Systems Rewritten: Automotive

Transcript

Systems Rewritten: Automotive

Niall (00:03):
Tesla trades more like an AI stock than it does like an automotive stock. The volume traded, the money exchange hands in Tesla every day far exceeds its next 10 competitors combined. Tesla trades at 350 times its earnings, whereas something like Toyota, the biggest producer in the world, trades at about eight to 10.

Mark (00:22):
I suspect decisions are being made because of the administration in the US. There was an EV favourable direction under previous administrations, that's been rolled back. And those companies need to make really short-term decisions actually in the context of automotive to keep going, to keep the doors open, to keep the factories rolling.

Peter (00:39):
Let's fast forward to a situation where those cars are being used virtually all the time and they're being programmed and run through AI systems that can optimise charging, optimise pickup routes, optimise drop-offs, optimise maintenance and repair and refurbish. It build whole business models around that circularity.

Tom (00:59):
Imagine it's 2006, not 2026. You're an automobile factory manager looking at combustion engine vehicles moving through the assembly line, a site that has been seen since the model T Ford a century earlier. Today, you are still watching legacy internal combustion engines roll off one side, but high voltage battery packs drop into electric chassis on the other. Electric vehicles could account for just over a quarter of global new car sales this year and as much as half of light vehicles sold worldwide by 2035. Five years ago, it was just 9%. Across the industry, the ground is shifting under automakers' feet, yet the rumbling is being felt much more in some countries than others. The map of ICE, I stands for internal combustion engine. The map of ICE EV and autonomous dominance is being rewritten. According to the IEA, Europe led major EV markets last year in terms of growth.

(02:07):
Driven by stricter EU CO2 standards, electric car sales jumped over 30% to hit 28% of total sales. The US remained stable at just under 10%. Meanwhile, in China, growth slowed briefly after a temporary trade-in scheme pause. Yet despite this, EVs still made up nearly 55% of all car sales. One of China's own manufacturers, BYD, claimed the global BEV crown from Tesla in 2025 with 2.26 million four year sales. One contributing factor to China's near dominance is battery economics. Chinese lithium packs undercut both US and European prices by roughly half, but a swathe of societal, political, and technological factors all contribute. Despite records being broken, the race to an electric future still faces an experienced competitor. In 2040, there will still be a billion internal combustion engine vehicles on the roads, forcing the EV tipping point, that's where EVs will outnumber their ICE competitors, out to 2047.

(03:24):
Then comes the newest sci-fi automotive adventure, the self-driving autonomous market, one that makes the future feel like the present. We're right now at a crossroads like the late 19th century to the start of the 20th century when horses and cars shared the roads. Will we witness the change from manmade human-driven combustion engines to robotic-made AI-driven autonomous electric ones in our lifetime? When it comes to systems being rewritten, it doesn't get much cooler than this. Welcome to the Next Five podcast. I'm Tom Parker, and this is the third episode of our Systems Rewritten series. Today we explore the surging energy demand, shifting consumer habits, sudden supply shocks, and the geopolitical races that are rewriting our automotive world. Joining me to break down what this means for car makers, drivers, and investors are three industry experts. First up, we have Nile Healey, chief operating officer at TradeNation.

Niall (04:29):
Thanks, Tom.

Tom (04:30):
Next is Mark Palmer, head of strategy and insights at Autotrader.

Mark (04:34):
Hello, Tom.

Tom (04:35):
And finally, Professor Peter Wells, professor of business and sustainability at the Centre for Automotive Industry Research at Cardiff Business School.

Peter (04:43):
Thank you.

Tom (04:44):
Okay. Well, Peter, let me start with you. BYD overtaking Tesla with 2.26 million BEV sales versus I have to say Tesla's 1.64 million marks a historic turning point in manufacturing. China's domestic NEV, that stands for new energy vehicle market share in August this year rose to a record high of 65.2%. According to the CPCA, that's the China Passenger Car Association, that figure is mainly down to the almost halving of ICE vehicle sales. Regardless, however, China's figures are impressive. What is the secret to their successful market penetration? Is it just because there's an extraordinary cost advantage from a battery point of view? They can produce battery packs at $84 per kilowatt hour compared to $150 plus in Europe and the US. And is the global automotive industry experiencing a permanent power shift to Chinese OEMs? And for listeners out there, OEM stands for original equipment manufacturers, or can Western automakers close the cost and battery gap before losing too much critical market share?

(05:56):
It's a big first question.

Peter (05:57):
Very big first question. And there are so many moving parts to this particular problem. I think when you look at the situation in China, they're already experiencing overcapacity. They're already worrying about their own market conditions and needing to push cars out further into export markets. Western manufacturers are struggling there for profitability and market share. It's not just about cost, it's about other issues as well. Things like the speeds of development, the ability to create new models, even whole new brands, new technologies, new opportunities for consumers. All of these things are coming together. In a market like China, they're moving very fast, faster than we are used to. And I think that's the key. We have to be able to get up to speed. We have to be able to change all of our systems, our product lines, our business models, our technologies, our support systems, our links to partners.

(06:50):
Our whole ecosystem has to be able to rearrange itself at the pace at which China can manage.

Tom (06:57):
Yeah, absolutely. Mark, Autotrader, you see real-time consumer intent, used cars, residual values, and dealer inventory. EV adoption is soaring in places like China as we discussed, but also Norway, I must add, that closed out 2025 with battery electric vehicles at 95.9% of new car registrations. And that's saying something because they're a country where oil and gas represents 70% of their GDP, but other major markets are still battling affordability concerns, public charging, anxiety, and steep depreciation on used EVs. How are consumers navigating this shift right now in the UK, US and other Western economies? And what is the demand picture looking like? What incentives are there to transition from ICE to EVs that could mark a major shift over the next five years?

Mark (07:47):
In the markets that you mentioned, the UK, the US, and established Western markets, there's lots of variation is probably the first thing to say. So Europe is progressing in a very different speeds. Norway's an outlier and has been investing in an electric transition since about 1990. A couple of things at play there, largely policy and incentive driven, not just cheaper cars or punitive taxation for petrol and diesel cars, but loads of free stuff parking, cheaper ferries, lots of nice things, carrot and stick, really, really good. But that's been in place for 30 plus years, so a very different experience in Norway. The US is a very different experience again, and I would say that probably what characterises the differences in approach are things like there's a product suitability issue when you've got these huge geographies and inadequate public charging, then electric cars don't make sense for every kind of use case for every driver.

(08:36):
And you see some of that in some of the US territories. There is a cultural inhibition or there's a barrier. The US has got a different relationship with gas cars than we would have in Europe. So again, that's slightly different. Where we are seeing, or probably the market to which I'm closest and where we're seeing the biggest increase is certainly in Europe is definitely in the UK. So we are running now over a quarter of all new car registrations are battery electric, not plug-in hybrid or new energy vehicles are battery electric. That's largely driven, of course, by legislation and incentives. So we have a zero emission vehicle mandate. A certain proportion of manufacturer sales need to be electric every year, and there is therefore a force into the market of that kind of volume. Now, at the same time, we've got a rapid increase in public charging infrastructure, which assists people who need to make certain long journeys.

(09:24):
85% of people in an electric car in the UK charge at home. So this is a top-up charging scenario. It suits our market, suits our use case. So that kind of barrier has also been broken down. We've got massive competition in the UK market, which is driving affordability. As Peter mentioned, the Chinese, you've talked about Chinese have got cost advantages, so therefore cars are becoming cheaper, cheaper to get into, cheaper to buy. The manufacturer is under pressure to incentivize purchase. So all of these things are coming into play. The last factor I would say, or the biggest factor, which is driving a huge increase in 2026 of electric vehicle interest in new and used is an increase in fuel prices. So since late February and into early March, we've seen an enormous increase in the volume and share of inquiries around new and used electric cars catalysed by higher petrol and diesel prices.

(10:15):
That's showing no signs at all of slowing down. So basically what we say is the biggest catalyst or the biggest factor in increasing electric car interest, similar to what we saw in 2022, is actually what you pay at the pump above all else.

Tom (10:28):
Yeah, absolutely. And now we're talking about what you pay at the pump there, some of the geopolitics around ice combustion engines moving to EV sentiments, but traditional automaker giants are still relying on ICE vehicles for nearly 90% of their sales while funding massive EV R&D. How are your clients putting risk on across the sector? Are they trading individual automotive equities or EV pure plays and are traders favouring long positions on low cost Chinese producers, shorting legacy players perhaps, or trading volatility around quarterly delivery numbers?

Niall (11:04):
I think there's three specific stories to look at here. The first one is from a trading perspective, Tesla is kind of a story on itself. Tesla trades more like an AI stock than it does like an automotive stock. The volume traded, the money cocks change hands in Tesla every day far exceeds its next 10 competitors combined. Tesla trades at 350 times its earnings, whereas something like Toyota, the biggest producer in the world, trades at about eight to 10. So there you go, you're paying a significant factor for that AI and future earnings potential coming from Tesla stocks compared to a company that we know will produce and pays a good dividend to its shareholders every year. So that's kind of a story into itself and that is a market that our clients have traded and one of our top equities traded for probably the past three years and it continues to be.

(11:53):
If we look at BYD and other Chinese producers, I think what you'll see is that, as you mentioned, they've kind of reached capacity in their domestic market and now it becomes a Chinese policy play. What are the tariffs, et cetera, that are going to be in place on these cars coming into different countries? And that is kind of that play which we're seeing. For the Toyotas, the GMs, the Fords of the world, the volumes are much lower compared to what we see and the people tend to buy and hold them because they're a bit steadier. They know what they're going to earn out of it. And a big surprise that we've seen in the past year is GM has actually rolled back on its EV production and in its guidance and actually their stock price is up 40%. With the pure electrics like Tesla and BYD, the stock price is actually down in the past 12 months.

(12:39):
It shows where the market is pricing the value. Is it the right thing for what we need globally? Probably not, but that is where the market is putting the value.
Peter (12:46):
Is it a short term thing? Because I see with Ford and GM in particular, they're retreating back to the US to a big truck petrol market. Nobody else wants that. So in 10 years time, what have they got?

Niall (12:59):
I think you're seeing, will that still be there? Sorry, I'm not quite prepared for that question, to be honest. No quite. Let me think. I'm thinking. I mean, I don't know much about the actual company itself outside financials, outside of where it's make its money, how it's made its money in the past. And I know that they're rolling back their EV because basically they're making more money from the stock actually continuing to do the ICE, which we've seen with GM over the past year.

Mark (13:26):
Just to come in on that, I wonder whether, or I suspect decisions are being made because of the administration in the US. There was an EV favourable direction under previous administrations that's been rolled back. And those companies need to make really short-term decisions actually in the context of automotive, don't they, to keep going, to keep the doors open, to keep the factories rolling. I can imagine if I were running one of those two companies, I'd be thinking, right, I've got a five-year window to try to keep things going, to invest in the next phase. How am I going to do that? I'm making no money anywhere else in the world. This administration is not on the pathway that the last one was where I did put my bets. I need to roll it back, do what I can at the moment, make the most of the opportunity.

(14:04):
Tariffs are in place. Great. I can sell trucks. I can make enough money for five years and then we'll see what happens. Might be a thing there. I don't know.

Niall (14:12):
But I mean, you mentioned about the cost of batteries that China is just outperforming economically in the US, and that's a big hit for these companies. If it's 105 versus $85, I believe you said roughly per kilowatt hour.

Tom (14:24):
Over 150 in the US and Europe versus 85.

Niall (14:27):
Yeah, that's a big difference for these companies. And until they can get those unit economics down, it's going to be very hard for them to compete.

Tom (14:33):
Well, Peter, I want to come to you. When we look at the physical reality of the EV transition, the real bottomneck isn't just automotive P&Ls, it's the supply chain for critical batteries. We've just touched on it there with the cost between different areas of the world. With the supply chain for critical battery metals and rare earth and the geopolitics involved in that, China currently refines roughly 60% to just over 90% of the world's lithium cobalt and magnet grade rare earth and controls over 90% of global permanent magnet production. In October last year, looking at the geopolitics of it all, Beijing placed controls on these critical mineral exports and then just a month later flip-flopped on it and suspended said controls. If these rare earth export controls were implemented in full, i.e. They did not go back on them, the economic value of downstream production at risk would've reached 6.5 trillion US dollars per year for countries outside of China.

(15:32):
So I have to say at this point that this isn't just happening in China, even though those are some scary figures. If we look at cobalt supply gaps that have emerged due to the DRC's export quotas tightening, how can Western automakers realistically deal with this? Can they build localised tariff compliant supply chains over the next five years? Or does global EV scale ultimately remain at the mercy of Chinese, let's say, mineral dominance?

Peter (16:03):
Mercy is a little strong, possibly. Take yourself back. You're too young to remember. You're a young man. But 1970s, oil crisis, not one, but two, bumped of oil prices, catastrophic impact on the automotive industry. That was geopolitical dependency. In a sense, we still have it. Talked about the prices going up for fuel going up in this country and many others, pushing people towards EVs. Again, that's a geopolitical problem due to Donald Trump deciding that a war in Iran would be a good idea. So once you see that there are these other factors at play, you can see that actually the geopolitics of production has been transformed, not just in terms of these rare materials, but also in things like integrated circuits and other key commodities that individual nations are now using as levers in their negotiations with other nations. For China, that huge sum that you just mentioned is also a lost market opportunity.

(16:57):
They don't want to lose that revenue any more than we want to be starved with that supply. So they're playing hardball here, but they know they cannot afford to lose those markets. The other thing to bear in mind, and something that's not really touched upon in the debate very often, is where do our forecasts for demand come from? In other words, what's underlying the extrapolation that says in five years time we're going to need X amount of cobalt or X amount of lithium? Well, nobody asked that question because actually what people are doing is just running forward from our current patterns, great big cars, vast numbers of cars all being used in high performance situations. If we change our demand structures, we already change our problems with supply.

Tom (17:40):
Yeah, that leads perfectly on now because with Peter saying, where do our demand forecasts come from? If we are looking at these critical mineral supply chains and adding that distinct layer of market risk, are you seeing money going towards the commodities underpinning the EV space when we don't necessarily know where that demand is coming from?

Niall (17:59):
Well, the problem is that there's no easy way for people or companies outside China to actually trade these markets. So if we look at the rare earth minerals, the CME is hoping to introduce a future contract in this. It's not there yet, but right now the spot market's price is being set by the spot market in China. So if you are a mining company or a production company in the West, you are struggling to hedge the price that you can sell at because you have no contract to do that and the price is being set in China. If this gets set up by the CME, this contract, it only works if there's enough people actually to make it into a market, if there's enough people buying and selling to make it into a liquid market. Otherwise, the actual cost of hedging it could end up being more volatile than the actual cost of waiting until the end.

(18:43):
So it's hard to say the money's going to right now because the there's not any place for it necessarily to go. Now I know ICE, and when I say ICE, I mean the Intercontinental Exchange, not internal combustion engine, is also looking to set this up, but the CME I know is a bit further ahead, but it's dependent on how many people actually trade it. So if you think you're a mining company who wants to get funding to operate in this sector, you're going to struggle to project your profits because you have no way of hedging how much you can sell your production material for. You're reliant on what the price is being set. When we look at I guess the risk of any sort of geopolitical tension, so if we look at the companies that are exposed to the price of NDPR, which is the main rare earth mineral for making magnets, these companies are NP Materials in the US and China Northern.

(19:31):
When there was risk over China actually not exporting this, their stock prices were high. When that was taken off, they fell. When you mentioned about the DRC and putting in the restrictions on cobalt, that's actually helped the main company, which is CMOC because their stock price has now gone up because they reduced it, I believe, by over 50% in what was allowed to be exported. And we see this across most commodities. We see it in oil. When oil prices go up, the companies that are actually producing it or refining it are doing better because they're selling their product higher. And unfortunately it's the same in this market.

Tom (20:04):
And it doesn't just affect this market as well. We've talked about across this series of AI infrastructure build-outs. We've got energy transitions that needs lots of different minerals in it. We've got your data centres. This is something that is being played across so many critical industries at the moment. And does that affect, do you think, some of the way that your investors are trading at the moment or even looking into those deeper numbers with these mineral trades?

Niall (20:27):
I mean, the only way they can trade it right now is to actually trade the mining stocks. So we see that, I mean, with our licence in Australia, there's a lot of Aussie mining stocks that are exposed to this and we do see a lot of interest and a lot of trades going back and forth in that, but that'll be the main play for anyone who wants to actually take exposure to these markets.

Tom (20:46):
Brilliant. Thank you. Well, here's a question to Mark and Peter, because I want to move on from what's powering our vehicles to who or what is driving them if we're looking into the future. The autonomous vehicle race also seems to be a sino American tit for tat battleground, if I can call it. An AI-powered indices that I found called Road to Autonomy tracks the fight for autonomous dominance every 12 hours and ranks them on a variety of different metrics like operations, scale, revenue, commercial, manufacturing and safety. China's Baydoo and America's Waymo are, let's say the Olympic leaders. They swap pole position almost weekly. As we record this episode, Waymo is number one, Baydo is number two. Tesla is down out of the medals, if we're continuing the analogy, in fifth behind two other Chinese competitors called Pony and WeRide. So what does the near future of autonomous vehicles look like?

(21:45):
Are we heading towards a future dominated by dedicated, let's say, geo-fenced autonomous robo taxi fleets? Or will we see consumer-owned autonomy coming to our roads like EVs did slowly and surely? Mark, I'm going to start with you.

Mark (22:03):
So I'll take it from... Actually, let's talk about the relatively near future, let's say the next five years, where are we? This will happen. There will be different levels of autonomy and ultimately there'll be self-driving cars as there are. We see them in trial, actually in London, aren't there? Trial started just this year, so we know we're on the pathway. Where it is making more sense, and again, to come back to unit economics, when those things work, then you can see that the ride hail market will be the one that is affected first of all. When somebody feels that they can conveniently and cheaply get from one place to another, then why would you even need to do whatever or have a driver or all those other things, that convenience and cost is the big driver of that.

(22:45):
So that will be the first one. There might be other opportunities, there will be other opportunities around things like last mile delivery or onsite airport travel. So that will be, I think, the near five years future.

Tom (22:55):
Perfect. It's the name of the podcast.

Mark (22:59):
Handy, in which case I could stop right there, but are we going to be transported? Is our own vehicle? Will my vehicle drive me around and I can do whatever I like in that car in the next five years? Absolutely no way, and certainly not at scale. A couple of reasons for that. We don't have legislation in place in most markets. The economics don't work for us. But the biggest thing, and I come at this from a general consumer car buyer, normal person in the public perspective, lots of people just, they like their car. They like their stuff in their car. If their car was going to go off and earn them some money during the day, they'd have to take the baby seat out. They'd have to take their golf clubs out of their vehicle. They would have to clean their car to make sure that it was okay for whoever is driving around.

(23:40):
People can't see that kind of future at the moment, and they don't really want to do that. They value ownership, actually ownership of the space as much as of the car. So that would be kind of point number one, and that requires quite a deep change in people's minds, I think. Second thing is people don't actually change their cars very often. Three, four, five years, people hold onto a car. So from right now, somebody buying a car right now in their market, they won't be changing their car until around the end of the decade, at which point do we think they're going to get into a car that does all of those things for them and over what time period? I think there's an awful lot to change before we get to a future like that. I think it will come around one day, but not in the next five years.

Tom (24:19):
Perfect. Peter?

Peter (24:20):
Yes. Very comprehensive answer and totally agree with you. Very interesting points. I think there's couple of things to add. One is there's actually quite a big prize here in the sense of, can you imagine London without all those private cars? Can you imagine any major city without all those private cars cluttering the place up, parking all over the place, getting in each other's way? We have that opportunity sort of dangling in front of us, not five years, I agree, not in the five years, but beyond that, you could redesign our lives and our mobilities around a much more efficient use of these vehicles. And when you think about it, a privately owned vehicle, the ones that we cherish, 95% of the time, they're sad. This is a horrendous waste of resources, and we just talked about resources. Let's fast-forward to a situation where those cars are being used virtually all the time, and they're being programmed and run through AI systems that can optimise charging, optimise pickup routes, optimise drop-offs, optimise maintenance and repair and refurbish.

(25:18):
Build whole business models around that circularity. There's enormous changes coming, and we're just seeing the first kind of touch, the first glimpse. Five years is too soon to see it all happen past that, which going to get quite exciting, I think. And yeah, I'd be happy to abandon my car given that sort of level of service, but we won't see it reaching, well, I have to say, deep as South Wales anytime soon. So let's look at the big cities first and then we'll take it from there.

Niall (25:44):
I can just jump in. I imagine safety's going to be a big factor here, right? If every single car in the city of London is speaking to each other and knows exactly what the other one's going to do, accidents are going to fall, which has to be a big selling point for the government because obviously it's very expensive to manage accidents and then slows things down. But also if we're talking about, I guess, a reduction in ownership there where people are just hailing these rights, they don't own a car themselves, what happens to the car companies? Because I imagine cars just become generic. You don't care what your car looks like if you're just hopping into it whenever you need to go to the shop and it's a different car every time.

Peter (26:18):
Yeah, maybe car companies are just suppliers of boxes with wheels.

Niall (26:21):
Maybe, yeah. And they're

Peter (26:22):
Not the focal company anymore.

Niall (26:24):
And do we just have car enthusiasts? We spoke about this. Do we have just car enthusiasts who meet on a truck day with their cars? Is that the long-term future? I don't know.

Tom (26:32):
Well, outside of long-term and indeed the five years, I want to actually ask for some of your data and insight on the markets at the moment because I want to look at what, say, the launch of the cyber cab did to Tesla stock, for example. Because we are right at the start of this journey, as Peter said, what is it doing to the markets if we're so far out from perhaps dominance of an autonomous world and future?

Niall (26:53):
Yeah. If we look at the buildup to the market or to the event, Tesla stock actually went up 8% in the week leading up to it. The feedback is that the event didn't quite add up to what was expected. It was a private event by invitation only. It wasn't aired live. Elon Musk didn't even turn up. The next day, the stock fell 6%. So the market kind of priced in what it expected from it. If you look at the volume of cars Tesla have going in the cyber cab, it's very low compared to the Chinese providers you've mentioned, Pony and Baidu, and they are doing thousands of cars at the moment. They have good hold within the Middle East. We talked about this as a race between say the China and the US market, but they're both almost competing in different markets because the Chinese companies don't operate in the US and the US companies don't operate in China.

(27:40):
So it's how the others infiltrate into the rest of the world that kind of matters moving forward. And we see the Chinese companies have actually gone into the Middle East, into the Gulf, and they actually have more rides there. What's important to note though, like I said about Tesla compared to Toyota, is that Tesla is still valued a hell of a lot more than these companies are, and it is just started out. And another point is that none of them are making any money yet. They're all operating a loss. So the markets are pricing in future earnings into this and pricing in it at a big premium compared to where things are at the moment.

Tom (28:13):
Well, on top of the cultural differences and stumbling blocks, that same barriers to autonomous future, is some of this also just linked to the success and speed of AI? Because you've got AI operating systems all the way through these cars and where AI gets to in the next two or three, five years, is that going to then perhaps just a box with wheels with some AI in it? Is the speed of that going to change the speed of autonomous vehicles?

Niall (28:38):
Yeah, I think so. I think that will help also. I mean, we touched on this earlier that who controls the ability to make magnets and to get these raw materials is going to be a big point. The US just doesn't have the access to the resources like China does at the moment, and that's going to be a key point is geopolitical trade agreements.

Mark (28:55):
There was one thing there. The length of time for this is really important to consider. Just to take it back to electric, we've got about a fifth to a quarter of the UK population that says they never want to own an electric car. Now it's still a car. It's still a car you'll own. It's still a car you can park outside your house and keep your stuff in and do all the other things you like to do. There's a quarter of the population, the driving population is saying, "Not for me." Imagine trying to persuade those people to give up any type of car for any reason. There are big cultural differences and big reasons of big hurdles, emotional hurdles and mindset hurdles that people need to get past in lots of places around the world and probably more established markets is more difficult before we get to that kind of future.

(29:37):
It will happen, but I would imagine we're talking about a generation or maybe even two before we see people just kind of give up the idea that they have this thing that they can use themselves.

Tom (29:47):
Isn't it the safety play, as you mentioned earlier, because supposedly autonomy saves 1.3 million deaths on our roads a year because human error, tiredness, whatever, we make mistakes. And yes, I know there's this three problem of having an AI deciding whether to knock over one person or five people. There are a lot of these cultural and philosophical or behavioural ways of looking at the future when it comes to autonomy and giving you away control to a vehicle. Is that one big tipping point that we can see here?

Mark (30:16):
Absolutely right. And the benefits, don't get me wrong, as you described them, a future where there's no congestion, where everything is much more efficient, where everything's cleaner, pedestrianised, sounds terrific. But we are in a situation where people turn off the noises in their car that are generated by their ADAS systems. There are people we speak to in our research that have features in their car that know they're not paying attention to the road. They try to turn that off. That is a thing that people are doing at the moment. Now of course, it makes a lot of sense. When we ask people what's a good reason to consider an electric car or switch to an electric car, doing the right thing for the climate and for future generations doesn't come very high on the list. It's only about saving money. And that's been the case for a really long time.

(30:58):
So I completely agree. Of course, a safer, cleaner, more convenient, and hopefully cheaper future would be... Absolutely. Why would you not?

Peter (31:07):
There's a word of caution. The auto lib scheme in France, in Paris, 5,000 cars, really had a go at it. They were all shared vehicles, electric. What they discovered was that people do many things inside cars, not all of them entirely savoury, and then leave the cars in awkward places. They struggled. And where they really struggled was matching capacity, the capacity in terms of the vehicles being available when people wanted, at a price they wanted, against demand. If you have too many vehicles, you've got too much cost. If you don't have enough vehicles, you've got a lot of unhappy customers. And getting that right in this world of autonomous cars is a key kind of business challenge.

Tom (31:44):
Well, look, we're coming towards the end of the episode and we're now going to do a quick fire round. We may have covered this just in our last conversation, but what do you think is the single biggest catalyst, whether it's battery breakthroughs, tariff wars, software maturity, society that will define automotive market winners over the next five years? And let's come to you first, Mark.

Mark (32:03):
Cost efficient production and sale. In the next five years, absolutely. Those manufacturers that can source, produce, build and sell vehicles profitably will still be able to invest in the next five years. It's a really, really short window in automotive, five years for a lifecycle of a car, for production, for retooling, for selling, for brand building. That would be the thing for me. If you can build cost effectively, sell cost effectively, then you will still be standing in five years time. If not, possibly not.

Tom (32:27):
Okay, great. And Peter?

Peter (32:30):
I think the Industrial Accelerator Act coming out through Europe now will redefine our relationship and include the UK because at the moment we're in a big debate about whether the UK fits, but it's going to redefine the relationship with the world in terms of what is manufactured where, not just cars, lots of things.

Tom (32:47):
Okay. And now?

Niall (32:48):
I agree with Mark actually. I think the unit economics for these cars who can make magnets, who can make batteries cheap economically and has access to the rare minerals needed to that.

Tom (32:59):
Brilliant. Okay. Well then at the top of the show, I was discussing this late 19th century, early 20th century cars sharing roads with horses. That went on for roughly 40 years. How long do you think this transition will be from ICE vehicles to EV cars? And let's pick two countries. Let's pick the UK and China. I'm going to come to you, Peter, first.

Peter (33:23):
Curiously, I've done this. I asked myself, when and where will the last exhaust pipe be built? And I ended up with two locations, the United Kingdom, because it's full of enthusiasts, and Nigeria.

Mark (33:35):
Because

Peter (33:36):
They've got a lot of petrol, they've got a massively growing population. They're not all that rich. They want to keep cars on the road. So 2075.

Tom (33:43):
2075. Okay. Nile?

Niall (33:46):
I guess there's kind of two markets here. I mean, we've seen already that EV vehicles in new sales have passed out ice in China and UK, although behind is still in 20%. I think that will probably happen in the mid 30s in the UK where we'll get more EVs. I think overall cars on the road, because of the lifetime of cars, I think we're looking into probably mid - 40s by the time there's more EV than internal combustion engines.

Peter (34:10):
And what's great about it is that by then they'll have petrol range anxiety because all the petrol stations would have gone.

Niall (34:16):
Yeah, that's a very good point. It'd be very expensive.

Tom (34:19):
Mark?

Mark (34:26):
I'd go for the same time period actually as the horse to car. When we think about it, the first electric cars kind of came into roads in around 2010, 2015. By the time we get to 2045, 50, there'll be very few combustion engine cars on the road. So that would be the same kind of timeframe. China much quicker, but in more established markets, 30 to 40 years.

Tom (34:46):
Okay. And lastly, in five years time, as your primary vehicle, what car are you driving? Is it combustion? Is it EV? Is it autonomous? I'm going to start with you, Peter.

Peter (34:56):
It's a bicycle, but I've had an electric car for 10 years, so I will still have one. But my primary mode of transport is my bike.

Tom (35:03):
Okay. Mark?

Mark (35:04):
Electric car.

Tom (35:05):
Niall.

Niall (35:06):
Two-year-old used EV probably for earlier conversations.

Tom (35:10):
And I want to ask one more question because we were discussing before we hit record today was what your first ever car was. And so what was that versus what it could be in five years? Peter, what was your first car?

Peter (35:21):
Morris Minor.

Tom (35:23):
Brilliant.

Peter (35:23):
Fabulous because tiny engine in big engine bay, you could rebuild it, you could fix it, you could fettle it, you could make gaskets out of cardboard. You could keep that thing on the road for nothing.

Tom (35:33):
And that's what's going to change for your EV, not for your bicycle, in the future. No, what was yours?

Niall (35:40):
My first car was a Suzuki Escudo, which was the Japanese import version of a Suzuki Vitara. The reason I got it when I saw it is because I was a fan of the Gran Turismo game as a kid and the Suzuki Scooto was the fastest car in the game. So I bought it realising that the actual road model was a lot slower.

Tom (36:00):
Brilliant. And finally, Mark.

Mark (36:01):
Two-toned Ford Fiesta, brown on the top and gold on the bottom. I wish you could buy them now.

Tom (36:08):
Love that. Mine was an old boxy sort of '90s VW Polo, not the newer curved version. And I think in five years time, I will probably drive an EV. Well, thank you to all of my guests because it's been a brilliant conversation. So first up, thanks very much to Niall Healy.

Niall (36:25):
Thank you, Tom.

Tom (36:25):
Next up, thank you, Peter Wells.

Mark (36:27):
It's been a pleasure.

Tom (36:28):
And thank you finally to Mark Palmer.

Mark (36:30):
Same. Thank you very much.

Tom (36:35):
And so we come to the end of episode three and the conclusion of our system's rewritten series. Over the course of three episodes, we have examined the core systems powering our modern global economy, from the record concentrations and sovereign debt pressures in financial markets to the $7 trillion physical infrastructure race in microchips and data centres. And finally, down to the high stakes automotive transition unfolding on our roads today. The systemic rule books are being rewritten simultaneously, but perhaps with ink as old as previous industrial revolutions. Geopolitics, core minerals, supply chains, and energy availability are dictating tomorrow's AI and our autonomous future as much as it brought farmers in from the fields and into the factories. The demands might be different. The political powerhouses have changed and the intelligence now isn't only human, but as with markets, whilst we look back and study history, past performance does not dictate future value.

(37:46):
I'm Tom Parker and this has been the Next Five podcast. Thanks for listening.