Intro: Welcome to the EV Ready podcast, featuring industry leaders and their perspectives on electrification hosted by EV Ready Energy.
Chris: Hey, everybody.
This is Chris Nihan, the host of the EV Ready podcast, and I’m grateful to introduce to everybody Mark McNabb, who has a decorated past and we’ll get into that in a second currently with Van Tuyl Companies and is going to talk to us a little bit about the automotive industry, where it stands from the point of view of the auto manufacturers, and I think is going to be a really good point of view for a lot of folks that are used to hearing the EV industry side of it, and I think you’ve experienced both sides, so I’m kind of grateful for you to be able to provide your opinion and thoughts.
Mark: My pleasure.
Chris: Awesome, awesome.
And look like Mark, you have probably forgotten more about the automotive industry than I’ll ever know.
Just to give a little bit of a background for everybody that’s listening and maybe isn’t familiar with Mark, was the COO of VW America, CEO of Maserati. I think you were also a special purchase director in Europe for a little while.
Mark: I was called the commercial director, which is kind of like a COO for a company.
Chris: Got it, got it.
Okay, yeah, and then eventually, obviously, you got to become the CEO of Electrify America, which has become the largest public universal fast charging network in the United States over the past several years.
I guess my first question for you is, how are you working with auto manufacturers today with Van Tuyl Companies?
Mark: So it’s, Chris, sorry, I probably should have done this, it’s Van Tuyl Companies.
Chris: Sorry.
Mark: So Larry is the largest, was the largest privately held dealer group in the US before his sale to Berkshire Hathaway.
So Larry’s always been around the car business.
I’ve known Larry for 25 or 30 years, to be honest, we go back that long.
And when I retired, Larry gave me a call and said, hey, we’re starting up a family office, really interested in making some investments.
So we’ve made quite a few investments around the auto industry in general. We could talk about some of those, but it’s just, it’s been a whole lot of fun. And honestly, it’s a path I didn’t expect to take.
I expected to go sit on a beach somewhere, but it’s been a lot of fun over the last, it’s now been almost six years.
Chris: And can you talk a little bit about like the, you know, I think the automotive industry probably didn’t change too, too much for a hundred years. And now it’s going through this, this massive evolution.
Can you talk a little bit about that?
And what your take is on this evolution that’s happening right now?
Mark: Yeah, I mean, I think, you know, the press kind of probably accelerates the evolution a little bit and then all of a sudden now it’s putting the brakes on.
But I think, you know, most of the time, you know, the regulatory environment is pushing a different type of transportation move from the typical combustion engine to, you know, battery electric or some form of plug-in hybrid or even hydrogen down the road.
So, I mean, there’s a big movement afoot.
The question is the transition and the time of the transition because,
you know, margins are a lot less on an EV today than they are on an ICE vehicle.
So, I think it’s just how much what I call capital destruction needs to happen until you reach economies of scale and you get the profitability on the electric vehicles that the OEMs really need to have in order to survive going forward.
Chris: And, you know, how quickly, I mean, you have, you know, certain people that are saying, you know, two years ago when everyone was coming out with their announcements, all electric by 2030 or all electric by 2035.
And then you have like these policy circumstances,
California obviously being the most aggressive and then others following their other countries like Norway and wherever it might be that have aggressive goals.
How do those goals, you know, relate or conflict with where auto manufacturers stand today?
Mark: You know, it’s a really good question.
I mean, from the way I look at it, first of all, CARB, California Resource Board, you know, if you go to California today versus 15 years ago, you can see the impact these guys have had on the air quality in the state.
So you got to applaud some of their efforts and everything.
I don’t think anyone in the auto industry fully disagrees that maybe battery electric or some form of plug-in hybrid are much more efficient, air quality engine needs to come out.
I think it’s really the trajectory that’s probably going to be the issue.
It’s going to be the speed of it.
You got to give the OEMs time to be able to profitably transition.
And, you know, again, there’s just been a lot of capital destruction.
You can see it.
Just look at the companies out there today, the Rivians, Lucid, any of the publicly traded companies.
You can see it in the profit announcements at Ford.
You can see it in the profit announcements at Mercedes.
So I think there’s a lot to be said on the transition and the trajectory of the transition that I think is probably the most important thing to keep our eyes on.
Chris: And you spoke about the cost and that the margin is less for these auto manufacturers.
I know we had a discussion in another group call recently talking about
the federal government and how they’re awarding leases versus direct purchases of vehicles.
And can you talk a little bit about the economics behind making an electric vehicle today?
Mark: Yeah, I mean, there are two things.
One that I would worry about leasing in general.
One is it puts all the onus on the OEM.
The OEM actually owns the vehicle at the end of the term of the lease.
And then they have to take it, refurbish it, and then put it back out into the market.
Well, if technology is moving the way it is, the cars that are coming back, let’s take the Nissan Leafs, for example.
The Nissan Leafs coming back from three, four, five years ago,
they’re not near the technology of the new cars that are coming out.
So inherently, all the risk goes back onto the OEM on that, which I think is a big problem for the future of EVs.
I really believe there needs to be more thought about the secondhand vehicle.
What do you do when it comes off lease?
How do you ensure that you’re able to keep the value up so that the OEMs aren’t losing significant amounts of money?
And that’s also, I mean, that’s on the lease side.
But on the purchase side, it’s the same thing.
I’ll use Tesla, for example, and God knows I have a Tesla.
So I’ve seen my Tesla devalued by probably $15,000 in the last one and a half, two years, because he’s (Elon Musk) taken aggressive price cuts.
Well, when you hit a price cut, it’s inherently one of the most inefficient ways to deploy capital and to make sure that what happens is, in essence, all your existing owners get a price cut.
So whether I own the car or whether the leasing company owns the car,
everything has to take a right down.
So when I go to trade that car in, that car won’t be traded in.
I’ll probably drive it to the day it dies just because of the economics
and the change in the economics by a decision that was made by Tesla to cut the prices.
And I get why they’re doing it, but you always have to think about
what is the secondary impact to these things.
Chris: Yeah, yeah.
You know, what I’m so curious to see, Mark, is not for Tesla,
but for all of the other universal cars that have J1772 and the CCS or Chattemo.
When the industry switches to NACS, I would imagine that there’s going to be a big price drop in the secondary market for any car that has a CCS plug.
If the entire industry.
Mark: Yeah, I would assume so.
I mean, I think that’s going to become a real issue going forward.
And I don’t think, again, everyone thinks about the secondary impacts.
And we all know the EV charging companies are all feeling pain right now.
Again, there’s been a lot of discussion about the regulatory environment and Biden and the whole administration saying, you know what?
Yeah, the EV thing is coming too fast.
Maybe let’s slow it down a little bit.
We’ll extend out.
Okay, well, that’s great.
But the people who’ve already deployed capital, banking on the fact that you are going to have utilization rates at 25% or 30%, they’ve all now going to have to take a haircut.
So EV charging, to me, that creates all kinds of secondary impact,
all from what’s being done for some of the right reasons.
But they’re trying to build infrastructure, trying to put the money out there.
But people don’t realize it’s not the capex that kills you with charging.
It’s the OPEX.
And that’s the problem I don’t think people fully understand.
Chris: So to your point, you were the CEO of Electrify America.
You were responsible for investing in building a nationwide fast charging network and trying to make that pencil in some way.
What were some of the biggest challenges in doing that?
And in terms of asset ownership of fast charging across the United States, how do you think that plays out over the next five years?
Mark: Yeah, I think on EA, and I had the fortune of working, or good fortune or misfortune, whichever way you want to term it, of working on the settlement agreement with the United States government relative to the diesel crisis in the US.
And as part of that, Appendix C was the start of Electrify America.
We would start a fast charging company.
I think for me, I had three or four major issues going in.
One was just starting it, recruiting, getting the right people in.
And that took some time to do that.
We ended up with some really fantastic people, guys that are now out there in big senior positions.
You’ve got Brendan running Blink.
Then you’ve got Seth Cutler now, who’s now the head of the OEM consortium on charging.
You’ve got Cliff Ficik, who is just an absolute forgets, more than anyone will know about charging.
Just one of these guys who’s just a brilliant engineer, came from BMW.
So we recruited in a lot of very, very good people.
Rob Barrosa, who’s now the CEO, Anthony, who did all the construction.
So we built the team to get out there, and we tried to address three or four different things.
One is we knew technology would change, so we wanted to make sure anything and everything we did was modular.
So for example, when we looked at California and all the charging that went out in California for what they so-called electric highway,
we noticed everything was 50 kilowatt.
And now cars can take higher speeds of charging.
So now we started looking at, all right, well, how do we not get caught in that?
So we built our chargers at 150 and said they’re easily upgradeable to 350.
And we just install another power cabinet, and we have to change the cables, liquid cool them.
So we built everything that we could upgrade, which I think was number one, one of the biggest things we needed to get done.
The second issue was speed.
So a lot of the issues that Electrify is experiencing today had to do because we were sprinting at speed because we had to hit milestones for the government in order to live up to our agreement that we made with them.
And we didn’t know.
I mean, no one knew when we put the agreements together what was going to work and what wasn’t going to work.
So I know there’s issues on software speed, or I’m sorry, on software,
and chargers not being up.
Think about the complexity of the deal where Tesla doesn’t have this complexity.
Tesla has its own little ecosystem.
Every car they know, they know it inside.
Now it’s their car.
We had to go out and test all the new cars that were coming to market,
some that hadn’t been fully engineered yet.
And we had to make sure that our chargers were compatible
with their software in order to make sure the charge.
So speed was certainly one of the issues.
Technology, certainly, again, making sure that we were staying up on technology.
And fourth was kind of staying away from all the noise, which is really hard to do.
So we need to have solar canopies.
Well, everybody and anybody knows, do you really need solar canopies in today’s world?
They don’t power anything.
I mean, I’d rather build a solar field and then get a discount on my energy, but I don’t want to build solar canopies.
I just, I thought it was ridiculous to do that.
And then lastly, I would say all of that above is making sure that we were adaptable, that we could adapt with the change.
So if there was new technology coming out, so we built our own little small technical center in order to make sure that we could stay out in front of everything and not behind it.
Chris: So what do you mean by that when you say technical center?
What does that mean?
Mark: Well, we actually brought so where all the different OEMs could bring the cars in, we could go through the cars, make sure that we could charge properly.
If they had new things that they were putting into their car,
we were up and on it.
And that’s a full-time job.
I mean, the OEMs are always tweaking their software, getting better every day, trying to make everything better with the next generation products.
So you can easily have a mishap in charging if you’re not on top of the game.
So we wanted to make sure we were really on top.
And then the biggest thing that our team, our biggest goal as a team by far was build the stations to minimize OPEX.
That was my goal when I first came in.
So battery, making sure you have battery mitigation
where you can offset high demand charges by using batteries, battery fully integrated.
So that’s to me, that was our biggest goal was to build these stations that would ensure that they last.
What always worried me as you build these stations and then 10 years down the road, it’s not economically viable.
And EA goes, you know what, we’re closing.
That would be a failure in my mind.
Chris: How important do you think purchasing prepaid kilowatt hours from auto manufacturers for new vehicle sales is going to be to whoever remains as the asset owners of fast charging in the future?
Or do you think it can be more of a traditional fueling market?
Mark: Yeah, it’s great.
Again, it depends on the economics, to be honest.
You know, I don’t think you should get into these deals with prepaid,
with unreasonable economics.
I think that’s bad from the beginning.
But I do think it is actually a very good idea for a lot of the OEMs to do because the customer, what you find in Tesla, they did a lot of work at University of California on kind of how the customer would interact with fast charging and how the customer interacted with charging in general.
When Tesla gave away the charging for free, everybody fast charged.
They never charged at home.
They just went straight to the fast charger.
Why should I pay for the energy?
As soon as they started doing away with that, you saw it starting to normalize where it was now down to like 70% at home and 30% to 40%, depending on the different markets on fast charging.
But I do think you need to get customers familiar with fast charge.
It’s intimidating.
Oh my God, you’re going to pump this amount of electrons in a car that fast.
Is it going to blow up?
So you got to get people comfortable.
So I do like the idea.
I don’t know if it has to be two years, three years, one year, six months.
But I do like the idea of getting people familiar.
And then the familiarity of finding the charger.
This is where I think Tesla has been brilliant.
Tesla is a fully integrated solution.
So I program in where I want to drive.
It tells me the four places I need to stop to charge.
I think that’s great.
I never think about it.
I’m like, okay, great.
I just follow it and I go like charge my car, pull out.
Chris: It shouldn’t be unique in the industry, but it is at this moment in time that we’re recording this podcast.
Mark: I think I really think that integration is one of the keys to their success is it takes all the anxiety or a lot of the anxiety that people go with range.
It takes it out of the equation.
Chris: Mark, I always say like right now Gen Z, and you probably heard me say this before or maybe not, but 90% of Gen Z has an iPhone.
If you were to go ask someone in that generation what type of phone they were going to get, they will get an iPhone because of the software.
And that’s how I feel about Tesla’s software.
Like I’ve been using it for so long.
I’m actually afraid to go use something else now.
Mark: I am too.
And there are products I really like.
I mean, I really love the Rivian.
I really like the Porsche Taycan.
I mean, there’s a bunch of cars that I would really like,
but then I start going, man, it’s just so easy with the Tesla.
I know exactly when I need it, where I need it, how I need it,
how long I need to stay in the car, which I think is the most fast.
Oh, you only need to charge for 30 minutes here or 15 minutes.
I mean, I think that’s just brilliant.
Chris: I just, two weeks ago, Tesla’s been calling me for two years saying, hey, you want to get a new car?
And I’ve said, when you let me transfer full self-driving
and unlimited supercharging, I’ll get a new car.
They called me two or three weeks ago.
And four days later, I upgraded to one of their 250 kilowatt vehicles.
And now I’m getting, you know, 100 miles, 125 miles
in seven or eight minutes, and it’s free.
Mark: Well, see, I got in with Model 3.
So I have one of the early, early Model 3s.
And I still love the car.
I think it’s a great vehicle.
It’s just done everything I expected it to do and more.
And like I said, the full integration is fantastic.
Chris: And just for the audience’s sake, I probably should have prefaced this.
When I say prepaid kilowatt hours, this is what we’re talking about is
different than gas fueling, where you just go to a fueling location
and then just purchase fuel.
There’s no network component.
There’s a network component to charging.
So wherever you charge, whoever owns those chargers or whoever has an agreement with the company that owns those chargers can incent you to use those chargers or to buy their product in some way.
So when we’re talking about purchasing prepaid kilowatt hours,
that means an auto manufacturer going to an Electrify America, going to an EVgo.
It’s harder with ChargePoint because they’re more decentralized,
but going to a customer that has a lot of ChargePoint stations
and buying millions of prepaid kilowatt hours and then offering their customers six months or one year or two years of free supercharging at all of their locations.
And if you go buy an electric car right now, whether it’s EVgo or it’s Electrify America or for Mercedes, it would be ChargePoint and Electrify America.
There’s a networked component to fueling that doesn’t exist with gas cars.
And the question that we were really trying to get at is how important is the networked component tied to making money selling electricity
versus the normal gas model where you just have charging stations out there and you’re charging people more for electricity than it costs you?
Mark: I never really thought of it in those terms.
I always thought of the reason we agreed to do a lot of these deals was,
first of all, pump up the utilization a little bit.
Because the individual charging station doesn’t make money
under a certain threshold of utilization.
Then call it 35%, 40% utilization.
You need to have that utilization figure in there.
You have an instant audience there.
Again, it’s always in the negotiation if you price your electrons too low, the more utilization you get, the more money you lose.
I always look at it as better from a familiarity standpoint.
I always think the most intimidating thing for the customer is
going to finding a charging station and taking that whole anxiety out of it.
That, I think, is absolutely the most important thing out there to do.
And that’s, again, where I give Tesla a lot of praise
because they got out ahead of it.
And when you buy a Tesla, you’re not buying the car, you’re buying the experience.
And it’s all the way through it.
And I think that that has to make its way into the rest of the OEMs,
is that simplicity and that taking the fear out of range anxiety, etc.
That has to be done going forward.
Chris: There’s a culture of electrification that exists within a Tesla showroom that doesn’t necessarily, it might exist at a lot of dealerships.
There might be, there’s probably many, I know there’s good dealers,
many good dealers that are selling electric cars, but for Tesla, it’s all they know.
They’re not good at selling gas cars.
Mark: I’ll be honest with you, and I’ve been to the Tesla showrooms,
I actually think it’s probably one of the weakest parts of their,
the weakest part of their whole engagement game.
Not to disagree, but I actually think this is where the OEMs could leverage but it’s going to take a lot of work to your point.
People are used to drive, selling ICE vehicles, you got to re-educate,
you got to teach them all the ins and outs, you got to teach them about the charging experience.
I think that’s stuff that needs to be done.
I stopped by a Tesla showroom in almost every city I go to just to experience.
And I’ve been underwhelmed by the experience there.
I think there’s way more they could do.
For example, I don’t think they talk enough about integrating solar
into your homes and the battery.
When I started poking and prodding, hey, what would this take?
Because I was super interested in putting solar on my roof and putting the battery back up in.
The Power Wall, I guess you want to call it from a Tesla standpoint.
And I had a really difficult time talking to anyone who really had any knowledge on it.
And so I think that’s probably one of the things they could improve in their experience level.
Chris: Yeah, it’s probably hard for somebody who’s selling a car
to go to talking about energy, is my guess.
I think some of the things they have, some of the tools that they have,
I would love to see some of the dealerships have those tools that are on the walls, things like that.
And it’s funny because a lot of times I’ll train dealerships on how to do this.
And I agree with you that that transition is specifically difficult.
This kind of transitions to my next question for you, and I’m sure this question is near and dear to you, is look like you have some people who think that direct is the future.
For me personally, I have only purchased a car direct.
I haven’t purchased a car to dealership,
and I have anxiety about going into a dealership.
The flip side to that is I’ve been working with dealerships so much over the past several years that I’ve gained an appreciation for a lot of these people and think that a lot of them are doing a great job.
And so I just kind of wanted your perspective on this direct versus dealership model and where you think this is going to go in the future.
Mark: Yeah, I think it’s a great question, and it’s probably a question
I’m sure some of your listeners will agree or disagree with me on,
but I actually still very strongly believe in the dealership model.
I think there is a lot of things that dealerships bring
that you can’t get from being an OEM direct model.
So let me just go to a bunch of different ones in my mind.
First of all, capital.
So when you’re talking and starting up a car company, the amount of capital you need to deploy to build vehicles.
I mean, it’s more than a billion dollars to engineer a platform,
get it to market and start selling cars.
So you’re a billion to a billion five into a vehicle before you even start selling it.
That’s a lot of capital.
So why do I say dealerships versus owned?
Well, dealerships are privately held groups.
They deploy the capital.
It doesn’t go on my balance sheet to build the facility.
It doesn’t go on my balance sheet to purchase the land.
It doesn’t go on my balance sheet to run all the sales organizations.
These are all done independently.
And this is inherently where the factories and the dealers always have
this relationship thing.
These guys have sunk a lot of money.
Today, the average price of a store with land and everything
is probably between 15 and 25 million dollars.
You’ve got to give the dealers.
They are passionate about what they do.
It’s a tough business.
It is transitioning.
I think if they can get more into embracing the internet and over the air or online selling tools, they can get to the same position as some of the fully owned.
Look, Tesla did an amazing job.
I think they’ve done it, but I look at a lot of these new startups
and you can already starting to see some of them talk about, well, maybe we need to go through a dealership.
They’re starting to realize that their balance sheets are underwater pretty quick.
So financially, from my standpoint, it makes no sense in the world
for these startups to take that risk on right from the beginning.
Chris: Yeah, you’re seeing some of like FinFast working with the dealers.
It’s interesting because look, I’m 33.
So when I got my first electric car, I was 26, I got a used Tesla off of their website.
And I knew the stigma of dealers at the time, but as I’ve worked with dealers, that’s kind of where my heart is now because I know what a good job that they try and do and how much they help their communities.
And I just think that to your point, I’m rooting for that outcome
that I think you’re rooting for as well.
But because I’ve only had a Tesla, I haven’t actually purchased from a dealership yet.
And I hope that the next car that I purchase will be.
But I’m just always, I think maybe there are some dealers that do the haggling thing and their reputation has been created by that.
But I just think so many of them are doing a good job and I hope it works out.
Mark: Yeah, I mean, I firmly believe that I’ve gone in and actually, I never really, to your point, I’ve always done with an OEM.
So I never really had to go out and purchase a car.
I purchased a bunch of cars in my last couple of years.
And I’ve always had a pretty good experience, never got into the back and forth, just got my deals done and kind of went in and said, hey, here’s where I want to be.
And I found it to be a really good experience.
There are some frustrations here and there and the dealers, most of the good dealers are really cognizant of that and want to improve.
But the other issue I wanted to bring up just is risk.
I mean, when things are going up, everything looks great.
I’m totally vertically integrated.
I own a supplier.
I own some of the suppliers.
I own the manufacturing.
I own the retail.
This is great.
Look at all the money I’m making.
Things are tough.
It gets a lot harder.
And if you hit a downturn, you start saying, okay, our product’s not that good.
I always liked having the dealers because it created tension in the decision making.
So we had a dealer product committee.
Some of the best things that ever came from some of the product development we did in the various companies I was with, all came from the dealer body, all came from the front line.
And sometimes that gets lost when you’re totally vertically integrated.
Does that Tesla salesman want to tell Musk, you’re full of it, this is garbage?
No, probably not.
But will a dealer?
Yeah, they will.
And I think that creates, if you know how to harness it, I think that creates a much better product in the end.
And so I really believe, again, I understand some of the issues when you go buy a car, the back and forth, and the finance, and they’ll throw the keys on the roof.
I don’t think that’s today’s dealer.
I think that’s yesteryear.
They’re evolving just like any other business is evolving.
And I actually believe that I bought a car from one of our stores that’s owned by Larry’s Group.
And it was a great experience.
And they didn’t know who I was.
It was just a great experience.
So I would just tell you, I think these guys, it’s evolving fast.
The good dealers are evolving with it.
And it’ll probably weed itself out.
We’ve had growth since 2008, free money since 2008.
It’s not free anymore.
So there’ll be some consolidation going on out there in the dealer world.
And the better dealers are going to get bigger.
And that’s going to create a better experience for the customers.
Chris: Can you speak to that?
Right now, there’s what?
There’s like 2,700 dealers in North America.
I’m sorry.
There’s 17,000 in North America.
Mark: 16,000, yeah.
Somewhere in the middle.
Mark: Yeah.
Chris: Where do you think that ends up?
How many dealer groups do you think will be around in the future?
Mark: You know, I don’t know.
And again, it depends on the economics going forward.
I do think you’re going to start seeing more consolidation.
We’re already starting to see it.
I mean, we’ve seen it over the last 10 years.
I think you’ll see, if there’s any downturn, you’ll see even more consolidation.
So depending on how the economy holds up, it’ll probably change the trajectory of consolidation a little bit.
But it’s still OK.
When you’re 25 million, there’s very few far in between
that can own four stores at 25 million bucks a piece.
You know, it’s not an easy deal to do.
Chris: To your point, I think a lot of the dealers
in the dealer groups that I’m working with, they’re the most thoughtful dealers, because that’s usually our approach is trying to think about,
you know, not just procurement installation, but everything tied to energy.
And most of them are requiring more stores.
So what you’re saying makes sense to me.
You made a comment about being vertically integrated, and when things are good, things are good.
I just want to bring this back, because I think you have a really interesting opinion on this regarding the EV space, regarding network providers, hardware providers, some of these publicly traded charging companies.
What’s happening in the market right now?
All of these companies obviously had large valuations.
They’re not the same anymore.
What’s happening, and how do you think this plays out?
Mark: I think it’s just really…
I think there were probably, as in any mason industry, there’s probably some bad decisions that were made.
Right location, it’s not really the right location.
You know, don’t think for a minute, you know, the EVgo’s, the Electrify’s, the Blink’s of the world.
They had to go out and predict where they thought EV penetration
would be its highest.
You know, some states had EV incentives in place, then did away with them.
Georgia is a perfect example of that.
So it was super hot.
I mean, that was a place you sold EVs in, and then all of a sudden you didn’t sell anything.
So, you know, some of it’s regulatory and the whipsaw effect.
So I think, you know, anyone who’s consistent with their incentives and everything that going forward, it’s easier to predict where the demand will come from and where you need to put the chargers.
I think it’s going to be for these guys, it’s a race to utilization.
You know, the way your bills or your OPEX is structured is you pay for the kilowatt hour and then you have what’s called a demand charge
and the demand charge can be extraordinarily punitive.
But if you have enough cars to spread that over, it actually starts working, the math starts working.
So it’s just going to be a race to penetration.
It’s really how quickly can I get my utilization up?
That’s what’s going to make each one of these sites viable in the future.
Chris: And I think you’re talking about asset owners.
How about the companies that are just selling the hardware
or the companies that are focused on their software?
Mark: I think they’re at the, you know, the guys selling the hardware,
we’ve seen some of the issues that have gone on with some of them.
Tritium is a perfect example of, you know, what’s happened in recent times.
I think the bigger going to get bigger, I mean, the BTCs, the Cygnets of the world, they seem to be gobbling up more and more share of the hardware market.
I’m sorry, I said BTC, ABB, excuse me, and Tritium.
So I just think you’re going to see more consolidation going on there
because if the sites are being slowed down and we look at what’s going on with NEVI, I think only eight states have actually put NEVI funds out to bid.
So, you know, it’s coming slower than a lot of these guys had geared up for.
So their overheads are too high for the amount of units they’re producing.
So I think just as you’re going to see in charge point operators,
I think you’re going to see in manufacturers, you’re going to see a consolidation going on.
And then, you know, if you get a big player coming in, a wild card that comes into the market to produce chargers, that could change the game immediately.
Producing a charger today is still a very manual process.
I mean, if you went on the line and looked at how they assemble chargers,
it’s still very manual.
You know, you have your power boards and you have all these different things, but you have to put them into the cabinet.
A lot of times it’s done by hand.
It hasn’t been fully automated for a lot of reasons.
That’s going to have to change too.
We’re going to have to see manufacturing efficiencies come out in the long run.
Chris: And what type of company do you think could be a company
that could be that conglomerate that enters?
Is it an energy company?
Is it an auto manufacturer?
Is it a cell phone manufacturer?
Mark: Yeah, I don’t think it should be an auto manufacturer.
I think auto manufacturers are going to shy away from that, producing their own hardware.
I think it’s just not in their expertise.
And I would caution any auto from doing that, with the exception of Tesla, who’s done it well.
You know, I think it could be a combination of a lot of different players.
I don’t think it’ll be an energy or an energy provider.
It’s just, again, outside of their scope.
But large-scale manufacturing, contract manufacturers are getting in the game.
I do think, you know, guys who possibly do cell phones,
guys who do other things, yes, I do think they have the possibility of getting into this and getting into it in a big way.
Guys who have manufacturing expertise could really help.
Chris: Yeah, you know, and I don’t really know much about the manufacturing side, but I’ve always kind of viewed it like,
if you’re a software company and we all agree that software…
And I’m not saying we all agree, I’m saying,
if we all agree that software is the most important component of charging, why wouldn’t a software technology company take a stab at an early market?
Mark: Or you see an alliance or a partnership with software and hardware.
I mean, there’s a lot of ways to get around that,
but the software is a critical component.
Again, you know, just as simple as putting Visa card readers on
and getting those to work all the time, you know,
in remote locations on 5G or 4G, possibly being upgraded to 5G.
It’s a tough deal.
I mean, a lot of times the failures are coming just in the Visa card reading part of the function.
So I just think there’s going to be just a lot more advancement around the software and the electronic integration in the next coming years.
Again, you got to believe this industry is only really charging wise,
fast charging, it’s only 15, 20 years old, and it’s really only taken flight in the last 10.
So I think you’re going to see a lot more advancement there.
It’s just your typical curve.
Chris: I’d love to hear your feedback on this kind of transitioning to another topic is you hear a lot of opinions.
It’s so funny because EV is just a technology, but it is so political and it is what it is, but the mining piece of it is a politicized part of it.
So from your perspective with the auto manufacturers, how do you look at this from an environmental perspective?
How do you look at this in terms of supply, timing, how much of a pain is actually getting the raw materials to build the cars?
Mark: Pretty difficult right now.
Most of that is really thrown on to the battery suppliers.
The OEMs will go out and step out and maybe do long-term contracts
on behalf of their battery supplier.
But yeah, let’s not kid ourselves, lithium, cobalt, they’re all difficult things.
I mean, lithium to me is probably not as big of an issue as some of the other minerals out there.
But I just think that again, typically when you start in an industry,
you don’t have all the answers.
I think it’s going to be one of these things they work through all the way through.
And I think the way CARB and dealing with CARB over the years the way they’ve looked at it was, hey, look, you guys will figure it out.
We’re putting the goals out there, the goals that will be better
for the health and safety of their populations.
And you guys will figure a lot of this out.
And I do believe there’s some truth to that.
I think maybe it’s a bit too aggressive.
Maybe the trajectory is a little too fast.
But I do believe people will figure that out.
So minerals is a big part.
I think it’s going to play a much bigger part.
I don’t think people are thinking about it.
But I think as EV production gets bigger and bigger,
it’ll become more and more critical issue.
Chris: Yep.
And this is my last question for you.
Sorry.
Sorry to get into such what sometimes are political topics, but hopefully it doesn’t come across that way. China. How are they affecting the supply chain?
Mark: I think gobbling up the supply chain.
I think it’s as simple as that.
I mean, they’ve gone out very aggressively over the last five years
and gobbled up all the different minerals.
They’ve got deals all over the world for different elements.
And they’ve been very thoughtful about how they do it.
So I think the biggest threat to the US is being, really between US and China is probably being, China has gobbled up and been much more aggressive about gobbling up the resources ahead of time.
So I think there is a real issue there.
I’m not a political person by general, but I do think anytime a majority of something is controlled by one company or one country, then it will create issues.
And I do think that that’s something that we should be very weary of going forward.
Chris: Yeah.
Yeah.
I’m really curious to see how that plays out.
It seems like they have a very strong position.
Mark: And again, I’m not…
There are better people to ask that question to, from an outsider looking in a little bit like you are.
I think we’re pretty well-informed outsiders, but we’re still outside.
I think there’s a lot of very smart people thinking about this.
Chris: Yeah.
Mark: But I think that’s the whole idea behind Buy America,
some of the stuff around the charging and looking at content, et cetera.
I think that’s a lot of the questions that are going out
and a lot of the things that have been going out regulatory-wise.
Chris: I’m going to ask you one more question, actually, because it sort of relates to this, is the federal tax credit for vehicles.
How do you think that plays out?
Is it difficult for dealers to provide that value based on how it’s been rolled out?
I’m a little bit less familiar with it, to be honest.
What’s your take?
Mark: I’m super disappointed in the federal tax credit.
I think they made a huge mistake.
So in the spirit of, I guess, what they would say is economic diversification is to make sure that they took all wealthy people
out of the equation to make sure that the funds were available to the mass, which I think inherently is a great idea.
I think the problem is early adopters tend to be more wealthy people
with more cars in the garage.
So if you look at the study of the early adopters on EVs, you’ll see a lot of them have two or three cars in the garage.
I think they shot themselves in the foot a little bit in terms of are those credits available to people?
What is it?
I can’t even remember the number.
Over $350,000 or whatever the case may be.
I think that was a mistake today.
I think they should have let that in.
I understand why they did it.
I understand why they were pushing and trying to get the incentives down
to make it more affordable for the middle class and below.
But I do think, again, you got to look at where the early adopters come from and you got to make sure that you don’t shoot yourself in the foot
for EV penetration.
So I have a pretty strong opinion on that just from a sales standpoint.
You know, I do think credits will need to be available
until the manufacturers can actually get the cost down.
I actually have always thought it would be very interesting to incent the manufacturers rather than the end customer because it’s the manufacturer that’s experiencing this severe economic condition with the transition.
So I think there could be more done there and they could do it on a per unit basis.
They could do it on a lot of different ways.
But I think ultimately they’re going to have to figure out the manufacturers how to force this transition.
And I don’t think it’s always consumer led.
So it could be a combination of both, to be very honest.
But I do think they got to figure out how to get the manufacturers
to be able to transition.
Chris: I know we’ve been in conversations with folks about, is it hard to, like I’ll give you the EV charging federal tax credit?
Is it prevailing wage?
Is it non-prevailing wage?
Geographically, where is it located?
Do the same challenges exist for a salesperson at a dealership?
Mark: For sure.
I mean, anytime you add complexity to the equation, it gets very difficult.
And then how do you explain that?
Anything as it works its way down the system,
it takes on its own little story.
So it gets interpreted differently.
So you tell me something, I’ll tell someone else something.
It could be interpreted very differently.
So I just think the more simple we keep things, the better we are.
But I do believe we shouldn’t overthink.
I think there’s a lot of things out there that are,
if our ultimate goal is to improve EV penetration and get the transition accelerated, then I think you got to stop thinking about all these other things and think about just that.
And I think that is so important to me is clarity of what’s the goal.
And I don’t know what the goal is.
Is the goal to make sure that we’re fair across the board?
Is the goal to transition faster?
I mean, there are all kinds of socioeconomic issues.
I get all that.
But to me, the biggest issue that I got when I sat and talked
to different levels of the government was we needed to transition to a cleaner transportation system.
If that’s your goal, then let’s make that the goal.
And let’s stop thinking about all the other.
Extraneous things.
Chris: Well, Mark, thank you so much for taking the time to talk about all this.
Mark: Oh, my pleasure.
Chris: Really interesting.
I appreciate it.
Chris: Oh, my pleasure.
Mark: I appreciate it.
It’s a lot of fun.
Chris: Awesome.
 

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