Sam Abuelsamid  0:00  
This is episode 420 of wheel bearings. I am Sam Abuelsamid from telemetry, and I'm the only one here right now because Nicole and Robbie are both traveling this weekend. But I have had a bunch of conversations with people over the last couple of weeks at a couple of different conferences I attended, and these have all been already available to Patreon supporters, but now everybody can listen in on these. I think there's some some really good stuff here. So have a listen. We're going to start off with Mike Dowsett, who is the Chief Engineer, Head of Development for electric drive systems at Magna International. Magna is one of the largest automotive suppliers in the world, and they produce just about everything, almost every part that goes into a vehicle for some automaker or another, in many cases, many automakers for similar components. So I talked to Mike at the Center for Automotive Research Management briefing seminar in Detroit last week,

Sam Abuelsamid  1:48  
what's what are you seeing right now? Overall, on the industry, 

Mike Dowsett  1:51  
I think that the consumers are making their voice heard. They weren't quite ready for the trajectory that we saw BEVs, I think the whole industry was expecting a much faster growth, aand I kind of touched on it just now up on stage that certainly in North America, I do think we have some unique challenges, and that is the vastness of the country. There are a lot of Americans that don't live in a city don't have access to a maya with 10 superchargers in the parking lot. There are many Americans that don't have a garage there, they can put their own charger. So I think an adjustment was the right thing to do. I think that the demand we're seeing now for hybrids is real, and I think it will continue for some time. I do think again, touched on it on stage briefly, but a plug in hybrid with a reasonable sized battery can deliver for the consumer some really exciting electric performance that they won't have been used to, and they'll feel and see the difference between that and their combustion engine. And if you can get a plug in hybrid with 5060, miles of range, which they're trying to do a card, I think that's the way to go. And then we're going to start to educate the masses that actually electric power trains are great to drive. They're exciting, they're silent. They really do change the driving experience. And I think that will boost the growth.

Sam Abuelsamid  29:03  
My next conversation is with Caroline ferlara and Mike Messina from Brembo. Brembo is probably the world's preeminent manufacturer of high performance automotive braking systems. They're involved in both production programs increasingly high performance vehicles from almost every brand have an option for Brembo brake systems. And they are also obviously heavily involved in motorsports. They supply all of the teams in Formula One and in many other series as well. So have a listen.

Mike Messina  30:47  
So in terms of, you know, obviously my, my forte is motorsports, and that's, that's where I live.

Mike Messina  31:43  
cautious to preserve, and that comes through technical innovation. So being the the the the Brembo, of whatever level you're at, so to speak, you know, when you come sort of, you know, down category, so to speak, you know, you have all these prestigious brands, then you have some other brands that are a little bit more, I don't, blue collar, but a little more mainstream,

Caroline Fallara  32:59  
right now. And this is, this is made out of, you know, we talk about the calipers a lot because this is what you see. And this is our is very distinct, distinctive from a brand standpoint. But our discs business is also huge. So there's a lot of cars that maybe you don't know, because it doesn't say, but they have rainbow discs on them. And this is, you know, this is, this has been a very important growth for us, and that's the reason why where we are today, also in terms of size, right? So it's on not only calipers, but also discs. So,

Sam Abuelsamid  58:17  
I also spoke with Michael Dunne. I've been meaning to have Michael on the show for ages. Michael is a real expert on the Chinese auto industry. In particular, he lived in China for better part of 2526 years, and as well as spending some time in Thailand and Malaysia, and we talked a lot about what's going on with the Chinese auto industry.

Sam Abuelsamid  58:48  
All right, yeah. Michael Dunne, CEO of Dunne insights, and one of the foremost American experts on the Chinese auto industry, he lived in China for a long time, right? Yes, I was there from 1990 through 2016 so how many years is that? 2626 years, 26 years with sidebars in Thailand and Indonesia, but basically Asia for 26 years. So, and you still, even, even now, you know, almost a decade later, you still spend a lot of time in China. You talk to a lot of the Chinese companies, for for those that are not familiar with the Chinese auto industry, give us an overview of what, what's going on there, what and how has it changed in the last well, in the last 20 years, but especially in the last five

Michael Dunne  59:37  
for Most of this century, Global automakers, your Mercedes, Buick, Honda, Toyota, Hyundai,

Michael Dunne  59:45  
j ust had golden years in China, growth and profits. Growth and profits. Chinese consumers love foreign brands, and it looked like forever profit machines for Global Automakers in China, until it didn't. Yeah. I mean, that's why Buick still exists today. Exactly.

Michael Dunne  1:19:42  
hope that was helpful. 

Sam Abuelsamid  1:19:45  
And finally, I've got conversation I had at the move America Conference in Detroit this week with Benjamin Millard, who is the general manager for North America at free to move. Free to move is a business unit of stellantis over the years.

Benjamin Maillard  1:20:58  
We are tech mobility company, are always flexible, always digital, that that's what we do, and that's what we do our best to provide to the dealers.

Sam Abuelsamid  1:06  
and have a listen.

Sam Abuelsamid  1:14  
All right, Mike, let's talk about electrification. David's subject, yeah, I just listened to to your panel over here. And I guess let's start off with the the industry is in, shall we say, a state of flux right now, you know, trying to figure out what, what to do next, from your perspective, leading the EV and electric propulsion stuff for Magna,

Mike Dowsett  3:21  
But in the short term, hybrids, absolutely and again. Mentioned it briefly on the stage for Magna. We have a very long heritage of combustion engine powertrain, so world leader in all wheel drive, four wheel drive and manual transmissions, DCTS. We've been doing that for decades, and then we worked on electric vehicles and the power trains for electric vehicles for a decade almost, and now we bring all of that together in a hybrid, which is a very natural place for Magna to be. It brings all of our experience and product knowledge together. And hybrids are real. We're seeing an awful lot of interest on the we call it DHD is the dedicated hybrid drive where we're actually put in one or two electric motors, high voltage electric motors, into the transmission that gives real exceptional performance. And it can be range extender, a parallel, a series hybrid, depending what we do with a clutch and the gear, the clutches and the gears inside that transmission, we can give our OEM customers, really, any scenario, any driving scenario they like, whether it's combustion engine and electric together or one or both. We can give any combination of those, and it's more complex. It's not an easy thing for some suppliers to do, but as I mentioned, for Magna, is a really natural place for us to be. We're using our same engineers, our same global skill set that we have in a real, true global team, to deliver these quite exciting hybrid transmissions. So certainly that's going to take up an awful lot of our time for the coming years. I do think we're seeing BEVs alongside it. I think. The data that Mike just presented is pretty accurate, but in most of the hybrids for North America, we're going to put an electric drive on the rear axle, for example. So we'll have a hybrid Taylor through the road hybrids for those application area. Call it a p4 but yeah, just an independent E drive in the rear very low cost, but it gives you that all wheel drive that you need when you get stuck or you can't get up your drive and you just need a little bit more or for that overtaking maneuver when you need more torque. So it gives real extreme flexibility. And our portfolio is so broad for electrification, but also hybridization that we can supply a hybrid transmission up front, either longitude nor transverse. We have both in our portfolio, a really low cost E drive, a p4, in the rear axle, whether they want it. So that's the selection the consumer can make if they want front wheel drive, or if they want all wheel drive. And all of that exists today in our portfolio. So so

Sam Abuelsamid  5:59  
it sounds like it's interesting, though, the way you've just described it is that you kind of come at the hybrid side from so the opposite direction of somebody like Toyota, yes, that, you know they, yeah, they've been doing hybrids the late 1990s and Magna focused more on Bev over the last decade. Yes. And now you're and Toyota, Honda, they're taking what they weren't from hybrids to bring it to plugins and Bev, and you're going the opposite direction, yeah. And so have you been able to leverage some of the the lessons learned from developing Bev or pure, electrified power trains to what you're doing on the hybrid. This hybrid

Mike Dowsett  6:46  
side, it's a great question, and absolutely yes is the on the easy answer is yes. So the application of high voltage electric motors into a transmission is not an easy task. There have been a lot of lessons learned in our first programs using full EVs, all of that cores into a hybrid transmission. It's extremely compact. There's a lot going on in a hybrid transmission. We're not given any more space in the vehicle than the original ice transmission. So we have to get two big electric motors, typically, a couple of clutches, usually. And we will get all of that into the existing drive. And to do that, we use all of our lessons learned. So we've been working on hybrid transmissions a lot longer, especially in Europe. We started off with 48 volt, and we're now up at 800 volt and 400 volt. And because we're a truly global engineering team, at least, we certainly transfer all those lessons learned for local engineering to support an individual customer. So we've won business on hybrid transmissions in China and North America and in Europe. So all we share those lessons learned on a daily basis. We have a system just for lessons learned, and they really go down into the absolute detail of designing one of these transmissions for our customers.

Sam Abuelsamid  8:01  
So one of the, one of the interesting things, like, from the conversation yesterday, I don't if you were here yesterday, but cherry Wieckowski, president of chair, talked about, is the one of the things that's different in China, for example, one of the advantages they have versus the Western automakers, because the Western automakers often, you know, they'll go to a supplier. A supplier will have a product off the shelf, but they will want something slightly customized, yep, for their use case, yep. Whereas in China, they the automakers are much more inclined to just take whatever's off the shelf, and they get the benefit of lower costs because that supplier is selling 234, million of the same part to multiple OEMs. Are you finding now with with OEMs, Western OEMs, that that they are more, maybe more willing to take essentially, an off the shelf component, as opposed to something that's more bespoke, especially because of the fact that they are now having to go back and invest down multiple pathways, whereas they were hoping to go all bad before.

Mike Dowsett  9:13  
I think there's a really strong desire from the big OEMs to do what you just described, reusing what's there that typically, especially those with all that combustion engine heritage, they're struggling to do that. They always want their unique spin on something, but there's a strong desire to do that to drive costs down at Magno, what we do is we have what's called building blocks. So in every aspect of our power train, we have split up into building blocks all the different aspects. I'll give you one example, an oil pump, for example, that we would have in a transmission or an E drive, and we have a building block that looks after just the oil cut. They look after another actuator, but it focuses on that globally. So if we found either. Off the shelf, third party oil pump that we can use, or if we design and develop on ourselves, that will be owned and managed by a building block, and we in engineering are charged to reuse as much of that as we can. So before we ever sit down, we start with our clean sheet of paper. No, we start with an existing E drive or transmission, and then we see how much of that we can reuse, and that does include taking off the shelf components from other tier 234, suppliers, and trying very hard to reuse the Addis, because we know if we change one thing, it has to be tested and validated, and it drives significant incremental costs. So we're trying ever so hard with all of our drives, combustion engine, whether they're hybrid or EV, to reuse these standard components from across our building blocks, and we've been more and more successful at that as we move forward, and we also get into a point where we're now able to collaborate really closely with an OEM, and we can justify some of those standard components we would do. We would say, I understand you would like this oil pump, for example. But however, if you use this oil pump, we can say, you X dollars, both in terms of engineering and piece price, yeah, and we, I'm finding certainly, that the OEMs are more and more open to that some of them are still struggling with their legacy, but that there's a huge drive for affordable vehicles, especially EVs, yeah,

Sam Abuelsamid  11:29  
especially since so many of these components that that do add that incremental cost, yeah, are not things that differentiate the product from the consumer perspective. Consumer doesn't care where that oil pump I'm as long as it

Mike Dowsett  11:41  
works very well. Yeah, I agree with you. In powertrain, though, adjusting one widget in the overall can affect the performance of the vehicle, whether it's torque or power or longevity or movie. So for an oil pump, if you find an oil pump that doesn't quite deliver the volume of oil you need or that cold viscosity when it's zero degrees, that can impact the overall performance. And then the consumer feel for the power we all feel the power train, whether we know it or not. You know you feed it through the seat of your pants. So that's all a factor. And many of the OEMs, especially in BEVs, are looking for, how do they transmit their brand? Now, most OEMs used to deliver their brand through their engine. They owned their engines. They tuned them, they made them. It's a lot harder to do with electric drive. Exactly that. So when you start to suggest changes that could impact the drivability, the way it accelerates, the way it decelerates, the noise, all of those factors come into that widget, unfortunately, so. But the good news is there's very much a two way collaboration with the OEMs now to come up with the best overall solution. Still hit their brand that they're looking for, the their drivability, the way the vehicle feels. But try and reuse as much as we can. You know, to validate any drive train is many, many millions of dollars. You only have to change one aspect, but you have to test that the whole thing are going for a long time. So the picture is clear. And in engineering, we're absolutely charged for maximum reuse, and if we come up with something new, we're already thinking about the next programs and how adaptable and flexible that is. So I'm designing an E drive now with my team in Troy, and we're already looking we're designing it primarily for the North American market and what we're seeing, but we also know it's going to be in demand in China and Europe for slightly different reasons. So we're building into that flexibility, and that's really important, because overall, it's going to drive down the cost of our power trains and make better business for Magnum.

Sam Abuelsamid  13:54  
Going back to a hybrid drives for a minute, what is Magnus approach to the hybrid drive architecture. Are you doing it, combining the motors with a step ratio transmission, or doing the ecbt type of architecture? Or you doing both,

Mike Dowsett  14:11  
both, okay, whatever our customer wants, and we have them all in our portfolio, so there's an interesting demand from our customers and their consumers. That's it's the full breadth of all of the different hybrid transmissions. If you see our our commercial depictions of DHD, our dedicated hybrid drives, you see it's one motor two motor series operation, parallel, extended reins. They're all in there, and we can do all of those. Usually the biggest constraint is the package space. How much space do we have to work with? And sometimes that can dictate what type of hybrid drive it is. And we're seeing all of those literally the full spectrum. The best is when you can have a dedicated. Hybrid drive that has a generator in it and a traction motor that can operate in all of those different modes and give absolute flexibility to the OEM. Cost a little more money, doesn't optimize one or the other, but gives you a really good performance. Pure electric. It can give you electric and combustion engine if you're hauling your boat out of the lake. Absolute flexibility, as long as the battery is big enough. I kind of touched a little on the stage. Haves with their tiny battery are very limited electrically, but the plug in hybrids with a decent 2030, kilo battery can do some incredible things there. Did that answer your question?

Sam Abuelsamid  15:41  
Yeah, that sounds like it, yeah. You're using that, that building block approach. You got the same, same basic motor designs that you can, yes, combine with different gear sets and different different combinations, depending on the all the other constraints that you have in the vehicle.

Mike Dowsett  15:58  
It's a really good point. We are trying to reuse all of our motors and the inverters that drive them as much as possible. And there is quite a lot of flexibility in doing that. So yes, absolutely, we can reuse motors and the inverter that drives them and then just adjust within the gearing to give the OEM what they want. That's what we do every day. That's how it is this.

Sam Abuelsamid  16:21  
So, talked about hybrids, plug in hybrids. E revs is an area that's getting a lot of attention. We mentioned it up on stage. So this idea of the extended range EV, where the propulsion of the vehicle is exclusively from the electric drive units, and you've got an engine, internal combustion engine, driving a generator to extend your range. The first of those for the North American market should be arriving first half of next year from stellantis. But beyond that are how much interest are you seeing from OEMs or North America for E rev applications? And you know, are they, are they coming to you, or are they doing it more in house or

Mike Dowsett  17:11  
and what kind of applications? It's funny, the answer is always yes. With Magno is so so big, and we have such a depth of knowledge, we're seeing a lot of interest, and North America is the primary market. But we are getting interest in China and Europe as well, but North America is the primary one. There are a couple of ways you can do this, and it doesn't have to be a combustion engine driving the rain. It could. Also could. There could be some other things. So again, I come back to the thing I said earlier about the vastness of the US. I have thought for more than a decade that a range extended battery electric vehicle is the ultimate solution for North America. You may not use that range extender for three four months, but on the day you need it, it's there, and you've got a strong tank of gasoline and and that's the reassurance that many North American customers are looking for the the range extender piece is not so expensive. You know, I've been driving valves for a few years now, and if there were an option to tick the box for $1,000 for a range extender, I would tick it every time. I don't think I'd ever use it, but I would still tick it

Sam Abuelsamid  18:21  
give me, can, can you get the cost down to that point where, you know, be 1000

Mike Dowsett  18:25  
we have to, I think it's in that ballpark. It might be 1500 it might be 800 it depends on how much power does that range extender produce? Yeah, big part of that.

Sam Abuelsamid  18:36  
And I can see where, you know, something like, you know, what BMW did with the i Three, yeah. So, yeah, you could not only get it down to that price point, yes, but yeah, I mean that that vehicle was also extremely limited. You know, once you're into range extended mode, yeah, yeah, you only had about two gallons of gas. And, you know, it was our limited and speed limited.

Mike Dowsett  18:57  
And so we've worked on lots of solutions, from a small SUV to the big trucks, and a range extender for the big trucks is like a v6 usually, yeah, it's a big engine. And then we're not really emission free, are we at that stage, even if you put really good after treatment on that. I think the lowest cost range extender is one that will keep you running at 70 mile an hour. You know, I've got, I think, in these 4567, gallon to gas, yeah. But it depends. Again, it comes back to that OEM brand. What do they want? What are they looking for? And we do see the entire range from our OEM, because customers, there isn't, there isn't a one system that's dominating. They are all over the place. Okay, it appears that that piece of our technology hasn't found it's it's no star, it's silver lining. They are all over the place, but they're reusing what we know. So the motors in there, the inverters in there, the gearbox that drives it for the optimum. Speed and efficiency, all of that is what we do every day. So it's coming. Don't know that there's a one job that fixes all but we're seeing more and more interest in that

Sam Abuelsamid  20:12  
so and if you had to look forward five years at the North American market, yeah, I mean, in China right now, and got you got E revs in all kinds of different views? Yes, but where do you think we're most likely to see them? In North America? Is it going to be the bigger trucks and utilities, or is it going to be that mix? You know, e revs in different applications?

Mike Dowsett  20:37  
I think it's going to be the mix. Okay, we have such a diverse consumer base that there are so many different applications. The range anxiety issue has not been fixed. We're still suffering from that. It needs a lot more work. And I do think range extenders are a really good midterm solution. I think their future is limited. There will be a transition to pure Bev, but I think the next decade is going to be full of range extenders in different formats. Yeah, whether they're true range extender very high electrical power, giving you full capability until your gas tank is empty, or we're the ones that just keep you a motor freeway speed until you can get to a charging station, I think we'll see all of those and family SUVs are probably the highest anxiety of any they want, that they want, that backup plan should they forget to charge. Or, as I get occasionally, the app on my phone doesn't quite do what I asked it to do, and you come out in the morning and your battery didn't charge overnight, as I think having the backup is a really good short to midterm solution. And as I say, we're seeing a lot of interest in that. We're doing a lot

Sam Abuelsamid  21:51  
of work. Yeah, once, once the charging infrastructure is more built out, and consumers are more comfortable with the reliability of it, that they know that they know that when they get to a charger, they're going to be able to charge reasonably quickly and, and the Chargers are going to be working when they get there. And, and I think you know. The other thing, of course, is, you know, as people get accustomed, especially with people with plug in hybrids, you know, and they realize, you know, my plug in hybrids got 50 miles of 40 or 50 miles of electric range, and I haven't put gas in it for six months, yep. Do I really need a four, 500 mile path? Yeah?

Mike Dowsett  22:28  
And then I absolutely agree. And then you throw in with that, the fabulous driving experience that is a Bev. Their next vehicle will not have a combustion engine in it. Yeah. Most people are 5060, mile range is that trying to push in California is enough for mostly, I have a I have a round trip of 180 miles in my Bev to go to the office and home. So my Bev gets a really good workout. And I've been on road trips and charged on road trips. Never had a problem. I have zero range anxiety. But what are you driving? Uh, Tesla, model Y performance, okay. And I had a model Y before that, all wheel drive for many years. No complaints. I mean, absolutely wonderful vehicle and zero range anxiety, yeah. And that includes pretty long road trips the Supercharger network, and the way it works for the GPS is very confidence inspiring. So I keep pushing the EV button. But in the meantime, hybrids, they're great for those that aren't quite on board yet. And as I say, I do think the next decade and a little bit more, we're going to be dominated by hybrids. When I talk to non automotive people, their first response is, I want a hybrid. They don't even really fully understand it, but they've already convinced themselves,

Sam Abuelsamid  23:45  
the cost differential between just a straight up gas engine and a hybrid has gotten so relatively small, yes, and you get so much benefit out of it. And it's in terms of fuel efficiency that it, you know, it makes sense that that should really be kind of the default, you know, that's your starting point for pretty much everyone.

Mike Dowsett  24:05  
Makes a lot of sense. And with battery prices coming down, that's going to get better and better and better.

Sam Abuelsamid  24:09  
Yeah, yeah. I mean, in a lot of cases, you know, you're only looking at 2020 $500 premium, yep, or for a hybrid version of the same vehicle, and instead of 30 miles per gallon.

Mike Dowsett  24:20  
You're getting 50, or if you have a shock to you, 100, yeah, no electric cars per gallon, yeah? I agree.

Sam Abuelsamid  24:28  
So one, one more thing on P, H versus E, rub. You know, given that you know, a P have is fairly mechanically complex, you know, the the hybrid drive unit compared to an E rev, and E rev is mechanically simpler in a lot of this past. You know, typically has a larger battery, but that doesn't necessarily happen that

Benjamin Maillard  24:51  
large woody. Which

Sam Abuelsamid  24:53  
one do you think is going to be the bigger factor in the North American market?

Mike Dowsett  24:59  
I. Yeah, it's very hard to say, but based on the discussions I've had with some of our customers, some of the vehicle maneuvers that define our industry, for example, hauling a boat out of the lake up Davies dam and continuing that for a couple of miles, you can't do electric only, so you really need the combination of the internal combustion engine and the electric motor to achieve what we've been doing for years. So I think that is gonna probably push us. P, have direction, okay, there are an awful lot of Americans that tow and haul huge trailers with huge loads once a year or twice a year. But it doesn't matter if you're trying to haul that out of the lake and you haven't got enough talk, that's a bad place to be. So when we design a power train, we're really driven by these specific vehicle maneuvers that are still in demand from our customer, the OEM. If we eliminate those, I see a different answer. But right now, those are still very much required by our customers, and to meet those without being a crazy electrical system, we use both the internal combustion engine and the electric motor in combination to achieve those difficult maneuvers. And it's not just hauling. You know, some of the roads in the US go uphill for a long way, miles and miles and miles, and that's challenging for an electric drivetrain. So you think, P HEF, but certainly the revs are a slightly lower cost and less complex solution, like you mentioned. Now, so is that I didn't want to say it depends. That's the answer that everyone good. It really does depend on what does our customer want to do with this vehicle.

Sam Abuelsamid  26:58  
Okay, any final thoughts, we haven't talked about that.

Mike Dowsett  27:02  
I don't think so. I kind of touched on it in there. Magna are in a wonderful place, because we have, we're receiving extensions on combustion engine business where the market's unsure. We're getting a huge amount of hybrid business right now, and we have a very, very strong Bev, a full electrocation portfolio. So right now, whichever way it goes, we're in a very strong position to give our customers what they want. Yeah, they have all the bases covered. We do, and I find that in this because, because the market is so volatile right now, the OEMs are leaning on their big suppliers like Magna that they can trust to deliver something really complex. That's happening more and more in my time in the industry, I've seen OEMs spreading the net wide, looking for the best solution. But although there are a lot of suppliers out there right now, I do find that because of the complexity and the need to be adapt and change direction quickly and cost effectively, they're looking at people like Magna with huge manufacturing experience, localized manufacturing around the world. It feels like all roads lead to Magna right now, and that's what our customers are telling us as well. Because of this adaptability, flexibility, the building block scenario I mentioned, all of that puts us in a really strong position. So that's all, I mean, okay, I don't mind which way it turns. Personally, I'm a vev committed person, and I will continue to try and push that outside of work. You know, I sell my my battery electric vehicle to anyone that asks the question,

Sam Abuelsamid  28:38  
Well, we, we, you know, I've been driving many BEVs for many years and reviewing them, but we actually just bought our first Bev a couple of months ago. That's nice. And what did you get? We bought a key to EV six. My wife out drives it, and she's loving us.

Mike Dowsett  28:54  
Beautiful car. Yeah, yeah.

Sam Abuelsamid  28:56  
All right. Well, thank you so much for your time. Mike, big

Mike Dowsett  28:59  
son. I appreciate it. Thank you.

Sam Abuelsamid  29:41  
So Brembo is obviously probably seen as the most high performance braking manufacturer in the world. You know, supply Formula One, supply many other racing programs, but it's been interesting to watch over the last. You know, 3040, years. You know where it used to be. You know, I've been, I've been in the industry, you know, since, since the beginning of the late, late 1980s when I graduated and watching, you know how Brembo has gone from being really a niche manufacturer to being available on so many mainstream vehicles now, and the evolution of the brand. Yeah, it's like, it's not so it's hard to find vehicles that don't offer a Brembo braking package on their performance models anymore. It's where let's start off with. You know where you see Brembo today? Overall? This is for me.

Mike Messina  32:06  
you know. How do you become the Brembo of that break, you know? And in terms of breaking your performance, how do you, how do you still hit a price point and offer a measurable difference? And so that's that's been probably the biggest priority. And as far as where I see us today, I think we've been able to do that because we are that next level of whatever it is you're driving. If you have a bremo options, it brakes notably different than the car that doesn't have it, and people can feel that. They can see it. So there's a, there's a there's a technical aspect that's been preserved, as well as the esthetic and and,

Caroline Fallara  32:45  
and then if I can add to that. So if you look at the company today, and just look at the financial reports, I mean, obviously passenger vehicles is the main part of our revenue generation

Caroline Fallara  33:34  
and looking back at how we got there, I mean, so I've been with gumbo for 20 years now, and in North America. So really saw the growth of the WAN on the market, but definitely motorsports. You know, that's where we started. And we talk about the history this year because it's our 50th anniversary motorsports. We started in 1975 with Ferrari right in Formula One. And everything we did in motorsports really helped us, you know, enter the road car sphere. And we all, let's say, of, you know, technology and developing the aluminum monoblock calipers lightweight, and that's what also helped us, you know, get into this market here in the US, if you look at the Cadillacs, for example. So back, you know, 1012, years ago, they didn't have fixed aluminum calipers. And so we were able to get into that more like mid premium segment, with that technology offering, you know, some lightweight advantages. And, you know, concur, concur, a little bit of that market here in in the US, so more mainstream. And now it's like, like we talked about the color, right? It's becoming more distinctive design aspects of the vehicle. So I think the company did a good job in trying to go more mainstream with all the different assets that we had between technology, branding and manufacturing. Right? Because we really expanded our footprint here in North America. So we have manufacturing in Homer, Michigan. We have maximum manufacturing in Mexico. So we talked yesterday produce local for local. That's definitely that's been part of our strategy as well. So all of these elements together really enabled us to get to where we are today.

Mike Messina  35:20  
So I think another one that, you know, technology transfer is a term you hear a lot, yeah. And I think people sort of get, you know, desensitized to it, that, you know, is it real, or is it really more of a marketing term? And that's a real aspect in this company. And if you consider, I think, what are we up to, 16,000 employees global now? And if I'm not mistaken, on average, it's about 10% of those employees are put into R and D. So at any given day, you've got 1600 people waking up that are either in motorsports or they're in R and D. They're belted, they're thinking of something. And so motorsports has really helped us in that standard aspect. One of the things that Caroline mentioned was weight. You know, obviously weight is always of a pinnacle importance, but also drag is as another component of that. And those are things that we've learned in various different forms of motorsports, which just so happens that, you know, electric vehicle manufacturers, they care a lot about weight and they care a lot about drag, yeah. And so we've been able to adapt a lot of those technologies as well into our OE applications.

Sam Abuelsamid  36:25  
Yeah, I mean, I'm an engineer by training. I spent the first 17 years of my career working in automotive product development, working primarily on brake systems, working on brakes, ABS and then stability control, so working on a lot of the electronic control systems, but I learned a lot about the core functionality of friction breaks during that time, especially early on and when I started in the early 1990s you know, it was pretty rare to find anything on, you know, in Mainstream production with fixed calipers. And, you know, the brake systems back in were, they were bad, and they were really awful, even the gatlins, yeah, yeah, and yeah, it, it was pretty unusual. And, you know, when, when we first started working with vehicles that had some sort of fixed calipers, and, you know, later, you know, monoblock caliper, like what Brembo produces, you know, it was, it was transformative in the performance. You know, not only just the core braking performance, the ability to control them, as you mentioned, you know. You know, with that, that technology transfer, things like friction reduction, yeah, you know, with brakes, you when you want the friction. You want it there now, and you want to be able to control it. But when you don't want it, you you also want to eliminate that drag. That's a period of the background on an EV where you're, you know, very or any electrified vehicle, even a hybrid, you know, where you want to recover as much of that kinetic energy as you can. You want to make sure. And, you know, looking at motorsports, yeah, you know, I know, one of the areas I follow is Indy cars, you know. And I'm on ovals, you know, they do a lot of work on, you know, I'm trying to make sure you own back those pads, you know, or, or any, you know, any, any form of motorsports. You sure don't want that drag,

Mike Messina  38:19  
right? And the other thing about ovals too is it's ice cold when they go to stop on pit lane. So to have a braking system that has no drag and then activates immediately on contact with no temperature in it, because it's been running around at 221, miles an hour for the last 30 minutes, that's also another technical challenge that Yeah, so there's materials that you use and those sort of things, is also part of that equation.

Sam Abuelsamid  38:44  
And you know, one of the interesting developments, especially in the last, let's say, probably the last 15 years or so in production cars, more longer than that on race cars, has been this adoption of carbon ceramic braking. Yeah, I think the first, probably the first car I ever drilled with carbon ceramic brakes was the the c6 ZR, one, yes, one that's that had carbon ceramic brakes. I've driven many others since then. Yeah, talk a little bit about that. What? What impact does that have? And then, you know, maybe get into the announcement you've got as far as expansion of that capability. So in terms of,

Mike Messina  39:29  
I think, well, there's, there's a couple of different ways to attack that. From a production standpoint, we've put a huge investment in the production process and owning every step of that. There's, it's a very if you think about cast iron, you know, you have a raw material, you melt it down, you pour it into a mold, you have a sheeting process, you know, and all those other things. And it's pretty straightforward, and we control that from from top to bottom. But when you get into carbon, if you're talking about carbon carbon and a racing standpoint, or carbon ceramic in an OE standpoint, application, or, should say, there's a lot. Lot of steps to that process. And so I think the biggest investment I've I'm 21 years with frembo now, and we, we've literally built factories to build those materials, to eliminate the third party so that we can control all of that. And so that's a big part of it. You know, they always say it's difficult to build one ceramic disc. It's really difficult to build 10,000 and to make them all the same. And so quality control is a huge aspect of it. But one of the other things that's, I mean, if you've driven them, and you know that there's, there's, there's really nothing that drives quite like a high performance carbon ceramic setup, the repeatability, that's one of the one of the biggest aspects of of braking. Everybody thinks it's the brakes that stop the car. It's really the tire that stopped the car. Was the brakes that stopped the tires. And tire technology has improved dramatically. Suspension technologies improved dramatically. Electronics have improved dramatically. And so the beauty of the ceramic brakes is that you're able to capitalize on that, that lower rotating mass, which is free horsepower, better ride quality, but also unbelievable repeatability, that they just feel the same every single time. No fair. And then that's what we really try to get to, is where the brakes are really just taken for granted. You know, you expect when you hit the gas pedal something's going to happen, and it's going to happen the same way every single time. And really the brakes are, are there now, you know, we've achieved that in a lot of those applications, and we've been able to do that because of the thermal properties of ceramics. And so, you know, cost has managed to come down as as volume has proliferated. And I think ceramics have been a great thing. It's also sort of created an expectation to that, oh, they're just going to live forever. And so there's an education component that we're catching up with there, you know, in terms of, you know, one of the questions earlier today was, you know, you start with the cons, the consumer, you start with a customer, and work back. And for us, those customers have always been the OES, and now, since our name was attached to it, we have to also have a line of sight to those end users too, and educate them on what it is that they're living with there. And, you know, it's great, but just like your tires, it requires a certain level of attention. And so there's some things you should know, you know, in order to maintain, you know, keep it optimized and understand about what you have.

Sam Abuelsamid  42:40  
Yeah, yeah. I mean, if you ask, you know an average driver, you know, somebody who's not necessarily enthusiast, chances are they probably won't be able to name a brake system manufacturer, but if they can, probably the one name that they know is Brembo,

Caroline Fallara  42:55  
yeah. And that's, you know, we usually do some brand awareness survey, and that's what comes out all the time. It's like, top of mind, like we said, so exactly what you said. So if they know it, if they know a brand that's brumbo, is the first one that they would mention, and

Mike Messina  43:10  
it's not only amongst breaks, like, yes, we make breaks, but we also or a supplier. And there aren't many tier one or below suppliers out in the world that people can just,

Sam Abuelsamid  43:22  
yeah. I mean, they know they most people don't know them, or at least in certain in the context of automotive suppliers, they don't necessarily know name Bosch or Don or Continental, or don't know they make your ECU, yeah, yeah. They may know Continental, you know, from the tire tires. Tires tires are probably the one supplier that, that people know, because, yeah, they see that upper and, you know, they they go buy them. But yeah, brakes, you know, Brembo is the one day. And people know so how many, how many vehicles a year now are typically equipped with Brembo brakes and steps.

Caroline Fallara  44:00  
Yes, this one, wow, that's a very good question. A lot,

Mike Messina  44:07  
are we? Are we in the millions? Are we? No,

Caroline Fallara  44:09  
but it's like, yeah. How do we determine, because between and again, which are vehicles between? You know, we, like we said. So we have vehicles that have only calipers, vehicles that have only the discs, and some that have so maybe looking back at the volumes, we could try to make an estimate volumes. We know well, well, we can. It's a good exercise for us. We don't know the answer right now.

Speaker 1  44:31  
We could do it by model, or we could do it by units, right? And those are two different and there's the motorcycle side.

Caroline Fallara  44:38  
Now we have most Likes. We have aftermarket too. So anyway, I have the line of aftermarkets and now bicycle. Now we have the mountain bike. It's great.

Speaker 1  44:48  
We've made, like, probably, I don't know six bikes that the specialized race team has, but that is interesting.

Mike Messina  44:56  
It's a little bit like, if you ask for how much, how much do you make on an f1 50, when. Can sell it, you know, nobody knows. And we're getting to that point to where how many cars are have a Brembo component on them now, in the US, or, you know, globally, every year, lose shot. I don't go on. It's a lot.

Sam Abuelsamid  45:13  
Oh, but, you know, certainly in motorsports, you know, f1 I think everyone's using Brembo brakes right now. Every team on the grid, all 10 games rumble rumble 11 next year.

Mike Messina  45:25  
Yeah, the McLaren uses a B racing, but they're one

Mike Messina  45:32  
way or another. It's every every team on the grit

Sam Abuelsamid  45:36  
and and, um, yeah, in other high end motorsports, you know, most of them are probably using at least some Brembo components, if not vol braiding systems. So, yeah, Brembo, your your focus, I think, has been on the hardware side, calipers, blindings, rotors. Are you doing anything on the software side yet, yeah, oh, I think we were working with the companies on that.

Mike Messina  46:04  
Roughly, you should think we're what, 10 years ago now, we started our first break by wire systems in f1 when they introduced curves, okay, and so, you know, integrating that regenerative breaking in a in a seamless, transparent application that the driver doesn't necessarily feel, was the first step, and, you know, making the car feel like it's freaking normally, while it's regenerating, regenerating electricity on the rear, through the rear wheels, especially in something like an f1 car, where you feel everything. It can run over a quarter or a dime, and it can tell you which one it was, and brakes they are. There is no compliance in the braking system in f1 car. So literally, everything that happens, all of that feedback, goes right back to his foot. He feels it. And so that was from the software development side of it, making that seamless integrations was was a big step. Now we've moved on into other applications where there's a level of adjustability in it, and teams are starting to address that. And so from the software standpoint, in motorsports, break by wire has been a huge development mountain. We've been climbing for the past 10 years, and now you're seeing it on the OE side, where some of that technology is starting to make its way over into obviously a break by wire in the OE. But we recently announced ozip last year before sensify, which is something that we're doing on the OEM side of things, which is sort of, or what would we say that is smart breaking, intelligent breaking, you know, so it's sort of, sort of the evolution that's the next level of ABS, where now you have the individual corners speaking to a main computer and all acting independently of each other. Instead of just having one channel that's, you know, delivering signals from from an axle, so to speak, you have independent four channel now and happening in real time. And so the software side of things is, is probably, I think it's I was, it's our biggest but it's definitely one of the biggest focuses internally that we have in the past

Sam Abuelsamid  48:07  
few years. Yeah, I spoke with David Salters from HRC us a couple of weeks ago, and we talked about what they're doing and software and how they're utilizing software on the Acura arxo Six, and then on the Indy car hybrid system, especially on the Acura, utilizing the software control of the hybrid to do things like pre loading the differential and, you know, giving the drivers more more control, you know, to tune on The Fly, you know, so each driver, especially in insurance ratio, you got multiple drivers, each one can make adjustments to their driving style, sure. So it affects the braking as well. Yeah, and yeah. The last thing I worked on as an engineer, you know, when I for, I left engineering in 2007 was for the last couple of years, was working on software for break by wire systems for hybrids. So I'm very familiar with how hard that lending, regen and friction breaking can be. And that was, you know, that was on mainstream road cars sale for I can just imagine what it would be like trying to do that blending on something like an f1

Mike Messina  49:20  
system, where you have, you know, you have the most specific, most accurate engineers, the most the most highly technical guys looking at all of the data. And then you have a Lewis Hamilton who's feeling it, yeah. And so there's a technical aspect that the technical guys are looking at. Well, we like this curve in the data. We like what this is happening here, and then there's a subjective element when the driver says, I don't like it, yeah, you know, I don't like how that's deal

Sam Abuelsamid  49:46  
well. And going back to what you said earlier about that, that repeatability, the predictability, that was one of the earliest things I learned in my career from from my boss at the time, was that, you know, it's got to be absolutely predictable for a driver. Driver, even, even for a consumer on the road, you know, especially for something like brakes, you you want to know that when you hit the brakes certain amount of pressure, you're going to get certain amount of D cell it's going to feel a certain way every single time, right? And you know, having that, you know, these kinds of brake systems where it's much more consistent in its behavior. You don't have flexing of the calipers you've got. It's much. It doesn't change as much with temperature and now you know the blending of friction and regen.

Mike Messina  50:33  
It's incredible. The other thing that happens too, that you see in racing, which you don't see as much on the elite side of it, is, well, one of the things, one of the things, one of the things we have to account for in racing is tire degradation, you know. So now it's, how does it feel when the tires are new and the car is full of fuel, versus how does it feel an hour later when it's out of gas on old tires? Yeah. And so it's, it's it's it's weight distribution, it's balance, it's contact, it's its ability to grip the road has all changed from start to finish. And how do you have a brake system that feels the same, and you know that follows that curve, and you know, over the course of an hour and 10 minutes? Yeah, is a really difficult

Sam Abuelsamid  51:11  
what razor? What about, I know, you know, for example, in endurance racing, you know, something like 24 hours Le Mans, you know they they change the brakes during the course of a race, sure you know and see how you deal into that depends

Mike Messina  51:25  
on the model in some and some of the Yeah. So when I started my first Le Mans was an oh five, and the top cars were all carbon. And we had different carbon materials we had. We had one material for endurance, one material for swim race, and to be able to finish that race without a change in carbon was a feat even 20 years ago. Now, I think we could run 41 hours at Le Mans. It's not even, it's just, it's a boring conversation to have that. Yeah, when it comes to car for the GT car, sort of running with iron. We're still there. Now, technically, we have friction compounds that will last, and we've done it. We've done all 24 hours without a change, you know. And the question is, you know, just because you can doesn't mean you should, because there's probably going to be a cost at some point, you know. So we used to have an iron brakes. We used to have a change window at Le Mans, for example, of anywhere from 13 to 16 hours. That was your window, you know. So somewhere in that first 13 to 16 hours you you're gonna do a change, you know, you need to make it first pass halfway. Now I think our change windows are 16 to 20, okay, and so you have a big window,

Sam Abuelsamid  52:40  
because you got a race like where you have several hours of rain overnight, you may not need to, may not need

Mike Messina  52:47  
it. And so it really becomes sort of a strategy thing. Now, if the guy that I'm racing that you know, we're neck and neck, and he comes in for a change, well, at the end of the race, I don't want my old brakes against just do brakes. So I'm going to do a change. We have a safety car. Yeah? It takes anywhere from 57 to 68 seconds to change an actual set of brakes. Now it's just cheap insurance. Why wouldn't you do it? Yeah? And so I think now, you know, it used to be more of a necessity. It's becoming where we're getting to the point now where it's almost more of a of a tactical decision, or all you know, we're moving towards luxury, where it's going to be a luxury, whether or not you have to

Sam Abuelsamid  53:26  
do it. So just to wrap up, kind of, what's, what's the future for Brembo, what's, what's next? Yeah, what you're doing today.

Speaker 1  53:34  
Do you want to talk like motorsports, specifically what you think it is?

Mike Messina  53:40  
And then we can the funny thing about that question is that I can't talk a lot about the future motorsports programs. We have a lot of it's going to be a good year. I mean, you know, 50 years was great, but the one years is going to be better.

Sam Abuelsamid  53:53  
Yeah, I guess, from a from a technological standpoint, what, you know? What? Where do you see things going?

Mike Messina  54:00  
I think the certainly friction materials, and whether that's on the disk side or whether that's on the pad side, you know, we've, we've got a lot of optimization software when it comes to caliper design, so we know where the loads are going. You know, a caliper being clamped, obviously, you know, statically is one thing, but dynamically, when the disc is spinning at 100 and 170 the loads that go into that thing are a lot different than what most people think. So the things that are improving are the optimization software, certainly, AI is going to play a play a role in that, in terms of, you know where the load is going, and how do you make that caliper? Where do you put the material in that caliper, so that you've got the perfect balance between stiffness and weight instead of just having to compromise all the time. So that's one aspect of it, friction materials, you know, you've got global regulations that are determining what kind of base metals or compounds that you can use now, and so looking for things that are, you know. Environmentally sustainable, and yet perform at the level they need to. That's going to continue to be a big focus. And you know, we have a team in a basement right now that's working on some things that will shock you and shocks me. And so that's that I think you know, over the next five to 10 years, you know. And whether we see that in racing, you know, one of the things you have to think about erasing all the time is the sanctioning body and the rules. You know, they're always focused on parity and bringing all the manufacturers in, but then controlling costs same time, while also putting on a great show that everybody wants to come and see. Yeah, and that's a really tricky balance. And so you're always in racing, you're always sort of working within those confines. And so in a certain way, that's what makes engineers creative, is giving them That's right, exactly. And, you know, and there's another component we were talking about this last night, is, you know, with all of those rules, are we stifling that creativity? If everybody has to work in the same kind of box now where it's no longer, you know, 30 years, 40 years ago, in f1 if you could build it, you could run it, you could race it. And that's starting to change just a little bit. So yeah, you but I think certainly materials and maintaining sustainability.

Sam Abuelsamid  56:12  
I was watching a video on YouTube a few months ago. I came around who was, I can't remember, Sam Collins or something. No, somebody, another guy who does racing videos, and he visited Brembo, oh yeah, seeing all the different caliber eyes. I mean, all these, yeah, that's it, all these different. Yeah, they're all Brembo calipers for f1 cars, but they all look still very different, yeah, so even though you got a lot of rules, right, yeah. Like I said, you know, Team interests, right, constraints, force, force engineers to be creative. Yeah, different ways, sir.

Mike Messina  56:47  
And, you know, we see I was something I learned really quickly when we got into nasbar, was, how hard can it be there? All they do is turn left. Yeah, that's why it's so hard. It's because all they do is turn left. They have, they have honed that thing into a really specific piece of so it's, it's, yeah, but again, I think, I think the biggest leaps are going to be in just the material basis. That's what I think is going to be really and software, and as you have, AI kind of playing a role in that too. It's gonna get interesting. I just, I wish I could talk more about it, yeah, um, but we just, we can't say yet, yeah.

Caroline Fallara  57:30  
And then on the production side, I meant for us is, you know, so the more mainstream applications of the technology will be, obviously, our main balls for the next years to film that, and like offering the customers, OEMs like greener solutions, right? So we had the green tail, I don't know if you had received or saw that the green tail discs that we introduced, speaking of the year, right? So helped. You know, the OEMs needing the emissions regulations studied, obviously, from Europe or Europe inside but so I would say between those two that would be a book is for the next years to come.

Sam Abuelsamid  58:09  
Okay. Well, thank you both so much. Free. Appreciate it. Yeah.

Michael Dunne  1:00:00  
Yeah, no China circuit 2008 no view it. So what happened? 2020 now let's back up 2015 Xi Jinping gathers with his lieutenants in beidaihe, this resort area on the on the coast, and they put together a blueprint, a master plan that they called Made in China in 25 and the goal was, hey, we're tired of playing catch up with the West in autos and in everything, and they've been not able to catch the West, in particular, on internal combustion engines. Second thing was, they're importing enormous amounts of oil. They said, how do we change this game? Let's lead in next generation technologies not follow, and let's get off this oil addiction before it happens. So the solution batteries and electric cars, and they began to heavily subsidize the manufacture and purchase some EVs inside China, and that kind of grew gradually through the 2000 10s, because Chinese consumers are still not certain. Batteries, safety, range, charging, don't know, question marks, enter Tesla. Q1 2020. Starts manufacturing the model three in Shanghai, and it's a transformative moment. Chinese consumers suddenly go, wow, EVs are actually cool. We want them. And who else in this country makes EVs? Oh, there's a bunch of other Chinese companies. And we saw EVs just take off from 1 million units a year, about 5% of the market, to this year, 13 million, or 50% of the market. So is this like earthquake, where EVs were not cool, Chinese brands were not cool, and suddenly they were everything to the Chinese consumer. And guess what? The Global automakers have really taken it on the chin. That's what's happening inside China. You've got a massive dislocation. You've got Global Automakers sitting on all kinds of extra capacity. Chinese automakers flooding the zone with EVs price wars, brutal competition. And then one more point. And then we'll go on, because I like to keep in tight what's happened in the price wars are so intense inside China, they've said, We need a release release valve. What's that release valve exports? And so we've seen Chinese exports take off from a million in 2020, to this year, close to 7 million cars, number one exporter in the world. That's the picture the earthquake that happened inside China. And then the call it the tsunami waves that are hitting the rest of the

Sam Abuelsamid  1:02:39  
world now. So you mentioned, you know, Tesla starting production in Shanghai in 2020 it was kind of the pivot point. Up to that point, Chinese EVs were mostly, you know, on the low end of the market, cheap. They were cheap, but, you know, they weren't anything to get excited about. And and in the last five years, we've seen this real transformation of the industry. It's like they, I assume you've probably read the book apple in China, yes. And my understanding is that there's a lot of similar, a lot of parallels between that and what's happened in the auto industry, where, you know, they, the foreign companies, come in, they teach the locals, they train the locals, and then those people go on to start up work at other companies or start up new companies. Yes, that the same thing that's happening in the auto

Michael Dunne  1:03:28  
industry. Absolutely. I'm glad you said that, because not only did Tesla ignite consumers imagination around electric vehicles, but Tesla also brought world class supply chains to China, and guess what? Overnight, all of a sudden, these other EV startups start popping up, like Neo and ex pun Xiaomi, most recently, Huawei, coming from the tech industry, just like Tesla entering the auto industry and saying, Wow, we have our supply chains right here in our backyard. This is beautiful, and they've been they've been developed by Tesla. We'll just copy paste onto our car. It's not as simple as that. The Chinese do their own work, but by and large, the story is they're following a similar pattern, similar pattern, and there's always a use by date. For any foreign company operating in China, you're useful to the Chinese for a period of time, and you're treated well if you're a foreign company, a foreign company, and then one day, you're not you're not asked to leave, but you're shown the door that's the exit if you'd like to use it, because life is not going To be that wonderful for you going forward.

Unknown Speaker  1:04:39  
So

Sam Abuelsamid  1:04:43  
first, let's continue the way Chinese automakers are operating. You were on a panel this morning Terry wykowski, president of caresoft, and Terry was mentioning that one of the differences, you know, here or in the way, you know, in North America and Europe. The automakers will go to a supplier. He is the example of wiper motors. Everybody's got a proprietary wiper motor. There's similarities, but everybody wants something slightly different, and so you got all these different variations of basically the same product that from a consumer perspective, they don't care. But in China, it's very different. It's like 20 automakers will go to a supplier and they'll all buy the exact same part. They don't want anything customized. How? Why is that? What have they figured out that we can't seem to figure

Michael Dunne  1:05:34  
out. They see that cars of future will be differentiated based on their software. Everything else mechanical is standard, a commodity. Yes, this wiper motor might be slightly better than who cares. What really matters is the experience of the driver or rider inside the cockpit. That would be 80% of their effort to make it seamless, intuitive, fun, and that's what sells in China. So in that regard, they look around, they go, let's be less dumb. How do we source things as low cost as possible for those standard parts? The other thing worth mentioning is it is important, is that margin in China are very, very thin. Few companies make money, many lose money. That's okay, because their priority is to get scale, take market share. So this is a problem for us in the West. Oh, how do we compete with a company that doesn't care that much about profitability? They're all about how do I manufacture more and take share? That's a problem that hasn't been solved yet for automate from the West, like, oh, without profits. What are we going

Sam Abuelsamid  1:06:47  
to do without, you know, without the profits? And I saw a study earlier this year, I think, that estimated that currently is about 55% capacity utilization in China, and most of the Automate, most of the brands have capacity utilization in like the single digits or in the 10 to 20% range, which there's no way you how do you stay in business like that?

Michael Dunne  1:07:12  
Only in China. Call it the China playbook. They will say, we want to, we being the central government, we want to utterly dominate a given industry. Solar panels are the most famous example of that, but there are other steel shipbuilding buttons. When I first came to China, everybody's going to do buttons and run everybody on the world out of the button business. So now it's cars, and they'll say, We want over capacity. We accept over capacity. We'll accept price wars at home will accept hyper competition, because that means the fittest of our companies will be able to definitely beat other automakers around the world. And this is what scares the daylights out of people in Europe, Japan, Korea, United States right now. How do we contend with a country that has the scale, the supply chains, the speed, the software, the subsidies and the ambition to basically wipe everyone else out. How do we go up against that?

Sam Abuelsamid  1:08:10  
And are we? Is there any chance that we're reaching a point where various levels of government in China are going to start letting some of the weaker players fall by the wayside. Is that going to happen

Michael Dunne  1:08:23  
anytime soon? That should happen. I'm going to offer a big capital beauty. But when I first got to China 1990 the government said Our goal is to consolidate. We by the end of the decade, will only have 345, maybe five automakers in the ensuing 35 years, the number several 100? Yeah. So part of that is the way China's economy. It's a it's not a market economy. The government and industry are working together, and each province wants to have its own auto industry. And how come this? Guangdong has it and we on, wait. Can't happen. No, we want our so there's a built in inefficiency to the economy. So China isn't necessarily the most efficient economy, but it's very effective when the net result is, oh, we're manufacturing 33 million cars a year. We're exporting 6 million of them, and we seem to be eliminating the competitors. It's a formula that they're somehow comfortable with. Yes, some players will go away, but then some of the ones pop up, yeah, and ones that we thought were dead come back to life. It's like nothing else we've seen in the world.

Sam Abuelsamid  1:09:33  
And of course, it's not just the Western OEMs that are endangered here, but also suppliers. Yes. Last year I was at mobilize investor day, and am not Joshua basically said, Yeah, we're we're essentially decoupling from the Chinese market. And I've heard the same thing from other suppliers that they're basically giving up on China, you know, where they had had a pretty strong presence, yes. And now. You know, there's a shift towards local suppliers,

Michael Dunne  1:10:03  
definitely a shift. Xi Jinping has this line that every Chinese knows. He references it often. He said, our goal in China is to make China less dependent on the rest of the world, and the rest of the world more dependent on China. So what does that mean? In the extreme, China manufactures every single car in the world. Okay? How does that play out? What about jobs in the West? What about our own industries and technology and national security? So there's a collision. We're on a collision course. Something's going to give

Sam Abuelsamid  1:10:36  
so, you know, right now, the US and Canada are basically kind of isolated when it comes to Chinese cars. You know, they've been exporting, you know, especially to Latin America, but also increasingly in Europe, Southeast Asia. We're, we're one of the only places where you can't buy a Chinese car. How much longer do you think that lasts?

Michael Dunne  1:11:02  
I it. I could see it breaking. I feel it's like a dam. The dam is about to give about the break somewhere. And I could see that happening as soon as next quarter. I could see the Trump administration waking up, right or wrong, and saying, Look, by these offered to make a $7 billion investment and employ 25,000 Americans and build batteries here. Don't we need batteries here in America? Okay, we don't know about let's bring them in. It'd be a great deal. Or he may not. We don't know.

Sam Abuelsamid  1:11:39  
Yeah, because, I mean, at the same time, they're openly antagonistic to the whole idea of electric vehicles, anything that doesn't burn fossil fuels. So, yes, you know. And you know, you know what we just saw last week in Georgia or and then in Georgia, you know where ice went in and rounded up Korean workers that were installing equipment in a plant that's ultimately going to employ 1000s of Americans. They round them up and throw them out

Michael Dunne  1:12:07  
of the country. That makes no sense. Yeah, it's like the world turned upside down.

Sam Abuelsamid  1:12:11  
So, you know, given that, do you see that potentially being something that company, companies from other countries look at that and say, Yeah, you know what, it's not worth investing in the US. Do you think, does it potentially play out that way, or do they look past that and look long term and say, you know, at some point we move, we'll move past that

Michael Dunne  1:12:37  
feeling when I talk to manufacturers outside the United States, is it used to be so easy to step into the US and sell into the US, whether you're exporting or manufacturing here, it's gotten harder, but it's still the most profitable place in the world to sell and service cars. So the Chinese in particular are starving for profits. They can't find them at home. They go to places like Southeast Asia, South America, Middle East Africa, thin margins there us is still the place to make money they kill to get in here, though, they'll tolerate a lot of inconvenience in exchange for access to this market. So that's our level. Again. I think it might have been you or Terry, that something like 60% of all the profit in the auto industry is here and here America. So they look at that and they go, Oh, we got to get in there. Yeah. So that's if we're really smart as Americans, or in North America Canada, we use that maximize that leverage, and say, access to our market. The Chinese would do the same. They have done the same. Access to this market will cost you a lot of money and a lot of time, a lot of effort. We want your money. We want your IP we want training. We want promises of more money in exchange for getting that. Actually, we shouldn't give

Sam Abuelsamid  1:13:50  
it away. Where do you think the first Chinese auto plant appears in the Americas, Mexico, Canada or the US?

Michael Dunne  1:13:59  
No one knows, but I would guess southern United States. I'm going to say Georgia, Texas or Louisiana, those would be my top three guesses. Okay, yeah, somewhere in the south, far from unions,

Sam Abuelsamid  1:14:16  
even, even with the antagonism to towards China, you think, you think they'll still like look, for example, when Ford wanted to build their LFP plant, yes, initially in Virginia, yes. And Glenn youngkin said, Nope, we don't want anything related to the Chinese company here. Do you think that they'll, they'll look the governors in those states and look past that.

Michael Dunne  1:14:37  
It feels like it's going to land with the Trump administration. So I don't know that governors would, on their own, make that decision. They'd want to look for some interference from Washington, like, Is this okay? It's okay. All right, let's go. They go together.

Sam Abuelsamid  1:14:54  
Yeah, okay. So for the US auto industry, I. It is there any chance at all for them to survive?

Michael Dunne  1:15:04  
It would take a Absolutely, there's absolutely a chance. You've got great resource in terms of talent, experience, engineering. You've got some of the best in the world in terms of capabilities, where we fall down right now is we're not cost competitive. So how do we get cost competitive? I think we have to align with Japan, Korea, India and Europe, and say, as a group, we were going to jointly. It's almost like a Manhattan Project. We have to find a way to be competitive against the Chinese. How do we do that? Maybe we have design engineering here, manufacturing in India, something else happening in Europe, but it has to be an allied effort. I think alone.

Sam Abuelsamid  1:15:57  
It'll be tough. Look at Ford. They recently announced their next generation, EV platform, large scale casting, structural battery and same pattern that Tesla started with the Austin built model wise, a lot of the Chinese have adopted that, that architecture can can afford, you know, do it on their own, doing that, or, you know, do they have to partner with a bunch of other companies to potentially make that happen.

Michael Dunne  1:16:23  
It feels like at this juncture, we need everybody in working together, because the competition on China is formidable. It's not just low cost, it's high tech, it's high quality, it's advanced manufacturing, it's it's real. It's like 10 Japans coming at us at the same time,

Sam Abuelsamid  1:16:44  
of course, you know, at the same time, you can say that, you know, we've got a lot of policies that are openly antagonizing all of our traditional allies and trading partners. Are they going to want to work with us to make that a reality?

Michael Dunne  1:16:59  
I think it's sort of a situation where it's the least worst option. It's like, it's better than that other option, which is staying standing on their own, yeah, and trying to contend with China. So they'll, they'll be willing to swap to eat bitter, as the Chinese like to say, in order to survive, how do we survive? How do we survive into the next generation and thrive? Probably we have to find a way to cooperate. We should and the United States, I would like to see better behavior out of United States in terms of how we treat our allies. It's there for us to it's designed to work for us. Yeah, so I'm not, I'm confused, actually, about what's going on, and I'm hopeful that it'll all work out in the coming months. But who knows. Can Can

Sam Abuelsamid  1:17:43  
we do it before the Chinese arrived here? Do you think have to alright one, one last thing you mentioned earlier, you're working on a book. Can you just give us a hint of what's coming Yeah,

Michael Dunne  1:18:01  
thank you. Thank you for mentioning that. I'm so thrilled, actually and terrified to be writing a book. It's called car wars, and it's the battle for supremacy in next generation cars between the United States and China. It features a lot of the key characters, the guys you imagine, Elon Musk, the chairman of BYD Wang, Chong fu li shufu from Geely, Donald Trump, and other players along the way who have shaped things and will shape things going forward. It'll be out next year, in 2026 and it's designed to be kind of like a thriller, because the stakes are sky high. The uncertainty today is also very high, and there will be winners and losers, no doubt.

Sam Abuelsamid  1:18:51  
Well, definitely have to have a long conversation about that when it comes out. I can't wait to read that. Thank you. There's so much. Some you know, I've been in the auto industry for 40 years now, since I started as a co op at GMI, and this is by far the most interesting period of my career, terrifying, but interesting. Terrify.

Michael Dunne  1:19:13  
It's fast. Everything's up in the air. There's maximum uncertainty, yeah, and so they say you can't function a business when there's not with it without certainty? Well, here we are. We're finding a way to somehow cope in an environment where tariffs, geopolitics, batteries, battery supply chains. What about access to magnets? Everything is sort of up in the air.

Sam Abuelsamid  1:19:37  
Yeah. All right. Thank you so much for your time. Michael, thank you. Always good to talk.

Sam Abuelsamid  1:20:00  
They have gotten into a lot of different business areas, including car sharing and and aggregating different mobility services through a single app so that riders could find, figure out the best trip or best the best mode for each trip they took looking at different ride hailing and transit services all in a single interface. Their most recent endeavor is called car on demand, which is a subscription service, really more. It's a micro lease service, which is similar in concept to what Hyundai is doing with the revolve plus, but it's in addition to stellantis products, it can also work with any brand of vehicles with dealers opting in to participate. So have a listen to my conversation with Benjamin.

Benjamin Maillard  1:21:10  
So historically with dealers, what we do is we deal with loaners as well as trying, you know, to help them getting some some external revenue out of the loaner fleet. But what we do as well is we try to bring them new customers for buying cars from them under the form of mobility solutions. So we have a subscription program within free to move, which is a microlease solution. So that's you just pay monthly. That's fully flexible. And what we do for the dealer is we reference the program at the dealership level, and then the customer following exactly the same customer journey as you buying a car from a dealer if at the end, you don't want to sign for that piece for the next three years or signing for that loan for the next I have to stop saying five years, because now it's not five years, it's six to seven years

Sam Abuelsamid  1:22:04  
alone, yeah, or or more. So eight in some cases, they're easy as it

Benjamin Maillard  1:22:09  
so what you can do is go for the my trolleys option with free to move. And basically what we're gonna do is, in the back end, we're gonna buy the car from the dealer.

Speaker 3  1:22:17  
So afraid to move, buys the car from the dealer, and then you leave the car to the customer. Has that on a month to month

Benjamin Maillard  1:22:24  
basis. That's on a month to month basis, fully flexible, works perfectly well. You know, for EVs. I mean, look, getting the same test drive experience for an EV that when you get for an IC is just, I mean, just ausenburg. Of course, you're going to fall in love with the car, because what you get at acceleration and everything is just crazy. But then back home, your partner is going to start asking, Hey, what did you do? How many I know? How did I get, you know? How did I get that ping, charge and everything? So you really need to see.

Sam Abuelsamid  1:22:50  
That gives you an opportunity to exactly see what it's like to live with and what, yeah, charging your

Benjamin Maillard  1:22:54  
children and everything, exactly. So that's very good for EVs, that's good. I don't want to come

Sam Abuelsamid  1:22:59  
to realize, Wait, I only have to charge this thing once a week. Yeah, I only drive 40 miles a day.

Benjamin Maillard  1:23:04  
Yeah, yeah, no, exactly. And most of our customers are keeping the cars for close to 12 months. We are in the 1011, months now. So what we do after, of course, is that we find another subscription customer, or we sell that car, can be retailed, I mean, through the dealer, or we can auction that car, but, I mean, that's, that's on the back end, but on the customer experience. What we really try to provide is, as everybody, we started at the beginning by saying, Okay, it's, it's all about charging the customer for premium, for getting access to flexibility and doing everything online with a limited offer. It just doesn't work. The thing is, you start saying to the customer, a needs to customer. You know, subscription is freedom, but then you say, Okay, you cannot get access to the entire lineup of that OEM. It's gonna be that specific car for that period of fine, that corner at that dealership. And then the customer starts asking, I mean, it

Sam Abuelsamid  1:23:55  
has not freedom, my friend, How's that different from a regular?

Benjamin Maillard  1:24:00  
I mean, so we try to really bring that technology to the dealership without having, you know, adding hover lap with what the dealership can close as deals right through the normal, I will say, retail customer journal. Otherwise, you know, it just means, no, I mean, it's not additional incremental sales. Is just, I'm checking the sales that you were doing before. It's not where we want. So we really, we really place that product at the end of that customer journey. Unfortunately, not successful all the time, helping the dealer, saving, you know, on acquisition cost, or, you know, rationalizing those costs and making sales that, you know what? All goes well.

Sam Abuelsamid  1:24:39  
Say, for example, somebody comes in leases a Wagoner ass, or, you know, there's this micro lease of a Wagoner ass, or a 500 E and then decide, after two months that, you know, I like this, I want to buy this. And then you can make the arrangements with the dealer to have purchased that same car they've been living with for hour long.

Benjamin Maillard  1:24:57  
And what we do is, so we. If the free to move forward by dia partnership with you, it's, it's at least two homes. So basically, on every single monthly payment you do, there is a portion that helps building what could be used as your payment. We building equity exactly you delete, yeah, yeah. That's where we Yeah. Okay, yep.

Sam Abuelsamid  1:25:19  
So you mentioned subscription earlier. Is that the subscription program? Subscription program? Okay, yep, so, and is that applied to any vehicle in the stillness lineup, or is it

Benjamin Maillard  1:25:31  
only for the EV even outside Cenarius, we do NIS, we do avinos, we do whatever brands. Of course, the brands we love the most are the standardis brands. But, I mean, talking with the dealers, the thing is, now they are, most of them are holding multiple franchises, right? So they say, okay, look, I really love it, but will this apply to that other brand? Of course, we can, yeah. I mean, it doesn't change anything on the technology standpoint. So you just, I mean, we get connected with the dealer tools of the DMS. So we have an API in place. We just gather org inventory, we price in the back end, and then we just send back that price or to the dealer or directly to the customer, and then the customer replies online.

Sam Abuelsamid  1:26:11  
So just trying to understand the logistics that works. So so you get all that information from the DMS you have on your website, you have a list of the inventory that's available out there, and then customer goes to free to move website, yeah, yep. And then they look at the inventory list, they say, oh, I want that car. And then you, you make the acquisition from the from the dealer, and yep. And then exactly like, yeah, that's why we do, yeah. Okay, so it's not, you're not buying a bunch of vehicles that have those in your inventory.

Benjamin Maillard  1:26:45  
Oh, yeah, I know. We just outing you, you know, moving, moving in boundary. So, I mean, you can make your own selection as a dealer saying that, that one, yes, that order, not that, that's absolutely possible, but that's what we do, yeah. So we just gathered the entire inventory. Why? Because, really, the idea behind is to say, Why should I offer different I mean, what I what I love when I go to a dealership is being able, you know, to choose among that just huge inventory, you know, picking, you know, the color that I want, that trim level, that really specific card. Then when I'm sitting down, you know, looking at the numbers, usually, this is when you know disappointment can start to happen at some point six.

Sam Abuelsamid  1:27:26  
So the the monthly payment for that, how does that? How would that compare to doing, going, just knowing the dealer and doing a standard lease, yeah, for that same vehicle.

Benjamin Maillard  1:27:38  
So we, we try to be that close. What we discovered, I mean, we started doing subscription couple of years ago, and once again, at the beginning, we said, that's not a problem. Customer will be fine paying a premium for all the operations, all the staff there, just for gaining access to flexibility. That's not true.

Sam Abuelsamid  1:27:57  
And then the logistics of making that work, yeah, a bunch of companies have tried it, and you know exactly,

Benjamin Maillard  1:28:04  
but there is, I mean, there is a real cost, especially if you try to get disconnected from the dealership. What I mean by that is, if you say, Look, Mr. Dealer, send me the car and I'm going to take care about everything. You need, logistics. You need, you know, you need points, you know where you're going to concentrate those fires, people for making delivery and everything, thinks that dealers are doing well. I mean, that's no problem. So why not really helping the dealer setting more, right, while at the same time relying on the dealers logistics and everything, that's what we do, and that makes a big difference. So I mean, at the end we we don't apply a premium. Of course, there is a calculation. There is a margin on that and everything, but we aim to be really close to a traditional, traditional lease by 1015, more, okay, but the huge benefit is that there is no down once again. There is no commitment that's fully flexible. And yeah, that's

Sam Abuelsamid  1:28:58  
so how popular has this program been so far. Roughly how many customers have chosen this

Benjamin Maillard  1:29:06  
option? Yeah, so now we have a couple of hundreds. So we get close to 1000 to give you a sense of scale, so we, we started with a dealer, Shipman, Nissan in New Jersey, Miss Anna. We over two months, we achieved doing together a little bit more than 50 units. Okay, yeah, so Amit one leadership, Nissan, 50 units, two months. New Program, yeah, that's not bad, if we just put it at the scale of the country, the dealers and everything, yeah. So we get close to 1000 we have dealers in San Diego, Dallas. So New Jersey, Miami. We do Jacksonville. We have a couple of leaders, yeah.

Sam Abuelsamid  1:29:52  
And where, where would people find is this on the free to move.com

Benjamin Maillard  1:29:59  
website? Yeah, you go on free to move.com website. We have a dedicated app for that thing, which is freedom of my release app. Okay, so in that app, you can, you know, look at the entire inventory, just make your selection. Applying online. You get better, get you get the sorry to approve. You just go to the dealership, and then you get

Sam Abuelsamid  1:30:17  
your coin. Yep, over, over the years, free to move has dabbled in a lot of different things, part car sharing and, you know, very, Oh, yeah. I mean, I mean, that's part, part of why the system was set up, you know, within stellantis and originally within PSA, you're trying to, you know, to experiment with different business models that, you know, because everybody learn, everybody's trying to figure out, okay, you know, what, what, how? What else can we do beyond the traditional gear consumer model? And, you know, so it's, you know, it's been interesting to watch hail, what works, what doesn't. And of course, you know, installing is not the only ones to do it, and others, those tried it. But does it? Does it seem so far like this is something that might stick?

Benjamin Maillard  1:31:06  
I that I think it will. I mean, I think that offering, you know, cars that way is definitely something that's gonna stick. And I think that OEMs looking on that side for addressing new I mean, I don't want to, I don't want to call it new needs, but new consumption patterns and everything. Yeah, I think that this is definitely something that's going to make sense. But you're absolutely right. Back in 2016 when freedom of had been created, we started with connect to fleet. So fleet management solution was the primary, primary business of really move. Then starting doing car sharing scene and one

Sam Abuelsamid  1:31:46  
oil you had an aggregator app that tied into multiple rides on servicers. I think I was only in Europe, but, yeah, I think that was where I first started free to move was when, when the

Benjamin Maillard  1:31:59  
West was not done by a freedom of company was, was done by a company that we acquired, okay, and that company was using the freedom of brand at the time without any authorization or nothing. Oh, okay, but, but the model behind was, was good model. I mean, that was one of the first, you know, flexible mobility marketplace, but on the market. And do you know what those guys, they were not taking any commission, nothing at all. I mean, they were just doing it, you know, for addressing customer needs, which was, I just want to have all the offer, you know, reference at the same place, at my fingertip. I just want, you know, to, okay, this morning. Should I go for an Uber? Should I go for car sharing? But which car sharing? Which company that type of that? That was what the company, you know, proposed at the time. And we said, look, I mean, despite the fact that they are using our brand, makes maybe sense, you know, to have something on her hand and try, you know, to see what can be built in terms of business model out of that. So we started them doing car sharing. We started covering cities. Then we said, okay, look, now we have that nice technology. We have a certain operation knowledge. We have we know how to buy cars, doing insurance. How we can, you know, get customers all of that. Why not trying to spread that thing over the standardis networks and even outside so? Now we have, as well as SaaS solution that is installed over 3500 locations all over the world. So here are companies that are using the SaaS solution of freedomof for offering mobility solutions to the customers on a daily basis. And we have 35,000 cars on that side of the business. All of that together allows free to move, to say, okay, look, you go to Berlin, you can use a parser. And you go outside Berlin, you can get a car from free to move, or from one of the free to move partner for a week, providing to DC, same thing, all of that, anybody and you're not satisfied getting, you know, just pieces of car. You can do the microlease solution from Trading Book trip, delicious. That's how we do. Yeah, cool. Well, that's great. Thank you very much. Sam, pleasure to beat you. Pleasure as well. Thank you guys. Thank you.

Sam Abuelsamid  1:34:06  
Thanks for listening. And Nicole Robbie and I will all be back next week with a regular show talking about the stuff we're driving, including the Lexus LX 700 H and I also had a chance to drive an extended range EV motorhome last week, so stay tuned next week for that and talk to you. Then bye.