right? Like that that's jobs

specifically. And when you look at how

quickly Chinese manufacturers have taken

market share in in Europe, it's it's

amazing. It's actually terrifying. So

you understand that that what we're

facing here in the US is a similar

story, right? It's like, well, cheap

appliances or jobs because we're not

just like Europe, we're not lowcost

manufacturing

countries or regions. So, we can't

compete on price for a lot of those

things. And I think once that gets in

the consumer's mind of, oh, look at

this, you know, they don't care that

it's a subsidized

vehicle and that it's half the price,

right? To them, it's a better value. And

that's costing you jobs. That's market

share that's just flying out the window.

And it's very difficult to to stop it.

But Luna, come on.

>> But also, I mean, to me, the part of the

problem is um Volkswagen was reliant on

sales in China. So, it's not just about

losing market share in Europe, right?

And for for years or decades, they

agreed to minority stakes in JVS where

they willingly gave their IP and their

tech to the Chinese. Um, you know, they

were essentially trading control for

access. And now it's time to pay the

piper. Like they

>> they they have as much responsibility in

this as the Chinese. And and you know

what too and that's one of the things

that that as as you know a watcher of

this space and albeit from a different

perspective you know in this role that's

one of the things about China that is is

scary is China 2.0 China 3.0 which is to

say come on in take a minority stake in

this venture you have access as a

manufacturer to a what 25 to 30 million

unit market right so you when you think

about that globally and absorbing cost

like this is great you just you can just

run the factories here meanwhile once

they're ready and they say you know we

we can sort of turn off that demand

row you out whatever rules you want want

to change. And you're right. I mean, and

and I can't believe and there's a lot of

things and I say where I say this a lot

in a about a lot of things. I can't

believe

auto manufacturers didn't see that

coming. You know, just just like

electrification, you know, you can't

tell me, well, you know, that Toyota did

the math, but you can't tell me that

everybody did the math and says China

owns the entire supply chain here. How

does this ever become profitable? Right?

If it's not profitable on day one or

even close, right? Look at Ford Model E.

The loss is there, $5 billion a year.

How does it get profitable when China

controls that supply chain, which is

which is a strategy that's been in place

for decades, you know, controlling the

mines, controlling the processing. Um,

so I I agree with you. You had to see

this coming. We're here with Kevin

Tynen, the head of research for the

Prescigio Group. More with Kevin Tinen

after this.

>> We are back with Kevin Tynan of the

Presidio Group, formerly of Bloomberg

Intelligence. Let's get back to our

conversation.

When we go back and look at the history

of of this and how this all unfolded,

what are what are historians going to

point at and say was the fatal flaw

which led to them not seeing this

coming?

How how could they miss this?

>> Well,

yeah, this probably would be an

unpopular way to put it, but Right. So,

you go back to the diesel cheating

scandal, right?

and and as a global manufacturer which a

lot of those German companies are uh and

were and will continue to be right you

want to share as much technology

platforms parts as possible right that's

that's the point of being global but

when you understand that the demand

profile in all these regions is very

different right we drive big trucks here

that just doesn't work in Europe it

doesn't work in a lot of parts of the

world probably other than here. So when

you think about the the diesel scandal,

I think there's this sort of light bulb

that goes off for European

manufacturers, Germany especially, that

says, okay, maybe diesel is not the way

forward. And if it's not the way forward

in Europe, well then it's not going to

be the way forward in the US. And we

always sort of push back on diesel. I

know people love diesel, but it was

never it was never high volume. It was

>> some people some people love big truck

guys love diesel you know

>> right

>> it wasn't you know it was it was niche

right so now you say okay like let's

face the reality that that diesel is not

going to be our way forward and then you

get the cheating scandal and then it's

like okay now we have to be

environmentally responsible and you know

>> and do what we need to do. So now you

sort of invite electrification in you

say hey look we're going 100% EV and

then there's China waiting by the phone

going you know funny that you should

mention that because we've accumulated

all the assets and and and created the

supply chain and we can do it cheaper

than anybody we can get you EVs you know

all day every day and when you just let

them export to you and you import those

products again that's that's zero sum

That's one product you bring in is one

you don't build and sell in your own

country. And then that snowballs

once that Pandora's box is open, that

foot is in the door, it's hard to

reverse it. And I think that's exactly

what in hindsight it will look like. Is

that

>> is that is that then I mean no problem

for US manufacturers in the sense that

um Americans for the most part aren't

really buying EVs and we're not allowing

Chinese imports,

>> right? But but then what do you hear?

You hear, you know, what I call we're

getting technology shamed. And I don't

know if that's, you know, the narrative

that's coming out of China or or from

our own country, which says like, oh,

we're falling behind because we don't do

EVs as well or to the volume that China

does them, you know. And my my response

is, well, we don't have to. We do we do

pickup trucks better than everybody

else. Now what's what's going to happen

though and what it the the side of that

argument is that okay well now look at

China exports their vehicle exports

right 1.1 million exports in June alone

right so a 12 million unit a year run

rate just on exports never mind their

own domestic market

and then look at the size of the total

global auto it's 70 million vehicles 905

if you include commercial stuff. So,

they're already exporting a large part

of the world's vehicles.

We that we're not going to undo that by

standing and going toe-to-toe like I

think Bill Ford just came out and talked

about going toe-to-toe. And you know, as

I'm traveling around and talking to

dealers and I see other speakers and

this this idea of going toe-to-toe with

China, you understand that fight,

especially on EV, is already over,

right? This is not, oh, we stand

toe-to-toe. We're not going to take back

those China export markets, right? if

they're if they're exporting 12 million

units a year and growing

um we're not going to win that market

back because we're not a lowcost

manufacturer because we don't control

the supply chain right so again to me

the best thing that US manufacturers

could do is

you know and if it means joining up with

the European manufacturers and South

Korea and um you know other Asia

manufure saying like, "Hey, look, you've

won the EV battle. We're going to the

next technology, whatever that is,

whether that's better internal

combustion, whether that's

hybridization, whether that's hydrogen,

I don't know, whatever it is, but

understand that the export and the EV

fight, China's already won.

>> Wow."

>> And I think one of the dumbest thing we

could do is go, "Yeah, we'll stand here

toe-to-toe with you, right?" because you

know and it's

>> let me ask you Kevin when you say you're

basically saying like the American EV

has been crushed which I think was a

headline uh that we saw uh from that New

York Times piece a few days ago in your

mind does that also include pure play EV

makers in America like Tesla Lucid Riven

or are they in a separate category when

you're talking about going toeto toe And

we shouldn't we we're not doing that.

>> Well, here's the thing is I I'm my

second question is always, well, what is

your definition of winning,

right? And so you say like, okay,

is losing money, right, for Ford Model E

or look at Lucid. Lucid's like at its

bill of goods at its at its gross profit

line is like $100,000 per vehicle upside

down.

So, you know, and Rivian's closer, but

still, you know, no operating profit

there. So you say like, well, what what

and and you know, Tesla's profitability,

and you saw it the other day, um, you

know, and I would argue is not on the on

the automotive side, is not anywhere

near certainly what it used to be or

even what it used to be reported as. Um,

you know, because if you look at what

every other automaker does on the P&L in

terms of profitability of EV, I can't

believe Tesla's that different at the

end of the day, right? if you really if

you really got into the numbers. So that

said, you know, what is winning? Is

winning purposely losing money? And

that's and that's part of the issue too.

And and it's not that uh Chinese

manufacturers are that much more

profitable. You know, if there's 150

manufacturers in China, you know, a

handful are profitable. And and and the

point of that is that because it's not

automaker versus automaker, it's

automaker versus automaker plus China's

balance sheet, China government balance

sheet. And it's just not a fair fight.

So um the China the US EV getting

crushed. I'm saying like, well, if you

can't make money doing it, and I, you

know, I've said this for years, right?

If you can't make money doing it, you're

not going to want to do it. And that was

Toyota's argument, right? By the way,

Kevin, why does I mean with Tesla,

Elon wants to have another business or

many other businesses and that's not

valued as a car maker. Anyway, with

Rivian, you say maybe they're closer to

not losing $100,000 per car. With Lucid,

why bother? What's What's the point?

Who's who says like, "Ah, we should

continue this."

>> See a light at the end of the tunnel or

>> Well, Saudi Money says, "Let's continue

this." But well, I think I I think a big

factor of it was when you go back in

time, and this happened even this you

can make this argument for why Ford did

what it did, what GM did. Um, which is

to say when you look across the room and

there's Tesla worth a trillion dollars

for doing things, you know, you can do

also, you're not sure that the

profitability is there, right? because

you've done that math and you go like I

don't see it but but he's worth a

trillion dollars, right? His his money

losing automaker is worth a trillion

dollars. Maybe we get there or we have

access to capital that somehow gets us

there. Um but the math just didn't work

right. And that's what I'm saying is

Toyota did the same math and said we

don't get it. They're the one they're

the ones who stuck by stuck by their

analysis and said you know we and they

remember they were vilified for that.

like, oh, you're a dinosaur, you're and

now they're the smartest guys, right?

So, um, there was that valuation

component of it, right? So, if Mary Bar

Jim Farley can take Ford GM from

$40 billion market cap to 140 billion

market cap, even on a money losing

business model, right? That's that's

still value to them, right? And then you

hope that the day comes where where you

can get profitable in it. But it doesn't

look like that day is coming. And in

fact, it seems like they've they've

accepted that that day isn't coming by

writing down those assets.

>> Dude, can we get back to uh the German

automakers because I really want to

understand what's happening there. And

obviously you cover the entire industry

globally, but you have um like many of

us a love for a particular German brand

and motors that they aren't going to be

making anymore. Um Mercedes, you have

like a

>> at least one V12 there, right? So,

>> um and glorious.

>> You have a Do you have like an SL65 and

a 63 or something?

>> No, I have an older 600. So, I have the

naturally aspirated V12, the R129

platform, which ended in 2002. I also

have that car in the V8, uh the the

Silver Arrow edition, the last one they

made. And then

>> and then I have an ML55

AMG, so the little knockaround truck

with the uh naturally aspirated uh 5.5

L. They're And they're when they work,

they're unbelievable.

But but Mercedes, as I as far as I

understand it, Mercedes is doing better

than Volkswagen in this uh crisis and

BMW is doing better than both of them.

Is that fair?

>> Yeah, I BMW's announced some things. Um

but uh but yeah, that that's fair. And I

and I think um

you know when you look at BMW and the

component of that is obviously heavy

BMW, Rolls-Royce,

um Mercedes, right? different different

clientele right um and then within

Volkswagen the competitor would be Audi

which has really moved down market

especially here in the US when you look

at transaction prices of BMW and

Mercedes in the high7s heading toward

this is average high7s towards 80,000

and then you look at Audi is in the 60s

you know low to mid60s so I get the

point of finding open clear air to

operate in and not going head-to-head

with BMW and and uh Mercedes. But I

think it's hurt the brand. It's sort of

it's made it not look competitive to the

other two. But look, at the end of the

day, you said it in your first question,

which is you're dealing with unions.

It's hard to take costs out. So when

your market share regionally, globally

is declining quickly and you can't

rightsize your enterprise by getting

cost out of the system, whether it's

capacity, whether it's headcount,

whatever it is, you're going to have a

problem. And that's what that's what the

European manufacturers are facing now is

is do we continue to lose market share?

And if we do, can we get costs out quick

enough, which usually you cannot. Um, or

you have to find somewhere to go to

rebuild that revenue somehow.

>> How how serious is this movement in the

US to expel companies with I think is it

15% Chinese ownership? Um, how serious a

threat is that? I know Mercedes is

fighting against it. We had a piece on

on them. How is that a serious threat?

And and I asked also in light of what

happened with Polestar. Um how you know

could that actually happen to Mercedes

as well?

>> It's a it's a long tale on that. I think

the the number was 20 by 2030 which I

guess is not that far away. Probably be

here before we know it. Um you know and

maybe if that goes a couple years gets

pushed out a little bit further. I don't

think it would go as far as

>> Wait, what's the what's the number? 20%

ownership by 2030,

>> right? And right now Mercedes

>> provision

>> right now G J G J G J G J G J G J G J G

J G J G J G owns like 10% of Mercedes

>> 15 I think they're at 15 right combined

with G and private ownership

>> right so it would be you would you have

you know three four and if it's becomes

2032 I don't think it becomes 2035 but

basically you know you divest of them

you know those those

>> okay so they could adjust basically

>> I mean I guess if it's China that says

we're not giving up our stake, but I

guess you would have to. Um

>> but but but Kevin, um in in trying to

understand the problem with VW,

Mercedes, and BMW, and how bad each of

these German companies is impacted, it's

pretty apparent that BMW, which is doing

the best, produces a hell of a lot of

vehicles here in the US. Yeah.

>> And Mercedes produces some, right? BMW

has in Carolina. Mercedes has in Alabama

and Volkswagen has like none. Okay, they

have a Chattanooga plant, but no one

buys Volkswagen brand cars because they

don't really have any cool cars. And

then Audi and and Porsche obviously are

made in Germany for the most part.

>> Yeah. And look, I and that that's an

interesting point. Um and I and I

started to look at this last week before

I I was traveling. um you know where

where the operating profit comes from

for from global automakers right and and

and

two examples I usually give one is

Nissan and the other is Stalantis which

is right think about when it was Fiat

Chrysler and Sergio Marion was running

the company the presence in North

America and the US specifically was big

right you always knew who was running

the company you knew who was in charge

you knew, you know, like he was a he was

and and this is a very important market

in terms of operating profit.

>> They were always in Auburn Hills, all

the heads of the business,

>> right? Because because of Jeep, Ram and

the money that those those brands made

here is very important to the global

enterprise that became Stalantis. Nissan

is another example. Whatever the the

situation, the politics with Carlos go

once he's got same thing, right? like he

was a guy that you knew who the head of

Nissan was in the US in North America

for better or for worse, you know, with

with whatever their strategy was, but

really since then, you're kind of

looking at that company and I don't, you

know, and maybe that leadership is

great, but if it's over in Japan,

I feel like the this market loses

interest and and you really have to be

on top of this market because it is a

truck market and like it or not, you

know, that's where the profit is. So,

you have, you know, you can have your

your Nissan Centur, but at the end of

the day, it's going to be it's going to

be Rogue and and Pathfinder and and your

pickup trucks that that frontier that

make the difference here. And you can't

>> not forget the Armada, my favorite large

SUV.

>> Yeah. Right. So,

>> I love the Armada so much. Yeah, they're

enormous. Um I I just saw I was walking

in Atlanta the other day and saw what is

it like the QX80 and

>> the QX80 version.

>> Enormous. But but the point is is that

you had visible leadership, you had

vocal leadership

in in the US and it's a big contributor

to the profitability of those firms. And

when that went away, I feel like those

brands really slipped and have to get

back to that.

I want to go back to Mercedes for a

second because this AMG GT four-door

that they've come out with, which is the

electric sedan with the fabricated V8

sound, is so polarizing.

And Kevin, what like we're talking about

the strength and the merits of Mercedes.

What does a vehicle like that do to the

company potentially? Is it a non-issue

because the it's just gonna be here and

then go away because no one's

>> Did you see that reel I sent you the

other day on Instagram?

>> Yes, I did.

>> There's a parody. Somebody made this

parody reel which is AI. Um but you have

actual Mercedes and AMG execs bragging

about how they've ruined AMG. And I

don't think that's the case. Hannah and

I both love the

>> This is This is why I'm asking Kevin.

Let's get some an actual adult in the

room because you know people hate it but

the executives of course say it's a game

changer etc etc. I am going to drive it

this fall so I'm looking forward to it.

So give us a prep.

>> Well I think one of the things that's

important is is and you know my view is

this is a push industry. The

manufacturers going to do what's good

for them what makes them what makes them

profitable. But I understand the value

of meeting the customer where they are,

right? So, and but that means there has

to be choice. So, you can do your EV,

your plug-in hybrid, your hybrid,

whatever it is. Um,

>> your four cylinder AMG.

>> Yeah. Right. Like, you know, but but you

got to you got to understand where the

money is made, right? and and and as

long as they're doing that the

to go only EQ we're all electric right I

think is the mistake is my point is that

you know as my wife my lovely wife often

says look there's an ask for every seat

and and that's and that's true right but

but I think when you start limiting the

choice of of the consumer

because of profitability of because the

government is telling you you have to

move to one technology over another. Um

I think that's where you run into a

problem. I think Mercedes and I know and

and I was just saying like we spend time

with Adam Chamberlain uh at our

conference in in May and like he gets

it. He's a car guy. He's showing me, you

know, pictures on his phone of his

little pagod that he's having restored

and um

>> I like Adam.

>> Yeah. Like and he gets it. um

>> CEO of Mercedes-Benz USA, we should say

for listeners.

>> Right. Right. Right.

>> A British man.

>> Yeah. So, so, so as long as that sort of

passion is built into the brand, I think

it'll be okay. There's go there's going

to be compliance cars. There's going to

be emissions, fuel economy mandates. I

mean, look at Ferrari. I mean, that's

what that is. um you there's things you

have to do so that you can do the other

things that you want to do or the re

very profitable things and that's just

that's just the price of doing business.

>> Kevin, how badly has do you think the

luche has hurt Ferrari more than you

would have expected? It seems the

fallout seems pretty severe.

>> It did, but you know in the in the

scheme of things, what's it going to be?

you sell a handful of good clients and

you promise them a fire breather down

the road, right? So now, and I don't

know, I didn't do the sort of uh

research and analysis on this, but you

know, there's probably some sort of

global volume

uh uh sort of regulation that says,

look, if you want to sell this many

units, you have to have a emissions or

reduction or fuel economy level around

here. And this is the compliance car

that gets you there. This is what this

is the Chevrolet Bolt that lets you sell

Silverados all day long, right? So, so

you you you build a handful of them, you

get your good clients to buy them, and

now you're free to do the things that

you want to do, which is my point. And

until we get, you know, governments

around the world that step out of the

industry and let you just uh be what you

want to be, fail or succeed based on

what you want to do, that's what you

that that's the the cost of doing

business. So I don't I I didn't think I

thought the re was an overreaction to

that. I understood what it was. I um

would I have made it better looking?

Probably.

But I understand what it

>> me. It's interesting that the reaction

just continues to live. And maybe that's

an online, you know, amplification. But

I I want to just I want to get back to

Mercedes, Kevin. I want to get back to

Mercedes because uh because you're a fan

because Hannah and I are fans also of

especially the AMG GT63.

Uh, I'm currently in the AMG GT63 Pro,

which is like their, I guess, GT3

version of the car cuz they take out 500

lb by removing the hybrid pieces. But

the I also have driven the SE

performance version, which is like 800

plus horsepower, 1000 plus pound feet of

torque. It's insanely good.

>> Yeah. And

I've recently noticed because I'm always

hunting for older AMG GTs and hoping

that they'll fall in price. They're not

falling in price. And the same is true

with the X S65 and the SL65. I keep

hoping they're going to

>> uh depreciate more and they're not

depreciating.

>> I know. Well, and look, I think that

speaks a lot to,

you know, and and maybe it's niche in

this country, but, you know, people will

pay for the for the fire breathers. I

mean, I thought it was an interesting

move

when, you know, Dodge kills, SRT, Scat

Packs, Hellcats, Demons to make an

electric Daytona thing. Um, but the fact

that they're making them, as ridiculous,

and I'm talking about Mercedes, as as

ridiculous as they are for the everyday

driver, um, to me, again, like that's

sort of the point. And it shows that

that they understand that there's

there's a consumer there for that

product. And then you have to kind of

accept that every once in a while you or

more than every once in a while, but you

have to do you have to do the compliance

vehicle to be able to hit certain

regulatory targets that enable you to do

the things that your brand is passionate

about. And I, you know, I don't expect

the consumer or media to necessarily

understand that or like it, but it's

just it's just the realities of doing

business in the United States or in

Europe, too. But uh

>> by the way I on that point Hannah let me

just mention yeah

>> um we're always bemoning the death of

the manual transmission and you and I

have talked and we'll continue to talk a

lot about the BMW cars M cars that we

love for so long the CS like the M2 CS

doesn't have a manual

and the M3 CES never never did. Now, the

BMW is putting out an M3 CS with three

pedals and a stick,

>> and it's US only, which I thought was

crazy. Like, we're, you know, we always

talk about the fact that Europeans know

how to drive standard transmissions, but

the BMW is only selling this Han shelter

version in the US, which is which is

pretty cool.

>> Yeah. And and I think they just um

because I you know my my son is involved

um the Z4 he he had a manual

transmission Z4

>> that uh I think went out of production

or is I know he he cuz you know he's a

young guy. He's he's one of the 20somes

who can actually drive a manual

transmission um daily and uh and he

wanted to get another one and I guess

whether it wasn't in the program or

anymore or whatever happened but it was

a little disappointing. So now we're in

the used market looking for something

with uh that we can pedal ourselves.

>> The Z4 is a great used purchase. So is a

base M2 and they're I mean a Z4 in green

rag green rag top with a stick is such a

dream.

>> Yeah, his was his was purple

uh with a white interior and black top.

His his

>> I also approve of that color

combination.

>> Yeah, it was very nice. His his X6

uh X60 or whatever it is is is that

green color now. Uh very cool truck,

too. So Kevin, do you do you think E in

America EVs ultimately are still the

future because you know everyone in

quotes says they still are. It's taking

longer than we thought but they are

still the future. And if and if that's

the case

considering what you said before which

is China has already won EVs.

>> Yeah. What does that mean for us?

>> Yeah. I I look, here's here's the thing,

and you know, I've talked about this

since I was a child, which is

first of all, manufacturers

and dealerships will sell anything that

makes them money, right? You could

they'll sell you a bag of sand, right?

If if they can make money on it. So this

idea that automakers don't want to do it

or dealers don't want to sell them or

it's it's just it's it's about

profitability.

>> The purpose of car companies is to make

money. This is what

about making cars. It's about making

money. So, so if I'm working backwards

from that, to me that's that's the

argument, which is to say, well,

we don't control the the mining. We

don't control the materials processing.

We're way behind on that. Do we develop

our own supply chains? We're not going

to mine here. I can tell you that. Um,

do we get to the point where it becomes

costefficient enough for us to be

profitable on EV?

If so, yes, it's the future. Are we so

far away from profitability on EV

because we don't control any of that

supply chain or just, you know, the the

dynamics of the the cost inputs of that

technology will never make economic

sense. Then I would say then no, we're

not going to have EVs here. And and I

>> there's no point when when Chinesemade

vehicles would be sold in the US. It

>> Oh, well

again, and I I think that they could do

that with almost any technology because

it's subsidized.

So if if now you have to understand,

right, what what they China doesn't want

to be dependent on foreign oil. They've

accumulated the electricity

assets they they are. So it made sense

for their

for what they've built and their long

view of it to be electric to make their

transportation electric their generation

electric

and it and you understand that they want

the world dependent on China and them

not dependent on anything. So it's this

great capacity

uh supply chains to go in that direction

and now essentially the job is convince

the rest of the world that this is the

direction that you all need to go and

that's why I called it technology

shaming before well it makes sense for

you to go electric China and now you've

convinced Europe and Australia that you

need to go electric and you know whether

that's the argument of uh you know it's

an ESG argument or whatever it winds up

being. But it seems like the evidence in

terms of market share, the evidence is

that if you buy into that and go

electric, you give your your

manufacturing

industry to China. Now, keep in mind

also, and I've been saying this, there

probably will be an administration,

maybe the next one, that says, "Hey,

China, build your factories in the US.

Hire the UAW. share your intellectual

property, reinvest all your profits here

in our country, build all you want and

export, but you can't import anything.

There probably will be an administration

that says, "Look what I did. I brought

>> Dude, Trump already Trump has already

said that. He's like, I'm fine with the

Chinese if they build their factories

here."

>> But that changes the cost dynamics for

them also, right? So, so now they're not

this lowcost manufacturing in China and

then dumping vehicles all over the

world. Um, it changes that dynamic a

little bit. Not that they

>> they can steal whatever IP they haven't

yet taken. Right.

>> Right. Right. But the argument is we'll

go toe-to-toe and we'll steal we'll

steal it back, you know, which we

>> Well, you're not going electric, Kevin.

And neither are me and Hannah. So,

>> and again, I'm not I'm not anti-

anything, right? I love cars.

>> I love the electric Fiat 500.

>> I I car

>> if it has wheels, I I love it. Um, I'm

just saying from a financial analyst

perspective,

it just doesn't make sense. And I and I

understand that there's there's not a

whole lot of things that I would want to

drive, but that's because

you don't as a manufacturer, you don't

want to accidentally sell a lot of

something that you're losing money on.

It's it's the opposite point. It's why

we don't have great ones here. I think

it's why, you know, Chevrolet Bolt,

right? Like you look at Chevrolet,

General Motors is a good example, right?

You look at Bolt and it's like, "Oh,

it's not competitive to Tesla. Who

doesn't care about profitability?" Um,

you know, or even Lucid and Rivian don't

care about profitability. And you're

saying, "Well, Bolt is uglier than all

of those things." And it's like, you

can't tell me that Chevrolet, who makes

the C8 Corvette and has made Corvettes

for, you know, since 1953, can't come up

with a better design if they wanted to.

if they wanted to sell that product and

it was important and it was profitable,

you would get an incredible EV, right?

But when you look at the P&L and you're

losing $15,000

a pop and the government isn't making

you whole the way it is in China, right?

BYD was getting $44,000 a vehicle in the

early days of EV. It's probably about

still in the teens across the board for

those manufacturers. We're never going

to directly subsidize. So until you get

that, where's my motivation as a

manufacturer to you're forcing me to do

unprofitable things?

>> Dude, the the the Silverado and the

Sierra are amazing.

>> Yeah.

>> Yeah.

>> Amazing.

>> But even if you're losing money on them,

you're you're able to Right. So those

are those are again those can be your

compliance vehicles. I understand cafe

and emission, those regulations are

different now, but so and I would always

joke something like Bolt or Silverado

EV, if it were important to hitting some

sort of corporate average fuel economy

or emissions target, you would you would

uh you would put a number on the cubicle

of an intern that says 40,000 units. As

soon as that 40,000 unit is sold, that

intern comes running out of the cubicle,

goes to Mary Bar and says, "We did it.

Stop selling. Issue a recall, whatever

you got to do, and now go sell all the

internal combustion super profitable

ones."

>> And I'd like to say I'd like to just say

for the record, there have been many EVs

that I've given positive reviews to. For

instance, Gwagon EV I thought was great.

Uh Rolls-Royce Spectre, also great. Um,

>> Dodge Charger, Daytona, the electric. I

I had a lot of fun drag racing that.

>> I love Dude, I I love I lived with that

car for a week and absolutely loved it.

The whole Tyon, especially the wagon

version that's discontinued. Absolutely

loved the BMW i7. Um, I adore. And

>> what do they all have in common?

>> What?

>> They're probably six figures or better.

>> No, you're right. You're right. They're

expensive. They're expensive. That was a

conversation with Ke Kevin Tynan which

will continue on the other side of this

break. This is

we are back with Kevin Tynan of the

Presidio Group formerly of Bloomberg

Intelligence. Let's get back to our

conversation.

>> So call it for the first half of the

year. Are there any names that come to

mind in terms of brands that you think

are beating everyone else or really

doing especially poorly?

>> Well, it it's interesting because of the

expiration of the federal tax credit at

in September of last year, which in a

maybe nuanced way enabled

us or any manufacturer selling in the US

to kind of go back truck, right? And and

keep in mind, and when I say truck, I

mean everything. Pickups, crossovers,

minivans, whatever. We're 84% of it's

84% by volume in this country now,

right? So that financial pressure of a

compliance, money losing EV or small car

was a little bit riskoff as of the end

of last year. So what what you're seeing

is is you know GMC for example which is

really good stuff and I'm talking also

from the perspective that we have at the

Presidio Group which is you know looking

at the M&A market right dealers really

interested in in GMC and and maybe

surprisingly and I I don't mean in a bad

way Buick as well you know Buick is

>> they still make those. Yeah, I know,

right? Old guys like us still think

that. But I think what's interesting is

by transaction price, Buick is actually

GM's most affordable brand. It's not

Chevrolet anymore, right? Because

they're not doing big pickups. So, I

think that I think that that, you know,

average buyer age of might still be in

the early hundreds, but but it seems

like that's sort of rolled over and the

younger generation is saying like, "Hey,

I need something affordable." Uh, and

this is it's not

>> that's depressing, dude. I got to say,

like, so a GMC is among my very

favorites. If I have, you know, a Yukon

AT4 in the driveway, like I'm making

every excuse to go on an errand, right?

If I am test driving a Buick and Vista,

it makes me literally depressed about

life,

>> right? Right.

>> But but that that's sort of the that's

sort of the point, right? It's it's

going to be a loss leader. But but you

what you understand though is if you

take Buick out of that mix,

GM's average transaction price is

probably north of $60,000.

And what you're doing in that instance,

and what has happened over the years, is

that you're basically telling the

consumer, we have nothing for you until

you're ready to spend $60,000 because

we're not going to make a, you know, and

you're seeding that market to your, you

know, mostly Asia-babed competitors,

right? who who can who can willing to

lose money at sub 35 or 25,000 or 30 or

$25,000 because what they're saying is

we we'll use this as a loss leader. We

but we think you're going to like the

product and the dealership experience

enough that you'll come back. That same

argument for somebody like GM without a

Buick or uh you know the bottom of the

market Ford stuff has gone away. What

you're saying is is that we we don't

believe in our sort of customer

retention from 25 to 35 to 45 to 55

where you're profitable. That's four

unprofitable vehicles we have to sell

you hoping you come back into the

money-making part of our portfolio. So

>> by the by the way, first of all, GM has

an Asia based product, right? So they

can tell you it tracks. And and by the

way, part of the problem is tariffs

because it's more expensive for them to

produce that kind of vehicle here than

it is for them to produce in Korea and

import it. They'd rather take the 15%

hit.

>> On on another note, Kevin, I have to

say, so I recently bought a 2020 BMW

M760. It's the 6.6 L V12. I love it. And

after I got it, I took it to the BMW uh

place here in Portchester for service.

Um I had them, you know, check and test

everything from uh the radiators to the

hydraulic, you know, the air suspension,

like everything just cuz I want to keep

it forever. And I also uh hit a pothole

on the WT Parkway and blew out a tire.

So I had to take it to the BMW

dealership in day in Beayshore, Long

Island to replace my tires. Um, all this

is a long way of saying I've experienced

BMW service and it is next level. It is

the dealer the BMW dealership uh service

experience is

for me only paralleled by um you know

German like when I had my Porsche in

Berlin um or when I bought my uh G Wagon

in Stoodgard. Like that's the level of

service at these BMW dealerships. I'm so

impressed.

>> Yeah. And and I think um you know that's

one of the things and and it's one of

the areas in terms of the dealerships

I've been looking at a lot is fixed ops

you know parts and service um and and

what I'm starting to believe is that is

is that the the problem there that the

consumer has with with uh franchise

dealer service departments is is

capacity, right? It's, you know, there's

not enough text, there's not enough

bays, it's not and and it's really not

much more expensive when you look at the

hourly rate of independent repair shops.

Uh, but the fact of the matter is when

you call a service department and you're

two and a half, three weeks out from an

appointment

>> is a big deal, right? And that that then

that

>> these guys took me immediately, right?

>> By the way, the way the way the tech

works with me, I trust him. I don't feel

like I'm getting ripped off even though

the prices are high, you know.

>> Well, they saw your V12 and they

probably

closed the shop and went home for the

for the month because you you just sent

everybody to college.

>> It's not that bad. It isn't I mean isn't

it isn't cheap, but it's not crazy.

>> Yeah. Now, and that's that's one of the

things that like I'm saying is that we

we think that because when I look at

repair or RORO counts of customer pay,

what we would call customer pay of the

franchise dealer base, they're flat. But

when you look at the value of vehicles,

the number of vehicles, the age of

vehicles, how much we're traveling, you

would think that dealership RRO's would

be going gang busters through the roof,

and they're not. And I think it's a

capacity issue because I don't think

it's to your point, I don't think it's a

hourly rate issue either because it's

not that much worse than what you would

get at a BMW specialist, you know, in

Great Neck or wherever you wound up

being. So, um, interesting dynamic

happening in the franchise base in terms

of parts and service. Um, but yeah, for

for us guys with V12s, that's a it's a

little scary. I'm I'm wrestling with

mine with a obscure engine code right

now, but

>> it's a little bit older. Dude, I don't

want to keep you for the entire

afternoon. Like, I do still have a

million questions, but I'll just I'm

going to come over.

>> Have you back?

>> Yeah, stop by. Let me know when you're

in town. We'll go uh we'll go for a rip.

I got a good I got a good little windy

road on the river here that we uh that

uh it was funny during co we were all

isolated. were all working from home in

those first couple weeks. And I I got a

good neighborhood for car guys. And

about 12:00 every day, you would go down

this river road and there would just be

911s and me and my V12. And it was like

a it was like a just waving everybody.

Just everybody blowing off steam in the

middle of the afternoon and uh you know

if you got pulled over, you just coughed

into your hand a couple times and the

cop let you go. It's

the good days.

>> Oh, they were the great days. Love

lockdown. Well,

>> Kevin, thank you for joining us. It's so

good to talk with you.

>> Yeah, great.

>> Really appreciate it.

>> That does it for this week's show.

Remember to follow and subscribe to Hop

Pursuit on Apple, Spotify, and anywhere

else you listen. You can also send us

your comments. Email us at hop pursuit

bloomberg.net.

And check out Hannah's columns and

stories on bloomberg.com and on the

Bloomberg business app. Go there for car

reviews, events, and stories that you

won't find anywhere else. Find it all at

bloomberg.com/pursuits/autos.

I'm Matt Miller.

>> And I'm Hannah Elliot. We'll be back in

your podcast feed again next week.