← Shift Key with Robinson Meyer
Shift Key with Robinson Meyer
This Year’s Beijing Auto Show Has a Lesson for Trump
00:47:11
Fresh off the plane back, Kate Logan and Jeremy Wallace talk with Rob about their impressions on the state China’s EV market.
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- [00:00]
A
This episode of Shift Key is brought to you by heatmap Pro. You already rely on heatmap for daily reporting and commentary on the energy transition. That's why you listen to this show. Well, Heat Map Pro brings all of our research, reporting and insights down to the local level. It's a software platform that tracks all local opposition to clean energy projects and data centers. It forecasts community sentiment and it guides data driven engagement campaigns. Go to heatmap News Pro to book a demo and see the premier intelligence platform for project permitting and community engagement. That's heatmap News Pro. Hello, it's Friday, May 15th. President Trump and President Xi Jinping are meeting in China today and while we don't know what they are talking about, at least we don't know as I record this, there's a lot of scuttlebutt that they could discuss electric vehicles and Chinese battery manufacturing. The United States is at this point kind of the last holdout in North America where you could not buy a Chinese ev. They've been available in Mexico for a long time. There was a recent Great Wall Street Journal story about how they've started to leak across the border in El Paso. And Canada, as you'll recall, recently allowed Chinese EVs into its domestic market as well, provided that its automakers also build domestic factories. China is itself in a very interesting position here. It both clearly has what even the CEO of Ford now acknowledges are of the world's best cars. Never mind just electric cars, just best parked cars, period. But it's also dealing with like pretty moribund economic demand at home, meaning it's desperate to find global export markets for its goods. EVs increasingly support Chinese exports as well. In April, China actually exported more EVs than gas burning cars for the first time. So on today's show with all that in mind, I thought it would be fun to talk to two people who recently saw those EVs in China at the number one place to see them today. Today we're talking to Kate Logan. She's the director of the China Climate Hub and Climate Diplomacy at the Asia Society Policy Institute in Washington, DC. We're also joined by a friend of the show, Jeremy Wallace. He's a professor of China Studies at the Johns Hopkins School of Advanced International Studies. Kate and Jeremy recently went to the Beijing Auto show, which is both the world's most important car show for electric cars, but also just its biggest auto show at this point period. As one attendee observed, there were actually more EV models in one room of the Beijing Auto than there were available for sale in the entire US car market. So Kate and Jeremy are going to share their impressions from that. Whether they came away thinking that China may be solving some of the last remaining engineering problems for EVs, what impressed them, what they thought was maybe missing from the Expo, and how the US should handle what is clearly at this point, the superiority of Chinese electric vehicle technology. I'm Robinson Meyer, the founding executive editor of Heat Map News, and it's all coming up on Shift Key. Kate and Jeremy, welcome to Shift Key.
- [03:07]
B
Thanks. It's great to be here.
- [03:09]
C
Great to be here.
- [03:10]
A
So you've both just returned from China, I think potentially both in the past 48 hours, which we salute you so much for immediately doing the thing that one wants to do when one is severely jet lagged and coming on a podcast right in the middle of the day. And I think I wanted to start just like at the risk of asking two Americans to kind of sum up the atmosphere or vibe of a country of more than a billion people, which you just only were in for a few days, like, can you give us a vibe check? Where did you go? How did it feel on the street? How did it compare to previous trips? And like, how were you treated? I don't know as Americans? And was it like any different from the past? Then we can get into, like, what you did there. But I just wanted to start with this. What was the vibe? How was it?
- [03:53]
C
It was, it was fascinating. So I arrived. Speaking of jet lag up, six in the morning, walking around the central business district of Beijing. It was glorious weather and clean air in Beijing, which is not always the case. And so that's a difference from previous visits. It was the May Day holiday and so it was very, very quiet in the center of the city. People tend to travel and go out on excursions. So the traffic, that is quite often a problem and kind of one of the more larger hassles of living in Beijing was not as bad as usual. And I immediately went to the Beijing Auto show, which felt like the future. And so the vibes were very much about a transition that is happening.
- [04:40]
A
Kate, how long were you there? What did you see? What was the vibe?
- [04:43]
B
Yeah, so bit different to Jeremy. I put the Beijing Auto show at the end of my trip. So I actually have lived previously in Beijing for almost five years, from 2014 to 2018. And since the pandemic, I've been back about once per year. And I think what was interesting this time is to come back and really feel like the city has returned. And not only returned, but, you know, it feels like a city that's built for a burgeoning upper middle class in a way that there are a lot of, you know, businesses that I used to frequent that I really miss that are no longer there for a variety of factors, but also a lot more resources. But I think in terms of vibe on the ground, Beijing itself as a city is beautiful in the spring. But, you know, for me, the other fun part is just seeing how the electric vehicles on the roads have increased over the years. And what's really neat in China is that there's basically two license plates. There's blue ones and there's green ones. And when I left Beijing in 2018, you know, the green ones were rising, especially because a lot of the taxis are required to be EVs, or there are a lot of incentives for that. But this time I'd say about, you know, almost half or around half the vehicles on the roads are like, having those green plates, and it makes it quieter. And it's fun just to get in a dd, which is the Chinese ride hailing app, and see what kind of luck of the draw you're going to get in terms of the car.
- [06:03]
A
So you both went to the auto show? Kate? I don't know. I'm continuing to ask for vibe checks here, but I think, you know, travel between the US And China is reduced enough, though it's been picking up lately that I feel like it's just important to kind of start by painting a picture. What was the auto show like, Kate? And who did it seem to be for in the US when you go, like, the audience at the New York auto show is actually quite different from the audience at, say, the Washington, D.C. auto show, although to some degree, they're both for car buyers. Like, was the Beijing auto show, I don't know, closer to a kind of auto show for domestic consumers who are looking to buy vehicles? Or was it maybe closer to, say, ces, the big tech industry and electronics conference that happens every year in Las Vegas, which is kind of as much for, like, global press and investors and consumers as it is for people in Las Vegas who are going to go think about what laptop they want to buy next?
- [06:54]
B
So I'll start by caveating this in that this was my first time ever to an actual audio show. I've been to other industry trade shows, so take my interpretations with a grain of salt in that I don't have a benchmark. But the first thing I'll say is, apparently this is now not only the biggest auto show in China or the past few years, but largest auto show in the world this year. So I read something like 1400 plus vehicles, over 200 something new launches, et cetera, et cetera. But the word that I would describe is overwhelming. But I think even that's an understatement. They had put together not just one, but two giant exhibition halls. And off the central axis, you have all of these huge halls on themselves. So there are about eight in one building, nine in the other. And in terms of your question about who was there, they had it set up such that the early days were meant for media, for industry. The days that Jeremy and I went were more for public consumption. So it's a little bit for everyone at this point. And on the days we were there because it was more aimed toward the general public. You know, first of all, this thing is massive, but the halls are still filled to the brim. So you have families with young children showing their kids the latest electric vehicles, lots of humanoid robots, that kind of stuff. And then you have influencers everywhere with their phones on giant sticks, streaming content. And, you know, when we were there, there's a lot of Chinese influencers, but I've heard from friends in media who were there on the earlier days that there were a lot of international influencers from all sorts of countries as well. And we saw, I think, a few international visitors from other regions, including, you know, say, the Middle east, other areas in Europe, probably some Russians as well, even on the the public days. So there's a little bit for everyone at this point. But yeah, Jeremy, curious what you think as well.
- [08:43]
C
It was overwhelming is a good word. It was impressive. A cornucopia of cars, not all in one size, but in every possible size, from the tiniest little cars that make smart cars look big to kind of giant semi trucks with out any windshields that are meant to be operated autonomously and everything in between. And so it was really large, really impressive and meant, I think, to get to the original question, both for domestic car purchasers, but also as a signal to the world and to the industry that these brands are here and real. Which I think for most of the cases, the truth, but for maybe some, it's a show of strength, even if the financials are not always there.
- [09:36]
A
So often. When we hear about Chinese automakers, I think we hear about byd. This is the juggernaut. It's coming. I think we have, especially in the west, heard about the especially cheap BYD cars and they have this model called the Seagull, although they actually seem to have many models called the Seagull. And it kind of depends on what country you are, what they call the Seagull. But at least in China, they were selling a car that's translated as the Seagull. That was roughly $10,000 all in, which is obviously extremely, extremely cheap. It's hard to get a car in the US a new car below 25k at this point. If you get a little bit further into Chinese EVs, I think then you start to hear about Xiaomi, the cellular phone company that now also makes these Ferrari like cars. But you're there. This is. You're in Beijing. You're looking at Chinese consumers kind of choosing vehicles. What were the standout automakers at the level of the show? Who was most impressive? Who had the biggest crowds, and what were you most impressed by? Jeremy?
- [10:33]
C
I think the first thing to say is that the move that so much of the Western media takes to equate China with BYD simplifies the reality. The day that Kate and I were walking around the show, we visited God knows how many booths and displays, and only at the end of the day did we realize we had not yet seen byd and then went into an entire hall that was byd. And so you can walk for seven hours walking around, looking at the future of the car industry and not even see BYD until the end. And so, that being said, its displays were quite impressive. It is both the second largest battery maker on the planet as well as the largest EV player in the world. And its wares were quite impressive, both on the technical side of various battery charging capacities as well as the models. Sitting in a $6,000 car is a different experience than sitting in a $60,000 car, but it is a car and it does seem like it will move. It does seem like it will charge your phone and have a screen inside and get you from place to place at a quarter of the price of the Average cheapest possible U.S. vehicle on the market. I still think for all of the luxury and everything else that was on display and kind of the center of attention, the cheap EV and its reality is very compelling from an American perspective.
- [12:00]
B
Maybe I'll highlight the opposite end of what surprised me, which is that I went in thinking about affordable Chinese EVs and certainly agree with everything Jeremy just said. But at the same time, there were so many luxury SUVs on display, and that really surprised me because a couple of reasons. One is that they're not just high Quality in the sense of being luxurious to sit in full massage chairs, strong horsepower, mostly electric, and if not electric, battery, electric hybrid, but also more affordable. And I think about this idea of American car companies leading in luxury SUVs, that's what the American consumer likes, whatnot. And I think about where the Chinese companies are trying to sell these vehicles, and I think part of them are for the domestic market in China, sort of upscaling a bit. But some of the companies we talk to as well are very much looking at international luxury markets like the Middle East. I think the first booth that we went to at the start of the day was zeekr, which had this really beautiful new luxury SUV that I think Jeremy sat in for a few minutes, and you're just thinking about what that means for the future of international markets and exports, not just from China, but for other countries like the US Was certainly something that came to mind. And then the second thing was just in terms of where crowds were, clustering was also very much around the leading battery tech. So byd, we think of it as an auto company, but it's also very much a battery company. And then of course, Catl, the leading battery company, and both BYD and Catl, their pavilions at the center had a big chamber with a vehicle in negative temperatures. So for BYD, I think it was negative 30 degrees Celsius, and then for CATL, minus 50 degrees Celsius, basically showcasing that not only can their batteries charge to 70% in five minutes for BYD, for instance, but also do so and hold a charge at extremely cold temperatures. And they had a little hole where you could stick your hand in just to, you know, verify that that chamber was as cold as it looked with the little icicles dangling from the vehicle. But to see that up front and see that be a focus was really interesting as well.
- [14:14]
A
This idea of flash charging, I feel like, is one of the big memes that's emerged from the auto show. So historically, you know, one of the big challenges with electric vehicles has been the charging. The idea that you can't charge an EV as fast as you can refill the gas tank of a car. And a lot of the innovation and the operation and the kind of thought that goes into EVs in the west, or at least in the United States, has been around, therefore, taking the experience of charging and making it as convenient and pleasant as possible, either by operating these huge charging networks and building them as Tesla does, or by, like sticking superchargers at Wawa and Buc EE's and, you know, various places you might like to spend your time. But it sounds like the Chinese companies, at least BYD and catl, have actually found two different engineering fixes for the charging problem that just have charging now happen essentially as fast or on timescales very comparable to those that are filling up your car. And so one of them is flash charging, which I want to hear about, and then the other one is battery swapping. This has been theorized for a while, but taking out a spent battery out of a vehicle and fully installing a new fully charged battery into it. Reportedly there were both of these technologies were demonstrated at the auto show and are potentially now also demonstrated every day across cities in China. What did you see? I guess what I'm doing winding up to here is like, did they work? Did they seem to work? Were people transfixed by them? Did you see them just at the auto show? Or do you kind of see them also around Beijing?
- [15:47]
B
Maybe I could start with this. Since I mentioned I was in Beijing for about a week before I went to the auto show and I was at a Track two dialogue in the north of Beijing by the Olympic stadium and very close to our hotel was a battery swap station. And I think it's NIO that's been one of the leading Chinese car companies that's invested in battery swapping. So just seeing that on the streets was one of the first things I saw when I arrived to Beijing after having hearing about it from my perch in dc. One thing that was interesting is I also went on the sidelines of the auto show to an event that CATL held, talking about some of the future of their innovation in R and D. And one of the things they mentioned was for battery swapping. There's the potential in the future to swap out a battery with a longer range for say, a road trip. So if batteries improve in terms of their duration and battery density and all those factors, you might have a vehicle that starts with one battery. But if you want to go on a longer road trip, you can go just swap the battery and come back and go back to your regular battery after that. So I thought that was quite interesting as well. But yeah, Jeremy, maybe I'll throw to you.
- [16:53]
C
So battery swapping is very common in Beijing in the sense of for scooters, for two wheelers. China has electrified two wheelers for a long period of time. And the way that that works is that the two wheelers are driven around. When your battery is low, you will find a kind of a station, it looks like. I don't know, like a super sized vending machine. And you will put in a number and you will kind of swap, take the battery from your vehicle out and put it in and swap it out for a fully charged one. So the idea of swapping batteries, even though it's a very expensive piece of the vehicle, is very common. And so, but to do that for a car feels like something else. But NIO does seem to be doing this and doing it at scale. I still think the physics of moving electrons is easier than moving around batteries. And so I think that the charging and charging infrastructure is still going to be quite significant. But it does help answer questions about in dense urban areas where you don't necessarily have a charger, how is it going to work? And the idea that you could swap out a battery often for holidays, as I said, you get lots of videos of kind of long lines at charging stations or long lines, especially at a battery swapping station. And if that's your only way to really solve the problem, I think that it's still going to be kind of a pinch point. I think the flash charging, especially the super fast charging, probably is going to be a phenomena of the few, kind of like highly specialized ones, either that your brand puts out there in the world or the kind of CATL or BYD themselves for their batteries. But in the end, the scale of charging as a, as an EV driver in the United States, especially one in upstate New York at the time would drive and in the cold the range would shrink and the real stress was not the amount of time to charge, but whether or not the infrastructure was there to charge at all. And I think China has solved that by just ubiquitous charging of relative high speeds. And so I think that's the real solution. And the Chinese are way ahead on that space.
- [19:02]
A
When we talk about flash charging, every automaker advertises its charging technology as like very fast. So like, what were the actual speeds that you saw achieved, let's just say at the auto show, like how fast was CATL or BYD charging their car?
- [19:16]
B
I think BYD's tagline was ready in 5 full in 9 in only add 3 minutes at negative 30 degrees Celsius, if I remember correctly.
- [19:27]
A
What was the range?
- [19:28]
C
I don't know the range for that particular tagline, but we saw ranges up to hundreds of kilometers. Right. So into the 5, 6, 8, 700, even a thousand kilometers was offered. I think some of those were getting onto E revs. Right. So kind of cars that have mostly electric but with a gas tank in order to Charge the battery. So it's a pure electric drive vehicle, but has kind of. You can use gasoline to. To power the battery. But the range and speed of charging does seem like it's just. It wasn't the focus a lot of displays. Because it seems like a solved problem is the way that I would put it.
- [20:08]
A
One meme that I feel like has perpetuated in the US or kind of one thing we hear in the United States is that China is really ahead on EVs, but where the US is more ahead is on autonomous vehicles. And that there's not anything quite like Waymo in China. Waymo now operates across several large cities, across the entire geography of the Bay Area. And there's not anything quite like that in China. Is. Is that true? I mean, maybe you saw AVs kind of whizzing around Beijing, in which case do share. But what was the footprint of autonomous vehicles like at. At the auto show? Kate?
- [20:43]
B
Yeah, so I think one of the things that's interesting is that there are Chinese autonomous vehicles, but they're not yet really on the streets in the way that they are all across San Francisco or testing all across D.C. currently. So Pony AI, I believe, is the leader. And they have sort of pilot zones in four cities, I believe. And when I was in Beijing, I was asking contacts and colleagues if I could go try one, and they basically said it was off in this district that was pretty far out and pretty contained. So they certainly exist and they're running in certain areas. But at the show itself, it wasn't, I would say, you know, the huge focus that one might expect given the dialogue around autonomous vehicles in the U.S. however, one area where I did notice a lot of focus on automation is for logistics. And this is really interesting, obviously, because China has massive port infrastructure and a massive need for this kind of logistics automation. And there were all sorts of vehicles basically intended to move things rather than people around in an increasingly automated way. All the way from something around the size of a small parcel carrying vehicle to much larger trucks for moving things around ports. And even some electric semi trucks met for long haul at this point as well. So I found that quite interesting.
- [22:06]
C
I was just going to add, I think a lot of the car makers emphasized their equivalence of Tesla's fsd. Right. So the idea that the car, it's not fully autonomous, you still have to pay attention to the road and be ready to grab the wheel if necessary, but the car will mostly drive itself. And so that felt like something that a lot of the firms selling consumer Cars were trying to push, but the actual fully autonomous, no driver around, was not Waymo. And does seem like Waymo is ahead. I separately visited Baidu, the Chinese search engine is a leader in this space, in the Chinese space at least, and. Or claimed to be, and sat in a vehicle and kind of had it drive around, but in a kind of, like, structured course. And so it was not the most impressive, given what we've seen other firms do. So I do think that perception that you have is probably real.
- [23:03]
A
I mean, in some ways quite representative, because I think some, you know, we would say that Chinese automakers are five or 10 years ahead of American automakers in terms of battery chemistry, in terms of electric vehicle kind of overall architecture, in terms of maybe phone infotainment system integration. And it sounds like Chinese autonomous vehicles are maybe 10 years behind Americans. I mean, that's exactly where Google waymo was about 10 years ago. As a tech journalist, you could go get an. They had those little kind of VW bug cars at the time. And I never did this, but I had colleagues who did back when I was a tech journalist. You'd go sit in the car and it would drive you around the closed course in Mountain View, and you were like, oh, wow, it's driving. But it, it wasn't, you know, driving around San Francisco in the same way now. I mean, I think at this point,
- [23:47]
C
yeah, I mean, to be clear, the, the videos that they showed us of the car navigating by itself around kind of like crazy complicated structures in Wuhan, in the dark, in the rain, like, suggested that this was not the most impressive version of their technology. But it, it was not. They didn't lead with the strongest foot.
- [24:09]
A
Well, this gets actually at a question I was going to ask, which is what was the presence of American and European automakers at the, at the show? And, and what was the presence of, say, Kia, Hyundai, which is an East Asian automaker, but also sells many of its vehicles here in the United States and produces them here in the United States.
- [24:27]
B
A lot of these foreign automakers who are at the show who have long had some degree of production in China, many of them, you know, in the case, joint ventures with Chinese companies, because that was the requirement at the time that they entered the market, were very much leaning into their history as the original producers of internal combustion engine vehicles. So the number of historical vehicles that we saw at the show across booths like Volkswagen, Audi, Mercedes Benz, was really interesting and surprising. Mercedes Benz, you know, having a model of the first internal combustion engine vehicle on site so, you know, really leaning into the history and tradition, but you can see how that's now at odds with the idea of vehicles as these tech products and starting to flail a bit as a strategy. And then the other thing that I noticed is that a lot of the international brands also really leaned into their partnerships with race car drivers and all of these, you know, racing circuits internationally as another flashy means of attracting consumers. So I'm not a big race car, Formula one person, so I can't speak to that too deeply. But that was certainly another trend that we picked up on.
- [25:40]
A
So we're recording this on Tuesday, we're releasing it on Friday. At the end of this week, President Trump is meeting with President Xi and we don't really know what they're going to talk about at this summit. It was delayed because of the Iran war. Allegedly, Treasury Secretary Bessen is flying to South Korea to meet with his Chinese counterpart to talk about what they are going to talk about in only a few days, which is so funny because normally this is the most choreographed diplomatic event in the world. And instead it's kind of they're preparing for the summit much as I prepare for this podcast. But reading between the lines, I think some conservatives in the US have become concerned that Trump is going to allow catl, or Trump is going to invite Catl and kind of the Chinese government as well, to begin to build factories in the US or to begin some kind of manufacturing effort in the US Framed as part of an American first Re industrialization initiative. Now, you both have been to the Beijing Auto Show. You've seen the heights of CATL's technology. Like, is that a good idea? Should we try to welcome CATL and its kind of superior understanding of battery chemistry to the US and invite it into, say, the same kind of jointly owned enterprises that, you know, Chinese automakers once welcomed American automakers in. Or is this like a bad idea? It's gonna, I don't know, allow. These are gonna be dens of espionage and we're not gonna learn anything in the process.
- [27:03]
C
I think the opportunity for the United States and for Chinese firms of investment is real and should be taken very seriously. And so the various concerns that may be could be put out there about national security concerns or data concerns or economic concerns about these need to be parsed and tried. The more clear that we can be about what we're aiming for and what we are worried about, the better. So if the concern is that Chinese car companies will somehow use these vehicles and their cameras to spy on Americans and in a moment of crisis, run like rob off of a bridge. I just don't think that, to me, it doesn't feel like a major national security concern. Almost all of the connected car rules around the world are kind of like dealt with by data localization. So Tesla, when it sells cars in China, the data that is kind of generated by the car stays in China. And I think something like that feels very manageable. The economic concerns are usually on the line of, well, the big three are way behind. And so if the Chinese could come in, then all of a sudden the big three would be out of business. And that would be bad for union labor. It would be bad for these American companies. I think the reality is much more complicated and that the idea of remaining as an ice island where internal combustion engines are the only kind of old, expensive vehicles that all of us have to pay a tax for, does not seem particularly compelling to me. And moving in this direction, whether it is as through joint ventures, through tech licensing, whatever it may end up being, is, I think, a real opportunity. And I think from the Chinese perspective, access to the American market is something that they are desiring as well. The idea of involution, the idea that these firms are struggling to make profits. The American market is still a market where auto firms can make profits. And so I think the. There is. I think there is space for mutually beneficial deals to kind of incorporate Chinese automakers or their technologies in the US in ways that give American consumers better access to these products and help develop the American production capacity in the. In this direction.
- [29:31]
A
To the retort one sometimes hears, let's talk about data localization is like, yes, of course China is capable of getting Tesla to localize its data and to make sure that kind of no data from its cameras leaves the country or something. But do you really trust the US Government and the Trump administration to actually enforce this when they're kind of counterparty in these negotiations? Won't just be ctl, but it will be, you know, the Chinese ministries that kind of oversee the economy and exports. Do you attach any credence to this, or do you think these are ultimately kind of surmountable problems?
- [30:06]
C
I think it's very surmountable. So Baidu's kind of autonomous vehicles operate in the uae, and the UAE has data localization rules that they require and that Baidu and the Chinese companies kind of absolutely accede to. And I think all the European countries do the same thing. And I don't think that's going to be a big deal. The other point I would make is that our phones, I think have much more information on us in a much more detailed way than our cars do. And we still have phones that are developed and built in China and have apps that are from Chinese firms sending data to China or that can be localized in the United States if required. And so I think the idea of the vehicle as like we'll know if I run through stop signs perhaps or if I don't stop all the way. But the extent to which it my phone is what I really worry about when I worry about privacy.
- [31:00]
B
If I could jump in to add a few things, I want to call out a great report today from Harry Krestra, who's an expert on cybersecurity and his team at Carnegie Mellon that basically looks at reasonable ways to manage the risks around cybersecurity without cutting out the ways that access to some degree of Chinese clean tech could benefit the US Economy, US Workers and all of those other interests that we tend to deprioritize as compared to these security boogeyman or risks. And you know, a lot of these risks are real, but as Jeremy mentioned, they can't be managed. And I think they do a great job of articulating that. Going back to your original question, Rob, about Catl, I thought it was interesting because this is a question that's been articulated in a lot of different ways and I found it notable that you use CATL as the company that you called out as compared to BYD or another company, because Catl is actually a company that has an existing licensing agreement with Ford. And it's an example of a way that an American company has actively sought out a partnership with a Chinese cleantech provider in a way that works for U.S. commercial interests. And there was a great piece in Bloomberg today that looked at that partnership and the wholly Ford owned facility that's being built in Marshall, Michigan to produce CATL batteries and some of the trade offs around the benefits to the local economy, how some of those trade offs have been managed in other ways. But from my perspective, in the context of some of these broader questions, it was interesting to be in Beijing when a number of forceful signals came out from members of Congress and not just conservatives, actually much more from the Democratic side basically pushing against any sort of access to Chinese electric vehicles and or potentially batteries in the US So it's not just conservatives, it's both sides of the aisle that are pushing back in some ways. And I think the Ford CATL partnership is interesting because I'd be really curious if anyone might have the political courage to articulate what, you know, these types of partnerships would look like in a way that could work for Americans and you know, the labor interests that Jeremy outlined and all these other factors that might be traded off if we block access entirely.
- [33:07]
A
Well, and specifically the Congress members who most oppose it is Senator Slotkin from Michigan. Democrat of Michigan. Right. And so it is a kind of bipartisan thing. I think what's interesting is that that very Ford Catl deal, which like full disclosure, I wrote about as generally a good thing, I said it was good that US firms were learning from a few years ago, was opposed at the time by then Senator Marco Rubio, who's now the Secretary of State and presumably going to have some kind of say via cfius, the American Trade Control Board, for lack of better term, about any kind of kind of US Chinese joint venture that opens in the US and kind of has a nexus with EVs in some ways. I mean, it's funny, the phrase I was reaching for as you were describing this, Jeremy, was like literally about China. I was going to be like, only Trump can invite in Chinese EV makers and perhaps would be Decarbonizers should be very excited that. I mean there's lots of reasons why would be decarbonizers should be particularly excited that this president is welcoming them in because to some degree there will be no other president in as secure a position to do so politically. Kate, you went to this track 2 dialogue between, what was it, American clean energy companies and Chinese clean energy companies. And I realized that it was partially under Chatham House rules, you can't discuss all of it. You don't need to tell us who was saying what, but like what was discussed. And evidently if there's some kind of dialogue there, the Chinese clean energy companies found it had some reason for talking to their American peers at that moment. What were they interested in talking about with us at that meeting?
- [34:39]
B
Yeah, so like you mentioned, utter Chatham House, but I can share a few things. This was a track to dialogue focused on carbon capture and sequestration and carbon management. And the background of this is this is actually a topic where the US and China have engaged for a long time, well over a decade under Obama with the Climate Change Working Group and then the Clean Energy Research center, the SERC actually, which went all the way through Trump's first term before it terminated. And then under Biden, the Sunnylands Agreement between the US And China included a clause for the US and China each should develop five large scale ccus projects that essentially the idea was to pair up projects on each side so that they would test out CCS in different sectors where it will be needed, like cement or steel or perhaps even coal fired power plants, et cetera. So this dialogue was between actors on the US side and China, all non state actors, which is the definition of ATTRAC 2. Basically looking at advancing and continuing those exchanges that have been going on for a long time with the idea that this is a technology that's still relatively nascent, where both the US and China are investing in R and D in different ways. On the US side obviously there's strong commercial interests given the 45Q tax credit, as well as some of the oil and gas companies that have been using CCS for purposes like enhanced oil recovery. On the China side, what I thought was interesting is that there's also a lot of R and D, but very few policy incentives and very little market incentive for actually commercializing it and bringing it to scale. And I think at this point we're all familiar with the story that the US can lead in R and D, but at the end of the day it's usually China that then takes that technology and scales it up. And I think it'll be really interesting to see what happens with CCUs because it was a really substantive technical exchange. And I think this is often the case where you get technical experts talking to each other on both sides and they have a lot in common, a lot to learn from one another, but then, you know, it's not a technology that has a strong market incentive at the moment. So when will that happen and come into play and start to scale up is a big question. But I think it's good to see that there is that level of interest from both sides in continuing to gauge around it.
- [37:01]
A
One kind of line of thinking that has run through a lot of the China discussions we've had on the show is that China has done a lot on clean energy, they've done a lot on electric vehicles, they've done a lot on developing and commercializing and scaling the actual technologies that we need as a planet to decarbonize, despite not having as much of a focus on decarbonization explicitly at the high level policy, you know, setting process that a lot of Chinese policy on energy, on environment, has been focused on conventional air pollution, has been focused on energy security, and has been focused on kind of remaining at the cutting edge or the frontier of a number of breakthrough technologies including batteries and EVs. And those policies alone was able to get China to where it is today. That being said, there's always kind of this possibility that China could at some point tip over and just begin actively decarbonizing and focusing on climate policy as a goal in itself. Both because it's of course a worthy goal in itself and the Chinese government has stressed it as a goal for a long time and also because it's a, a soft power tool, right? Because you can go, you know, into cop A few years ago, and was so striking to me then was that climate policy is the one thing you can say you're doing as a country that every other country in the world will think is a good thing and kind of see it as vaguely benefiting itself. Have there been signs recently? Did you see signs when you were there, maybe even in how policymakers were talking and how EV companies were framing their technologies, that that tip over or transition is happening and that China is beginning to actively target carbon emissions not just as a byproduct of, of conventional air pollution, but as a policy goal themselves.
- [38:44]
C
I think there are signals in both directions. So let me start with the bad news first. So the coal to chemicals sector, which is a sector that takes coal and transforms coal into kind of basically more of a petrochemical in order to produce the various plastics and other things, is something that China has been developing and expanding for, for a number of years and continues to do so with the Iran war. We see kind of a rising price in, in oil as well as in coal. But in China this is pushing ever further into the coal to chemical sector. And so there's no, as far as I can tell, it's only expansion in that world and not contraction, which is something that would need to happen because it's a terrible emitter as well as kind of like local pollution as well. It's a huge carbon source and growing, basically the growing source of emissions in China. The one source is cold chemicals and it continues to expand. The good news is in contrast with the recent five year plan that I think you've talked about in previous episodes and was relatively weak as a signal for decarbonization. We've seen some policy announcements about local level leaders being pushed to that, that this will be part of their evaluations, that decarbonization and energy efficiency emissions themselves will become core pieces of the way that they are evaluated. And we have long thought internally inside of China as well as outsiders all think that these systems are extremely significant and affect the behavior of politicians and firms inside of China. And so I think that's a really Good signal that we might be moving in a real direction where the shift from peaking to eventually decarbonizing to actually beginning to move in that direction is happening.
- [40:37]
B
Yeah, I was just going to follow up on what Jeremy mentioned of this new evaluation mechanism for local officials and say I think it's a good example of how China is serious. But something China often does is take what is already the prevailing economic and or policy trend and then codify that into something that sends a strong signal. So you see this with this recent guiding opinion coupled with the evaluation mechanism where local officials will now be assessed on how well they abide by China's carbon intensity target. China's consumption of coal and oil, and we've been talking about electric vehicles. China is set to peak oil consumption this year and that's been said by government officials largely as a result of the over 50% of electric vehicle new sales penetration on the streets. So that's worth saying out loud. But again, to see China take a step to lead on something that's not necessarily already the prevailing direction is quite rare. The other piece that's notable recently is both Xi Jinping and Li Qiang, who's China's premier second in command, have made really high profile statements and trips emphasizing new energy as energy security. And I think that's notable because they could make the choice, for instance, to go to Shaanxi, big coal producing region, and say that coal is the ballast of energy security. But instead they're choosing to go visit hydropower plants and solar demonstration projects and emphasize how new energy is energy security, while still noting that fossil fuels and coal have a role to play as the balancer of the power system. So I think that in itself does reflect the overall future direction. Despite everything Jeremy mentioned on coal to chemicals also very much being the case.
- [42:28]
A
Did you get any glimpse into how the Chinese economy was doing and how it compared to how it was doing in the past? I think we get kind of mixed signals here in the United States. And so just as to people who've been there a bunch or live there, what's happening in China's economy right now?
- [42:46]
C
The China macro situation is a complicated one, right? So for years China, the overall situation has been characterized by deflation as opposed to inflation. And for as bad as inflation is, and Americans will tell you it's very, very bad, deflation is a worse situation because it leads everyone to push off making purchases, which just leads to real collapse of economics. China with the war, is seeing kind of a return to inflation, but it's a cost push inflation and not kind of from increased demand. And so it's a messy situation. That being said, all of this investment in EVs in clean tech is increasingly desirable around the world and something that the rest of the world is buying. And so exports are surging. And so the overall macro situation is maybe better this year than it was a year ago. And I think there's a real push in the export sector that is going to continue to grow because these are, they're making desirable products. But it continues to be the case that the Chinese real estate market has not resolved its tensions, that people are holding onto properties that are not worth as much as they used to be. And the bottom is not yet totally clear. I think once it bottoms out, you will have a people will have a sense about how much wealth they have lost, but also how much wealth they still have. When the prices are still declining, it's hard to feel settled at all. And so I think we're probably within a year or two of that fully bottoming out and that that will be clarifying about the situation.
- [44:23]
A
Last question. You walked around the Beijing Auto show for seven hours. You saw lots of vehicles. Surely there was one vehicle there that you saw and you thought, boy, if I had that in the US I want to drive that. I want to own it or I want to drive it or my life would be so much better if I had this. What is the one car that you saw at the Beijing Auto show that you wish you had? Kate, you start.
- [44:44]
B
Tough question. I will be the millennial self that I am, who has a nearly 20 year old RAV4 that is currently falling apart and say that I would just love to have a BYD seal or equivalent, basically the very reliable yet high tech, affordable accessible ev. And not just because of all those factors, but also because they come in a lot of fun bright colors as well. And they do have that sort of, you know, allure from a design perspective too. Plus the flash charging.
- [45:14]
C
Jeremy, let me be cute if you don't mind and then I'll give my actual answer as this is a car show. The Beijing Auto show officially recommended everyone to arrive by mass transit. And so the best way to get there I went on two different days. One day I went on mass transit and one day I went on cars and it actually was more difficult to access the venues by cars. And so let me suggest that mass transit remains very desirable for urban environments. That being said, I visited Xiaomi's automated factory in Beijing as well as kind of sat in those cars. And the various Xiaomi products are extremely impressive at desirable price points. And so the, I don't know, Su7yu7 Ultra Max, plus all of them, whichever one you'll let me buy or whichever one Senator Slotkin will let me buy, I would purchase.
- [46:06]
A
You're in good company there, Jeremy, because Jim Farley, the CEO of Ford, famously imported through some loophole in SU7 and says it's the best car that he's ever driven, or at least it's the best car he could get for the money. And so, you know, you might be talking of mass transit, and of course, mass transit's crucial to the overall decarbonization story. However, CEO of Ford agrees with you that the SU7 is it. Well, there's obviously so much more to talk about, and I look forward to continuing this conversation, but we're going to have to leave it there. Kate, thank you so much for joining us. And Jeremy, thank you so much for joining us here on Shift Ski.
- [46:40]
B
Thank you. This is great.
- [46:42]
C
Thank you.
- [46:47]
A
And that will do it for us today. We'll be back next week with a new episode of Shift Key Key, I realize it's been a very busy week for us. Three episodes. Until then, Shift Key is a production of Heat Map News. Our editors are Jillian Goodman and Nico Loricella. Multimedia editing and audio engineering is by Jacob Lambert and by Nick Woodbury. Our music is by Adam Cromlau. Thanks so much for listening. Have a great weekend. We'll see you next week.