A Nightmare Tariff Scenario for the Auto Industry — ft. Tim Higgins

Ed opens the show by discussing Trump’s tariffs, xAI’s purchase of X, and OpenAI’s record-breaking funding round. Then Tim Higgins, Wall Street Journal columnist covering the automobile industry, joins the show to break down how the auto tariffs will impact the car industry and the broader economy. He shares his take on who stands to benefit from those tariffs, checks in on Tesla’s biggest challenges, and examines the competitive landscape of the self-driving and electric vehicle markets. Vote for Prof G Markets at the Webby Awards Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:28Speaker 01

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• 1:24Ed Elson?

  Welcome to Prof G Markets. So Scott is out this week. He's on his grand college tour with his son. I believe they are in Chicago right now. They just visited Northwestern and U Chicago. Fun time to be in the Galloway family. So I'm flying solo today, which means we're not starting with a joke. We're not starting with a dick joke. Many of you will probably be sad to hear that. Many of you will probably be relieved to hear that. We'll just be getting into the markets today. Later on, I'll be speaking with Tim Higgins, Wall Street Journal columnist covering the automobile industry. We'll cover his thoughts on the winners and losers of the auto tariffs. But before we do that, let's get into the headlines.

• 2:07Ed Elson?

  President Trump announced reciprocal tariffs on US trade partners, marking the occasion as Liberation Day. He also imposed a 25% tariff on imported vehicles. Elon Musk's XAI has purchased his social media platform X. The all-stock deal values X at $33 billion or $45 billion when you include the debt. And finally, OpenAI closed a $40 billion funding round led by SoftBank, which values the company at $300 billion. It is the largest private funding round in tech history.

• 2:48Ed Elson?

  Okay, let's start with these reciprocal tariffs. Of course, everyone is talking about it. Liberation Day has come. You know, I think the idea of reciprocal tariffs, reciprocity, I actually think that's a nice idea in theory. I don't see any issue with saying, you know, you guys charge us this amount, and we're going to charge you the same amount right back. Reciprocity, that sounds fair to me. The thing is, if you're going off of what Trump says, you would get the idea that we are the benevolent nation when it comes to tariffs. You'd get the idea that everyone else is screwing us. You know, they've been playing hardball, we've been playing softball, so let's play hardball right back. And I

• 3:31Ed Elson?

  would agree with that notion, if it were true. And the trouble is, it isn't. The reality is that we are, in fact, the stringent nation when it comes to tariffs. Most other nations are actually more lenient than we are. And I can give you countless examples of where that is the case. You look at Japan, for example. We charge 25% on every Japanese truck that enters the US. Meanwhile, for American trucks that enter Japan, the tariff is 0%. You look at Brazil. We charge them 81% for their cane sugar. They charge us 14%. You look at New Zealand. We charge them 13% for their butter and 10% for their

• 4:15Ed Elson?

  milk, and they charge us nothing. In fact, since 2009, we have implemented the highest number of domestically beneficial trade interventions, more than any other nation, three times more than Germany, three times more than Canada, five times more than France. So actually, when you look at the tariff situation... It's not that everyone's playing hardball and we're playing softball. We're actually going pretty hard on everyone. And I'm fine with the idea of reciprocity. I think reciprocity makes sense. But let's be clear. True reciprocity would mean we're in for hundreds and hundreds of tariffs that are coming right back in our direction. We are not the benevolent nation we think we are. In fact, we are quite hawkish on trade. So we'll see where this goes.

• 5:00Ed Elson?

  I think implementation is going to be a nightmare. That's at least what many economists are saying. It's very difficult to do this as quickly as Trump is saying we can do it. I don't see those tariff revenues hitting our bottom line anytime soon. But I think the most important consequence of this action is we are going to see extreme retaliation from every other nation around the world when it comes to tariffs. I don't see how this works in our favor. All this is to me is a reflection of our delusion, our tendency and obsession with thinking that we are the victim in a world where both historically and presently, you look at the numbers, we are in fact, in most cases, the victim.

• 5:43Ed Elson?

  Let's talk about XAI. You know, the first thing you might be thinking here, certainly the first thing I thought when I saw this headline. Now, wow, XAI is valued at $80 billion. X, the social media company, is valued at $33 billion, $45 billion when you include the debt. That's actually really impressive. You think back to just a few months ago, when Fidelity marked down their stake in X and they were valuing the company at less than $10 billion. And in those few months since that point, the tech sector has only been in decline. The Nasdaq's down around 11% year to date. So I see this headline, I think, well, things must be going awfully well over at X if the company is commanding a $45 billion enterprise value at this point.

• 6:28Ed Elson?

  I want to clear this up right off the bat. Both of those numbers are fake numbers.

• 6:35Ed Elson?

  They are totally an accounting trick and they are an example, in my view, of Elon's incredibly deft understanding, not of how to run and operate a business, but of how to game the markets and inflate the perceived value of his companies way beyond what is even remotely reasonable or logical. And he's used several distinct strategies to get there here, and I'm going to explain them now. The first thing you have to understand here, this was an all-stock deal, meaning no cash was exchanged in this transaction. What this deal does is it says to the shareholders of X, we're diluting your ownership stake in X and in exchange, you're going to receive these shares in XAI. And to the shareholders of XAI, the opposite, we're diluting your stake in XAI. In exchange, you're going to

• 7:20Ed Elson?

  get these shares in X. So to assign any dollar amount to this transaction to begin with is a red herring because no dollars were exchanged. The only thing that matters here is the ratio in the value between the two companies because that's what determines the dilution. And what the ratio tells us is that the shareholders in X will own 30% of the combined company and the shareholders in XAI will own 70% of the combined company. But no one got richer and no one got poorer because again, no cash was exchanged. So how did we arrive then at this gigantic valuation? Well, a lot of it has to do with the power of the word AI. XAI is

• 8:04Ed Elson?

  an AI company and despite the fact that it has generated almost no revenue yet, investors are willing to overlook that and they're willing to assume that over the long term, the company is going to make a lot of money. Elon Musk knows this and that's why he's combining these two companies. He believes that if he can rebrand the social media platform as an AI company, he can inflate the perceived value, which will make it a lot easier for him to raise money in the future. And by the way, I'm sure he's right. But again, this doesn't have anything to do with actual dollars. It has no basis in revenue, no basis in earnings. This is all a function of his ability to tell a compelling story. Now, everything I've

• 8:46Ed Elson?

  described so far is pretty standard in the world of venture capital. You know, an all-stock deal, that's pretty common. Pumping AI, that's common too. We've seen it a lot. Here's where it gets a little dicey though.

• 9:01Ed Elson?

  You might remember a few weeks ago, we discussed a headline that X had been valued at $45 billion in the private markets, not with stock, but with cash, meaning someone had actually paid money at that valuation. And I asked the question to Josh Brown, who the hell is paying for this? Revenues are down at X 40%, EBITDA is shrinking, it's down to $1.2 billion. And apparently, by the way, that's a highly adjusted number, which means the real number is even smaller. So how does the valuation add up? Well, I found my answer. According to Bloomberg, the buyer in that private transaction was Elon

• 9:42Ed Elson?

  Musk. Elon invested $150 million of his own money at the ridiculous valuation of $45 billion. So when you read that headline, when you read a headline that says X valued at $45 billion, including debt, you're not actually getting the real story here. The real story is that Elon Musk valued X at $45 billion. The whole thing is a charade to make you think the company is more valuable than it really is. So I'm just fascinated by this transaction, because it shows you just how good Elon Musk is at gaming the system. He's a master of branding, using the word AI, combining the company, turning

• 10:23Ed Elson?

  this whole thing into an AI company. He's a genius in creative accounting, massively adjusting the EBITDA of X, the social media company, and then going in and buying shares in the private markets and not disclosing that it's him buying the shares so that everyone thinks the company is more valuable than it is. But most importantly, he understands more than anyone else that in 2025, all of this is worth it. Because if you can convince other people that you're more successful than you are, that your company is more valuable than it really is when you go in and look at the revenue and you look at the numbers, if you can do that, you can ride the momentum until you actually are successful. The common

• 11:06Ed Elson?

  term for this is fake it till you make it. But Elon Musk is a champion of this principle. And this transaction, what we've seen here, XAI buying X for $45 billion, including debt.

• 11:20Ed Elson?

  The numbers are nothing. The numbers are meaningless. This transaction is simply a reflection of his fundamental belief in that principle, that if you fake it, eventually you will make it. And that's what these numbers are. They are fake.

• 11:36Ed Elson?

  Okay, OpenAI, $40 billion in funding, $300 billion valuation. This is the largest financing round in history. Actually, the valuation is higher than any IPO in the history of global markets. So this is a huge deal. And I think the question everyone's asking, and everyone's going to be asking, is, is it worth it? Is this company overvalued? My opinion, I don't think it is. I genuinely believe that this is a once in a lifetime company. Apple, Microsoft, Google, Berkshire Hathaway, Standard Oil.

• 12:20Ed Elson?

  I think OpenAI is on track to reach a level of influence and a level of value that is comparable to these companies. And if I could have invested in this company at $300 billion valuation, I would have. But before we get into the details, I just want to check in on a prediction that Scott made on this deal and the role that SoftBank would play in it.

• 12:43Scott Galloway?

  I think the insecurity in the market right now is probably going to give them a reason to hit the sanity button and either get different terms or better terms or not do this investment. I guess my prediction is I'm not sure this round is going to close on the terms initially reported in the press, because it hasn't closed yet. And it just feels to me this is too rich. If you're a limited partner in SoftBank, basically Masayoshi Son has tried to convince you that within five years, this will be one of the 10 most valuable companies in the world, because it's going to have to have a trillion dollar plus market cap to justify the kinds of returns for this type of risk. I think that is a difficult argument to make with any level of certainty right now.

• 13:25Ed Elson?

  So that prediction didn't really pan out. OpenAI has secured that that $300 billion valuation. But there is an interesting caveat in the deal. And that is SoftBank is leading the round with $30 billion. But they've said that if OpenAI doesn't restructure into a for-profit company by the end of the year, they're going to reduce that investment to $20 billion. So to be fair to Scott, we do have a new and fairly significant term here. But in terms of the valuation, we're still at $300 billion. SoftBank was down for that. They did not get the jitters. And as I've said, I think that this is the right valuation. Let's look at the numbers on this company. Let's look at why this is such a strong company.

• 14:09Ed Elson?

  On revenue, the company's on track for $13 billion in sales this year. Huge. On users, they've now hit 500 million weekly active users, not monthly actives, weekly active. So in other words, the population of the entirety of North America. So US, Canada, Mexico combined, they are logging on to ChatGPT and using the product every week. This is absurd growth, especially when you consider the fact that ChatGPT launched only 26 months ago. It's only a couple of years old. But what makes it so compelling to me? What makes the $300 billion valuation worth it is the monetization rate at OpenAI.

• 14:55Ed Elson?

  Only 5% of ChatGPT users are paying for the product. And as I've said before, this isn't because OpenAI hasn't figured out how to monetize the platform. They're smart people. It's because they've chosen not to. They're sacrificing revenue in exchange for growth. And all it would take if they wanted to 5, 10, 15x their revenue overnight would be to flip a switch. And the switch would be very simple. It would be a paywall that says, if you want to continue using ChatGPT, please insert your credit card details here. This is an absurdly strong position to be in. And it honestly reminds me of the early days of Amazon and of Facebook and of Google.

• 15:38Ed Elson?

  The only difference, though, is that the customers of OpenAI are already paying for the product. They're not reliant on advertising to supplement the revenue. And by the way, they could take the ad model if they wanted to. That's certainly on the cards for OpenAI, but they have chosen not to. Instead, they're shooting for growth and it's paying off tremendously. So those are the numbers. Now let's just talk anecdotally about the success of this company.

• 16:06Ed Elson?

  I have never seen a product that has captured the imagination of the public like ChatGPT has. And it all started really with the launch, when they launched two years ago. The eureka moment for me was when my mum showed me that she was using ChatGPT to generate a personalized poem that she delivered to me and my family on New Year's Eve two years ago. And I really think this is a good rule of thumb in tech. I think if your parents start using a product, a frontier tech product, that means you have something extremely special. Even my grandparents are playing with this. That's just, that's just not normal. That doesn't really happen in tech.

• 16:49Ed Elson?

  And since that point, it's only gotten better. It's only gotten more viral. Last week, OpenAI launched image generation. On day one, they were clocking a million new signups every hour. I don't know about you, but my entire social media feed has been filled with these AI-generated images that people have been making on ChatGPT. Everyone's making these Studio Ghibli images. Some people are taking images and turning them into the Muppets characters. Last week, my sister sent me a picture of her and her new dog, except it was an AI-generated image that rendered them as cartoon characters. She said she was playing with ChatGPT all day. This is the kind of creative inspiration that I don't think you can really capture

• 17:34Ed Elson?

  or understand with just numbers. To me, it's so much bigger than that. To me, this is a once in a generation product. I think the only thing that stands in OpenAI's way is the competition. You know, it's not a question anymore of whether AI is going to take over the world. Everyone knows that's going to happen. It's a question of which AI company takes over the world. And the only real competitors you have right now are DeepSeek, Anthropic and Gemini. And you look at the user numbers on those platforms, you look at what they're doing in revenue, they are tiny compared to OpenAI. OpenAI is totally running away with it. So I'm really bullish on this company. My prediction, I think OpenAI is the next trillion dollar company.

• 18:16Ed Elson?

  I think the growth potential there is massive. I think the technology is out of this world. I love using it. I use the product every day. I talk to my friends, they use it every day. People in all sorts of sectors, people in consulting, people in finance, people in creative industries. And so $300 billion valuation for this company, what I believe is the next big tech company. I think the investors are getting a good deal and I would have liked to be in the deal myself. Those are the headlines. We'll be right back for our conversation with Tim Higgins. We're going to be breaking down what is going on in the car industry and what these tariffs are going to do to the car industry.

• 18:56Ed Elson?

  Stay with us.

• 19:05Speaker 00

  This episode is brought to you by Welch's Fruit Snacks. Back to school season can be tough on parents, but choosing a snack you and your kids can both get behind doesn't have to be. Stock up on Welch's Fruit Snacks, made with whole fruit and now made with no artificial dyes. It's a snack kids already love and one you can feel good about giving them. Go back to school with Welch's Fruit Snacks, now made with no artificial dyes.

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• 20:03Speaker 03

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• 20:24Ed Elson?

  Welcome back. Here's our conversation with Tim Higgins, columnist for The Wall Street Journal, CNBC on-air contributor, and the author of Power Play, which is a book about Tesla. Thank you for joining me on Prof G Markets, Tim.

• 20:37Speaker 08

  Well, thank you.

• 20:40Ed Elson?

  So there are a lot of headlines about cars that are floating around in the news this week. And so we really wanted to get you in here to talk about this today. For those that don't know, Tim covers media and tech for The Wall Street Journal, but he's also covered a lot of the auto industry as well. And of course, he wrote that book about Tesla. So we're going to focus on the automobile industry exclusively today. And I'd like to start with this new tariff that Trump introduced last week. He's putting a 25% tariff on all foreign-made cars and also a 25% tariff on all foreign-made auto parts. So, Tim, break it down for us. One, why is Trump doing this? And two, what does this mean for the car industry and for the economy at large?

• 21:25Speaker 08

  Well, the president has talked about how he's doing this for as part of his kind of Make America Great plan to bring manufacturing back to the US and to bring kind of that high-value manufacturing to the US. For automakers, this is a nightmare scenario. Building, designing, making cars is something that takes many, many years. There's these supply chains, there's these factories, and the system is not parochial anymore. It's very global. And if you think about the US in the last year... The more than 16 million cars were sold and 54% of those were produced in the US.

• 22:07Speaker 08

  That means 46% were imported and that's just talking about where they're built. That doesn't even get into the complicated supply chain of where those parts came. And a lot of them come from outside the US.

• 22:20Ed Elson?

  Yeah, so, you know, all the car stocks basically dropped across the board after the announcement. And I think that was probably expected for the foreign car stocks. But, you know, then I see stocks like General Motors and Ford, they're also dropping. So why are they dropping as well? Is that because of what you said there that they also rely on car parts that are outside of the US?

• 22:42Speaker 08

  Part of that, but also US car makers are not so US anymore. Think about General Motors.

• 22:51Speaker 08

  46% of their cars that are sold in the US are assembled outside of the US. Primarily in Mexico, Canada, South Korea.

• 23:00Speaker 08

  It's a global business. Ford is probably the best position perhaps. They have a lot of US manufacturing. The other Detroit automaker now known as Stellantis, it used to be known as Chrysler. They build a lot of models outside of the US, but they also have a lot of US parts in their vehicles. So if they're made in Mexico, they got a lot of US parts. So they could be okay. I mean, they could be better off, who knows? You know, overall analysts are expecting this is going to hit the operating margins, operating profits for these carmakers.

• 23:33Ed Elson?

  Are there any winners of these tariffs? I mean, we've been over the losers, of course, the foreign car companies. Sounds like most of the American car companies too. Are there any winners here that you could identify?

• 23:45Speaker 08

  Well, the stock market thinks that Tesla might be the winner if you look at kind of the way the stock has moved. But even Elon Musk, the CEO of that company and a very vocal Trump advisor these days, has said there will be an impact. So Tesla's probably better positioned. Ford seems to be better positioned. Real winners, at least if you listen to the United Auto Workers Union, could be American workers if, in fact, work does return to the US, whether it's final assembly or the work making parts. But it's not yet clear exactly if production is going to return to the US. We don't know yet.

• 24:29Speaker 08

  We could see a scenario in which some popular models or some models might just not come to the US. They might get discontinued. One of the concerns, one of the really big concerns you hear from economists and kind of industry observers, since the pandemic, it has just been really amazing to watch kind of the cost of cars increase for your pocketbook. I look at numbers from earlier this year, and this was before the tariffs. The average price of a new car transacting in the US was around $48,000. I don't think, a lot of people think $48,000 is affordable for many people.

• 25:12Speaker 08

  Economists kind of look at that number and they think it'll probably just go higher with these tariffs. Though, as my colleagues at the Wall Street Journal have reported, Trump has been, you know, perhaps warning US automakers not to raise those prices, though most believe the cost increases will be pushed off to consumers.

• 25:32Ed Elson?

  Yeah, there was this quote he said that I wanted to get your take on. The reporters were asking him about the prices and if he was concerned about what this would do to prices. Because I think this is one of the main consequences of these tariffs is that prices go up. He said, quote, "I couldn't care less. I hope they raise their prices because if they do, people are going to buy American-made cars and we have plenty." So his point is, you know, let them raise the prices because it doesn't matter. Because people will buy American and in the American cars, the American companies won't have to raise their prices. I guess my question to you, is that true?

• 26:11Ed Elson?

  Is that true that we have enough American car makers and enough American car part makers? Can we do this all on our own such that the price of a truly American car won't actually go up?

• 26:25Speaker 08

  It depends on the timeline you're looking at. He's making the gamble, the President's making the gamble that production will return to the US, that a new kind of American economy will emerge, they'll be stronger. That's going to take time. Cars take many, many years to develop and to create that ecosystem. And you just don't see it pop up overnight. In the interim, there does seem to have been a buildup of inventory by some of the makers, car makers in the US. But that's going to probably be eaten through very quickly. If you look at sales results in March, which are just coming in,

• 27:06Speaker 08

  it seems to be a surge of buyers out there trying to get in before the effects go into place. Economists and industry observers are kind of talking about how the situation and make it kind of a perfect storm, if you will, that resembles perhaps what we saw in the wake of the pandemic, when there was shortages of vehicles and sent prices up just because of that. There's a concern that there'll be a shortage of affordable vehicles and that'll just push prices up for everybody, not just in new cars, but also in used cars.

• 27:43Ed Elson?

  You mentioned Tesla there, that it's a winner potentially from these tariffs. I'd like to talk about Tesla more generally, which you've covered extensively. It's been a very bad year for the stock overall. It's down 36% in the first quarter. Worst performance for the company in any period since 2022. They've lost almost half a trillion dollars in market cap. As you look at Tesla today...

• 28:12Ed Elson?

  What do you think are the biggest obstacles for the company right now? What's gone wrong? And what do you think the next four years look like for Tesla?

• 28:22Speaker 08

  Well, there are two, two really big issues for Tesla. The one that's obvious, at least to people who are kind of paying attention to the brand and protesting outside of the, the stores or the showrooms in recent weeks is the political one. Elon Musk and Tesla are intertwined. It's hard to say, it's hard to talk about Tesla as a brand without thinking about Elon Musk. And Elon Musk has clearly become very political. I can't think of a modern equivalent of a CEO essentially operating out of the White House grounds on a day-to-day basis. I mean, it's unprecedented in the modern time.

• 29:02Speaker 08

  And, you know, by that kind of very position, there's a large percentage of the US who's against it because they're Democrats perhaps, and he's on the Republican side, right? So you've got the politicalization of the brand. You've got Musk taking some contentious positions. And so that's, you know, a challenge for Tesla, the brand. But then Tesla, the company also has a challenge in that it does not have new product to speak of in the mainstream sense. Of course, we all know the Cybertruck, but that is not a mainstream vehicle. The last mainstream vehicle they brought out was the Model Y, a compact sport utility

• 29:42Speaker 08

  vehicle, as Musk likes to point out, the best-selling vehicle in the world, really helped build the modern Tesla, what we think of as this powerhouse, most valuable automaker in the world, company because of this vehicle. But it's old and it's long in the tooth. In the car business, fresh sheet metal is key to keep those sales growing and investors are getting jittery about that. What Musk is doing, he's been kind of vocal about that, is that he's betting that the future of Tesla is not about pumping out, you know, new sheet metal per se, but it's about soft And it's about autonomous vehicles. It is about robots.

• 30:25Speaker 08

  The Model Y and whatever the future cars that he makes, the Cybertruck or Cybercab. These will be delivery vehicles, if you will, for that software that the potential, the value is in autonomy. And that's, that's the gamble. The interim, however, is all about selling that sheet metal. And he's still playing in the game of, of selling cars. And so it's not surprising, given the kind of the age of his fleet. That sales have, have been the way they are. They're trying to kind of juice them or get some excitement in the, in the lineup this year with a refreshed

• 31:05Speaker 08

  version of the Model Y. It's not yet clear if that will bring the excitement back to the brand. Supporters, fans of the company say that sales in the first quarter were probably affected because people are waiting to buy this new vehicle in the coming days and whatnot, but we will see.

• 31:23Ed Elson?

  What do you think? Do you think that's true?

• 31:24Speaker 08

  Well, I think that there, there always is a segment of the Tesla kind of fan community who wants the newest thing. And here that's, you know, clearly they're going to be out there. Now, how much win behind that sale is there? I'm not quite sure. If you look at other car companies over the years, refresh has helped, but they don't kind of overcome the fact that they aren't new vehicles. Time will tell. There's also efforts to bring out cheaper vehicles this year, basically variations of what's already out there. So that could help. At one point Elon, at one point Musk was talking about deliveries rising 23% this year. I don't think a lot of people think that's going to happen.

• 32:04Ed Elson?

  Yeah, it seems that the valuation, which is still actually quite high. I mean, yes, the stock's down 36%, but on a price to earnings multiple, still trading at 130 times earnings, then you've got GM trading at five, six, seven, Ford at five, six, seven, Stellantis in a same ballpark. I mean, it's a totally different story. It's a totally different valuation. And it certainly appears that the real story here for Tesla, or at least the growth story is, you know, the robot taxis and the energy business and the AI and the robots, et cetera. As you look at all of those other businesses, which I often write off because I say, well,

• 32:50Ed Elson?

  Show me when they ship. But when you look at those businesses, which of them is most compelling to you? If you had to sort of fashion a bull case on Tesla, which of those businesses do you think is going to really drive the value for the company?

• 33:05Speaker 08

  The biggest bet is the idea of the robots, the humanoid robots. Now, when you talk about how real that is, I mean, there's a lot of steps. When I talk to robotic experts, professors, people in the in the space, there's a lot of things that need to occur. You can do demos, you can do concepts, but many steps ahead. There are others out there who are still, you know, kind of showing the same thing. And and that's, that's a, that's a big, that's a big leap. When you talk about driverless taxis, now, this is a technology that some have have figured out. I'm in San Francisco. I have been in the Waymo robotaxi. People are using it for their daily commutes here.

• 33:50Speaker 08

  It's a business. It is expanding to places like it's in Los Angeles, it's going other places. Next on the horizon here in San Francisco is Amazon.com's its own gamble with Zooks. I have been in their robotaxi as well. It's not yet been opened up to the general public, but is on the is on a path. We've seen those with Tesla. We have not seen the company demonstrate an ability to operate vehicles without people behind the wheel on public roads. That's a big leap forward. Now, supporters and Tesla enthusiasts will say that FSD, their fully, their full self-driving

• 34:29Speaker 08

  technology, which is not fully self-driving just yet, it is a driver assisted system, which still requires somebody behind the wheel. Supporters would say that's getting very far along and they can see it happening. And Musk talks about how they're going to launch that technology in Texas this year, the robotaxi technology. We'll see. We haven't seen it yet. And when you look at companies that have launched robotaxis like Waymo, it's a many, many year process. The operational part of it, the behind the scenes, the boring stuff, if you will, how you get the cars charged, how you clean out the vomit in the backseat, how you just

• 35:11Speaker 08

  kind of keep that fleet operating is complicated. It's expensive. It's, it takes effort. It takes discipline and we haven't really seen Tesla get into the details of how they are going to think about operating all that.

• 35:26Ed Elson?

  Yeah, we were talking about Waymo on this podcast last week because they're expanding into DC and many other cities around, around America. And something I was noticing is just how much of a difference there is between what they've shipped versus what all the other autonomous companies have shipped. And that is Waymo is doing 10,000 rides a week and all the other companies are doing none. You know, not a single other company has completed a paid passenger ride in one of these robotaxis. You mentioned Zoox there, for example. By the way, insane name for a company. It sounds like a Dr. Seuss character to me.

• 36:06Speaker 08

  Or some sort of prescription drug.

• 36:08Ed Elson?

  Or a prescription drug, exactly. But that, you know, they, they haven't done anything yet, nor has Tesla. There's GM's service Cruise, which was shut down last year. The way it looks to me, Waymo is way ahead in this market, which seems like it is going to be a very large market. Now, what others would say to me is, well, Tesla has the scale. Tesla has the benefit of the unsupervised driving versus the supervised driving, which people talk about. Take us through what the robotaxi market looks like in your view. And do you think I have it

• 36:49Ed Elson?

  right or wrong that Waymo is just light years ahead of all the rest of them? Or is it a bit more competitive than that?

• 36:56Speaker 08

  I don't think you're wrong in the idea that Waymo's out there doing it. And that means a lot at this point. Now, I understand, you know, in tech, we can always point to, you know, the, the folks who let the other guys go ahead and learn and then come in and kind of dominate the market. I think of Apple, right? I mean, they, they weren't the first with the cell phone or smartphone, right? And they came in with a better idea and totally cleaned up, right? Maybe that's what Tesla do. You know? We'll see, but Waymo gets a lot of credit for what they've done. It is not just their technology, it's the politics of the situation. It is managing the relationships with the local communities. General Motors' Cruise in San Francisco really suffered from its relationship with the community.

• 37:40Speaker 08

  Uber Technology, when they had their test vehicle back when they were in the business of trying to develop autonomous cars, really suffered when they had a fatality with one of their test vehicles outside of Phoenix. These were black eyes for the industry and kind of showed that this is life and death stuff we're talking about here. This is not just shipping software and fixing it down the road. Move Fast and Break Things takes on new meaning when it's a multiple, you know, thousands of pounds of robots going down the road in the messiness of humanity. It's complicated. Now, you know, the Tesla case argument is somewhat compelling, right?

• 38:25Speaker 08

  They are trying to figure out a way to price a vehicle that could be sold to the consumer, that that fleet of vehicles could in part be owned by the consumer, maybe somebody will have a flock of autonomous vehicles, the owner will then be responsible for maintaining them. This is all kind of like interesting kind of modeling that could be, that could make sense. But one of the challenges for that kind of idea of a consumer model is the regulatory issues. In this country, in the US, historically, the federal government has regulated the car and the state governments have regulated the driver, raising the question of who's in charge when the car is the driver.

• 39:10Speaker 08

  Right now, it seems to be the states. And so the challenge is, you know, a patchwork of 50 states with 50 different ideas for how these vehicles could be operating. And on top of that, you have local municipalities raising concerns. So there was some thought, and investors seemed to reward Tesla in the aftermath of the November elections, that Musk being close with Trump, Musk being in Washington, might help Tesla in this regulatory issue in Washington, you know, for a few months into the Trump administration. And we haven't necessarily seen any of those signs yet, but it's still early days for that kind of question. But regulations are going to be a big issue for kind of the Tesla version

• 39:55Speaker 08

  or vision of the future.

• 39:58Ed Elson?

  We'll be right back.

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• 41:26Ed Elson?

  We're back with Prof G Markets. Just want to shift us to some of these other EV makers that have been in the headlines recently. One company we've been talking about a lot and looking at is BYD, the Chinese electric vehicle maker. Stock is up more than 50% year to date. They recently reported that they had higher sales annually last year than Tesla, which is just striking. You know, we now have a new EV leader. So tell us about BYD. What has made this company? So successful.

• 42:03Ed Elson?

  And I'd be curious to know how you think it compares with Tesla, both in terms of the vehicles themselves, but also the company as a whole.

• 42:10Speaker 08

  Yeah, BYD is a real threat. There are several Chinese companies that are a real threat, and even Elon Musk would talk about the way he sees competition in the market is China being very formidable. It is a place that has embraced the idea of the electrification of the automobile in a lot of ways, embraced his vision for the idea of what the future of the car will be. These vehicles, these EVs coming out of China that are for that market are really kind of the next step, if you will, in the consumer product. Much more personal gadget like, if you will, they do feel like kind of iPhones on wheels,

• 42:50Speaker 08

  if you will, which is what Tesla really carved as a niche for itself here in the States. In part because the people that are working on these vehicles in China come out of that world. It is perhaps not surprising then. A lot of attention on that personal environment, the touchscreens and in the being technologically forward. BYD, the number of new vehicles they have brought out is really almost staggering in the last few years. And we get to that point again about Tesla not having brought out new vehicles in the China market in particular.

• 43:31Speaker 08

  Really, the Model Y was the last new vehicle for the Chinese market, and that's many years now. And so when you're competing in a place like China that is moving at a rate of speed and development that US companies, US automakers are just not geared for, it's a challenge. Even Tesla, a company that was known for moving fast, isn't keeping up in a place like China. And that, in a lot of ways, this was probably the hope of the Chinese government when they allowed Tesla in to be the first foreign automaker to open a factory in country without having to have the requirement of a joint partner. They could be solely US owned was the idea that they would spark an EV car revolution,

• 44:16Speaker 08

  that it would encourage local EV makers to compete. And this is really what we've seen. So the challenge for a company like Tesla is can they remain relevant in the China market, which is so important to them. But you look at companies like General Motors, which has just fallen off a cliff in that market and which is really incredible, given GM was the original US automaker, to figure out how to to crack that such an important market for them, saw, you know, huge growth, huge development in China, and to see it kind of, you know, fall apart in recent years is rather remarkable. And it is a kind of a lesson of like, you know, in China, just because you were big once, doesn't mean

• 45:00Speaker 08

  you're going to continue to be big. There are all these upstarts like BYD and a whole bunch of other ones that if we were to name them, I think a lot of the listeners would never have heard of them, but are, you know, massive at this point. And BYD is is taking the world. We don't have them in the US. They have some buses, but you can't buy these cars here, and in part because of these tariffs that we talk about, right? And so one potential here, if you look at at the market for the global auto game, is kind of a two world situation, maybe three worlds. It's unclear how Europe's going to play out. But the idea that China becomes kind of the creator of EVs for the world, and

• 45:41Speaker 08

  then is the US kind of left with pickup trucks and SUVs and kind of a parochial kind of market. It's, it seems like we're heading that way.

• 45:51Ed Elson?

  Yeah. Where does this leave all of the legacy car companies? Because, you know, a lot of these legacy car companies, they are making EVs too. And we very rarely mention them in the EV conversation. You know, name any company, GM, Mercedes Benz, Porsche, BMW, everyone's making EVs. Where are they in that process? Are they just, is it right that we don't include them in the conversation? Are they just old news? Or are they in the race?

• 46:24Speaker 08

  Well, I think General Motors would take exception. They would like to argue that they are in the race. They have invested a lot of money and a lot of time over the years in trying to develop electric vehicles. I have some.

• 46:38Speaker 08

  But they have, I think it's fair to say, failed to capture the imagination of the consumer in the way that Tesla has, you know, but they're trying. They're trying to bring down price. They're being very aggressive. One of the challenges companies, these traditional legacy automakers have is they make the profits from the sale of, at least in the US, they make the profits from the sale of pickups and SUVs. Having to go a whole new way is challenging. I mean, we've seen the Biden administration try to put in place kind of a regime that would help these legacy automakers make the transition to electric vehicles. And a lot of money was kind of promised for that. And the idea was to build

• 47:22Speaker 08

  up a US manufacturing infrastructure to compete against China, to compete against the benefits they have with the battery supply chain and such. And now with the Trump administration, that idea is kind of thrown out the window and a lot of chaos has been thrown into that. The idea of kind of the way Trump would call it, it was mandating EVs, though it wasn't necessarily a mandate. He kind of argued it was. There was a push to have a percentage of vehicles go EV, without a doubt. But it's part of this kind of uncertainty that we're

• 48:00Speaker 08

  seeing in the US automotive landscape, among these administrations. What these CEOs of these companies would like probably the most is a policy that stays in place for more than four years, so they can plot it out. If you're looking at a seven-year window of trying to plot out for your next new vehicle, and in that time, you're going to have two different administrations with totally opposite views about how to industrialize the economy, that's a nightmare scenario, which is kind of where we began this conversation of like, this is kind of the nightmare scenario for these car company executives who thought things were going to go a certain way and now are scrambling to try to figure out the chaos that they say is ahead of them.

• 48:44Ed Elson?

  Two companies we haven't mentioned are Rivian and Lucid. I'd say those are the other. EV leaders in in America at least, where do they stand in all of this? How are they faring at the moment? And are they in a similar position? Are they in a similar mess that these legacy car companies are as a result of these tariffs?

• 49:06Speaker 08

  Definitely not the same situation as legacy companies. They they don't have the benefit of of having the legacy product line that still is generating profit in the US, right? Rivian, you know, has seen, you know, I think, an interesting kind of positioning with its branding. It is not Tesla. It is not Elon Musk. It is producing a vehicle that people are seem to be excited about. Both companies, Lucid and Rivian, are probably on that, if we have a scale of like vehicles that companies who are like the Koreans, who are importing a lot of vehicles and seem to be in looking kind of bleak here with the idea of of these tariffs. And Tesla, on the other end of that, according to at least investors' mindset of being largely

• 49:51Speaker 08

  US done, they're probably closer to the Tesla side of things on the tariff situation. Lucid is is an interesting kind of branding kind of deal. They've got a a cheaper vehicle coming. I shouldn't say cheaper. I think they'd be upset. A more affordable vehicle coming. But, you know, they have an interesting branding position. They came out at the high end like Tesla did with the Model S. And, you know, the idea was to kind of go more mainstream. But what are they at this point? Are they a high end vehicle? Or are they more affordable? They've been trying to have lease deals and whatnot to make them more affordable. They've got new product that's interesting. People are excited about it, but they haven't quite hit that scale yet to be to get out

• 50:34Speaker 08

  of that danger zone of you're still a startup car company, right? I know they're public, but this Rivian's similar. They're they're growing pains. These it is not easy to start a car company in the modern era. That's why Tesla was such a remarkable story. And, you know, operating as a car company in this kind of environment, this geopolitical environment is a challenge. Then you throw in, where are interest rates going to be? Are we going ahead into a recession? These are There's a reason why it's tough to be in the the car business, right?

• 51:08Ed Elson?

  You know, we've talked about all of these different car companies, these car stocks. Is there a car stock or a car company that you think that we're not paying enough attention to right now? And we talk a lot about Tesla, been talking a lot more about BYD recently, I would say. But there are so many others out there. Is there a company that you're particularly interested in that you think that we should be paying more attention to either for good reasons or for bad reasons?

• 51:36Speaker 08

  Well, you know, it's interesting. I think one of the more interesting car stories of the last 10 years or so is the rise of Hyundai and Kia. They have just developed such a strong position in the US market, but still, a lot of that is coming from outside of the US. They, yes, they just, Hyundai just opened a new factory in Georgia for its its EV and hybrid vehicles and and they're trying to become more US-based. But it'll be interesting to see how they respond to these tariffs and can they respond quick enough. It's a, it's a company that has created a very powerful brand. And, you know, that's

• 52:16Speaker 08

  not easy to do. And so that's an interesting company. I think the Germans are also kind of at this inflection point, facing real challenges in their home market, real challenges with that kind of evolution to the EV as well, in a kind of a similar but different way than the Detroit companies. And watching them play in the tariffs here in the States could be another kind of interesting and eye-opening experience. I think of a story one of my colleagues did about Mercedes and how they invested heavily in a US factory in Alabama, yet they still face the challenge that a good percentage of the the parts come from outside of the US. And so even though they're building here, those vehicles will

• 53:01Speaker 08

  probably be hit with cost increases. So lots of different simmering dramas around the automotive industry. We're already seeing CEOs kind of move in and out of these companies, always a sign of a kind of a critical period, if you will, in the space. A great global drama.

• 53:21Ed Elson?

  Tim Higgins is a columnist for The Wall Street Journal. He writes about the worlds of autos, media and tech. He became a columnist in 2023 after working for more than two decades as an award-winning reporter, covering everything from the bankruptcy of General Motors to the 2016 presidential campaigns. He is also a CNBC on-air contributor and the author of Power Play, a book about Tesla. Tim, this was great. I'm glad we got the auto update and I appreciate your time.

• 53:47Speaker 08

  Well, thank you.

• 53:50Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Isabella Kinsel is our research associate. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

• 54:48Speaker 09

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