Inevitable EV Disruption: Mike Colias on Auto Industry’s Future

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There's a new book out, it's called Inevitable: Inside the Messy, Unstoppable Transition to Electric Vehicles. And I have been lucky enough to have an advanced reader's copy and in my Welsh farm girl words, I bloody love it, and you will too. And joining me today is the author, none other than Mike Colias.

Now, if you don't know Mike, and you probably do if you're in the auto industry, but if you don't, Mike is a Wall Street Journal reporter and veteran of the US automotive beat. He is based in Detroit and he's covered General Motors for 12 years, added FORD to his duties five years ago. And this book brings together facts, data, backstories, and insider information, as he masterfully weaves together multiple sources, fact checked several times, I might add, to bring us from the start of the EV to where we are today. All of the many twists and turns that we've taken in this industry, as we try desperately hard to evolve from the world of ICE to BEV. I can think of no better time for this book to come into existence. So, I'm thrilled to welcome to the show, Mike Colias, author of Inevitable. Mike, welcome to the show.

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[00:03:13] Jan Griffiths: What I loved about it, Mike, is that it's a story, you know, you're telling a story. So often, the information that we get in our beloved auto industry is soundbites, it's articles. It's a little bit of this, and this happened to you and this happened there. As far as I know, nobody has really sat down and threaded it all together. And I thought I was up to date on a lot of things going on in the auto industry, but there were some things in there that I didn't know. So, it was great to just sit down and just immerse yourself in all of it. But what possessed you to do this?

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[00:05:00] Jan Griffiths: Yeah, you're right. And it's the backstories, everybody loves a backstory, and there's a ton of them in this book and I loved every one of them. But let's start off and talk about Jim Farley, you talk about Farley quite a bit in your book, and I'm going to read a quote from your book and it's right at the very beginning. In fact, I think it's the very first chapter and you say, and I quote, "About a dozen Ford executives gathered inside a nearly empty warehouse on the automaker's campus in Dearborn, Michigan. They were there for an autopsy. It was early 2022. After a late start, Ford had loudly announced its arrival into the electric vehicle race. Its muscular Mustang Mach-E SUV was a relative hit, it was the top selling US electric model without Tesla in its name. The Lightning, a battery powered version of the company's top selling F-150 pickup truck, had a waiting list stretching more than two years and was being plugged by Jimmy Fallon. But Ford CEO, Jim Farley was worried. Farley wanted to see this teardown of his own company's Mustang Mach-E right next to a teardown of a Tesla Model 3. It was an engineering reality check." And it most certainly was. Tell us what was going on there.

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And obviously, Ford was just starting up at this point, so you do have to scale a business and you're probably going to be unprofitable for a certain period of time. But I think he just saw the writing on the wall that there's a big gap between the way we're engineering and building these cars, and the way Tesla must be doing it, and probably the Chinese, too. And so, he wanted to know the truth of what was going on under the sheet metal. And I think that was a wake up call for Ford and probably the engineers in the room. And he had overseeing this whole process. A guy named Doug Field, who was sort of the Godfather of the Model 3 at Tesla, who had just joined Ford months earlier. And so, he was kind of the perfect guy to take this thing apart and show, look, we've got way more bolts and yards of wiring in here that adds needless weight, that adds needless cost. And they just realized they have a long way to go to sort of engineer and design these EVs to get the cost out.

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[00:09:00] Mike Colias: I agree with you. I think there was a lot of sort of eye rolling and a lot of people dismissed Tesla inside the industry over the years. I also think there were executives who took the threat seriously and just weren't able to break the inertia of these big organizations. I mean, there's another spot in the book where Jim Farley was in Europe and he was worried about Tesla, and that was 2016 or 2017. Mary Barra, to her credit was early on, I think, realizing that this is the direction we need to move. And GM was one of the first big OEMs to declare in a big way the future is electric. This is what we're going to do. Now, the execution we can talk about hasn't quite been there in a lot of aspects of that.

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[00:10:40] Jan Griffiths: Yeah, I think it comes back to culture. Our culture will not allow these innovative ideas to come to fruition, it just will not.

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[00:11:01] Jan Griffiths: Yeah, absolutely. And I think, you know, you mentioned GM, the iCar is a classic example with General Motors. And Lutz had a vehicle ready, debuted in 2007 Auto Show, I think I was there actually I can't really remember. It was a few auto shows ago. But he had it, right? He knew it in his bones and he had it. And the product that emerged that came into production was not exactly like the prototype, was it?

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And none of those decisions were bad ones, they all made business sense at the time. But I think I point to that example in the book because at the same time you had Tesla, you know, designing the Model S right? And from scratch. It didn't have any of those constraints, they didn't have to figure out, "Okay, what platform are we going to put this on to really contain costs?" And so, the Chevy Volt comes out and it was considered like this breakthrough product, right? GM got a lot of accolades for that. It had a very cult following fan base, but it wasn't what Tesla ended up doing, which was, hey, look at this electric car that can look like, you know, a stunning car that you'd want to show your neighbor when you get it home from the showroom. It didn't have that "it" factor that Tesla was able to build its brand around and grow from there.

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[00:13:45] Mike Colias: That's right. That quote could have come out of like a Bob Lutz book because that kind of stuff drove lots crazy, but I think when faced with the reality of working inside the parameters you need to work in a big global automaker like that, you've got to sacrifice some stuff. The design got sacrificed and it didn't turn out to be a bad car. A lot of people thought they should have built on the success of that Volt. But, yeah, to try to do a complete teardown, a company like that, I mean, are we going to do a billion dollars on this model that is basically just kind of a science experiment at this point and we don't really know the market for it. And that starting point is let's figure out how to do this with the most cost effective kind of lens on the program. And so, you weren't going to be able to take the kind of liberties that a Tesla took. So, it's not really any one person's fault that the Volt ended up looking kind of like an ordinary car—it was just kind of the reality of the way the place is set up. But that's why it's so hard, I think—this whole innovation—to innovate beyond what you are at your core. When you're a big organization and that inertia takes hold, it's difficult.

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[00:15:19] Mike Colias: Yeah, it's funny just in hearing you talk about that. I know that we've seen cases where car companies try to, okay, we need to innovate in this one particular area, so we're going to break off this group and let them do their thing. You know, this skunk works kind of idea. And Ford's been doing this with its next generation of EVs because it's had the same problems, right? They've had a few electric cars on the market, the Lightning pickup truck, the Mach-E. They've sold well for the EV market as it is today, but they know there's a lot of shortcomings there. It's not optimized. They're losing a ton of money, $5 billion last year on their EV program. So, they're coming out with their second generation and that's what they did. They created a skunkworks team out in California of like a hundred engineers. And they've been trying to sort of work outside of the Ford machine, but I think in talking to people about where it's at now, eventually, you have to go back to the machine to get the thing, you know, built, inspect, and engineering manufacturing stuff. It's just that part's been hard. It sounds like they made a lot of progress in the skunk works, mirroring it back into the organization, you're kind of facing a lot of those same constraints. So, it's a universal problem in the auto industry. We need a clean sheet design to do these electric cars as optimized as possible. It's been hard for the legacy automakers.

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I mean, you've got to completely rethink and reinvent your processes and start questioning: "Why are we doing this? Why are we not bringing suppliers in early? Why are we still going through and quoting the business after the design is done?"

All these things that were well-known processes. At some point in time, that was the right thing to do, but it's not anymore. We have to completely rethink everything that we do. And I don't see us doing enough of that, Mike.

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[00:18:46] Jan Griffiths: Yeah, 'cause if VW purchasing is involved in that lookout, that's gonna be a problem. And the other thought too with VW is with Rivian. Again, I'll be very interested to see how that culture takes hold because, clearly, the Volkswagen culture and the Rivian culture couldn't be more different. I mean, they're completely opposite ends of the spectrum. So, which culture will take hold? I get the sense that VW recognizes that and wants to be more innovative—maybe more of a Rivian-type automaker. But are their roots in legacy auto so they so strong that it will prevent them from doing that? I guess time will tell, right?

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And so, Volkswagen knows it needs that stuff. Rivian definitely needs help, I think, on the sort of industrialization. And so, if you can do it the right way, right? And with two companies like that. There's other examples of startups and traditional OEMs trying to figure it out. And it does feel like maybe what it might take to kind of move past this messy part of the transition that we're in now.

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[00:22:00] Mike Colias: Well, we'll find out what happens with that vacancy, but yeah, it's been a rough stretch for that company. And I'm sure there's a lot riding on that CEO appointment because there's some great brands there, right? Jeep and Ram and all this stuff in Europe. And you're talking to top five global automaker from volume, and they've stumbled here and there. You know, I think their most profitable market in North America.

So, yeah, it'll be interesting to see who gets appointed there. Yeah. I think it's easier to—and nothing about this is easy, like corporate culture is one of the fuzziest, most ethereal. Like, how do you change a culture? I think it's easier to set a culture from the beginning, like Elon Musk was able to do and RJ Scaringe at Rivian.

It's much harder to try to change one that's been in existence for a long time. And that's what Mary Barra has been up against for her entire long tenure. And she's made a big focus on that. And in that case, I think, if nothing else, Mary has figured out how to make very fast and efficient strategic decisions. GM has done a lot under her tenure now. A lot of it hasn't worked out, but she's figured out a way to get the machine to make a decision and then follow that path.

And I think there's been so many—from investing in cruise, which kind of ended with a thud here recently, as it's dissolved back into the company. I think the progress they made there on autonomous driving is going to pay dividends at some point, but certainly not what they envisioned when they went down that particular path.

EVs, like I said, she was one of the first to declare a full pivot to EVs. Now, it seems like GM's kind of big, messy middle with everybody else. But she's been able to get GM—which has had, as you know, this reputation of just not being able to get out of its own way—to make some big bets. And, along the way, she's been a very good operator. I mean, the company has been the most profitable consistently of the Detroit Three during most of her tenure.

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So, you've got a Chinese brand, and I was watching some of the social media around NIO not too long ago. And they have, it's like a cult following. I mean, when they launch a vehicle, not only is it a great vehicle (and we'll talk about the whole battery-swapping thing in a minute), but not only is it a great vehicle, but it's the branding and the way that, I mean, they have followers—they have real followers. I think 10, 000 people attended some vehicle launch. Could you imagine that happening with GM or Ford—10,000 people showing up? They would kill for that kind of brand loyalty. What is going on there, Mike?

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In the early days, it was the Tesla killer and it had its stumbles. It was close to bankruptcy and it's had to be bailed out a few times out over in China, but it started out with this one and a half million dollar supercar. It was their first model, you know, I mean, that's just like pure marketing and sort of setting the brand, right? This is what you can expect from us.

recruited kind of in the mid: 2010

And we can talk more about a few of those folks, but getting back to NIO—they hired a designer from BMW, their lead designer, way back in 2014, I think it was. And so, the cars, everyone kind of looks at it now, but 10 years ago, five years ago, when you hear the term, a Chinese EV, you might think of a small little get around car, glorified golf cart kind of thing. And NIO is really one of the first to show that like, no, these are going to be really stylish machines that we're building. And they've been able to leverage that, along with a retail setup, they've got all of these like beautiful, high-end, showroom-type—coffee shop and spa combos—all over in big cities, all over the world. And it's really, I think helped to sort of build this aura around the brand that they've really seemed to nail.

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So, I walked into the dealership in jeans and a biker jacket—'cause it was the weekend, or I wasn't working. And I was probably hung over, 'cause I partied like a rockstar back then, those days are long gone. And I was practically ignored because they looked at me and they thought, "Well, jeans and biker jacket? There's no way she could afford a Lexus." It was a Lexus dealership. And I remember that.

They've come a long way now—I don't think that would happen now. And I think about even my local VW dealer. And I do like VW product, but it's dumpy in there. You know, it's not a place I want to spend time in. And it seems like NIO's got that figured out.

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But you are going to run, I think we're seeing some of this with Tesla, there's a great big Tesla showroom and service center right by my house that opened a year or two ago that looks a lot like a dealership. There was a need for, you know, once you get to scale, you've got to have some place to service these cars. And you can't, I mean, in the early days of Tesla, right? You'd put it on a flatbed and you'd see it two weeks later, because I'm sure the Tesla service on it was pretty white glove, high end, but early Tesla owners had to put up with a lot to get their cars serviced. And once you get more into the mass market consumer, people aren't going to put up with that. So, you need a place to service these cars.

But I do think that what we've seen with a lot of the traditional OEMs, as they've gotten into EVs, we've seen efforts to kind of carve the retail network out a bit and take more control. You know, Ford started to go down that path. I think the dealers revolted a bit and they've backed off some. I think Honda just came out and said that this EV that they're doing with Sony, they're going to do through a direct to consumer. Polestar, I believe the same thing. So, a lot of people in the industry are looking at this as the OEMs thinking, maybe this is a way through this transition that we can take some of the power back from the retail network. I think it's going to be hard because you've got franchise laws in place, very strong ones all over the country, and the dealers are pretty powerful group.

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[00:30:19] Mike Colias: Yep. A guy named Bob Galyen, who was Chief Engineer for the battery on the EV1 at GM and was kind of really highly regarded battery chemical engineer, who rose through GM and then was at Delphi and then, I believe, Magna. He was in his fifties, he had like this very esteemed career working in the US, all in and around batteries, and was in China to give a talk on batteries at a conference. This was, I think, 2011, and he was approached by the CEO of ATL at the time, a company that made battery cells for small devices, right? Consumer electronics. And he was starting an EV battery company. And so, we sort of courted Bob Galyen, and Bob decided, "Okay, even though I'm heading into the twilight of my career, I'm going to go try this." And he was, I think, employee number two at CATL, which is now the biggest battery company in the world. So, yet another example of someone who toiled in electrification in the US, just to not see anything really come to fruition—then went over to China, and things explode.

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[00:32:33] Mike Colias: Yeah, I think the short answer is yes, I believe it is. And when I say that, it's like an aggregate of all the people I talk to on a daily and weekly basis. And I don't know many people in the industry who don't think it is, who think this has just been this fad that we spent a lot of money on and now it's going to go away.

And I guess if I had to boil down a few of the reasons why, I mean, I would point to China and Tesla. Let's just take those two things. China is now almost half of sales over there are either electric or plug-in hybrid. Here, it's 10%. So, we're seeing this very narrow view of how this is playing out globally. China now has a ton of excess capacity. They've got overcapacity—too many players. There's going to be a shakeout in China, but they are making, in many cases, really good EVs, affordably. They have like a 25 to 30 percent cost advantage over the Western OEMs. And so, what people in the industry are now worried about are these cars going into markets like Europe, which has already happened, like Mexico. There's more gas combustion engine cars being exported from China now because the consumers there want the EVs, and so the combustion stuff is kind of the excess. But eventually, it's going to be more and more EVs.

So, if you're Mary Barra and you've got this kind of plateauing of EV demand, and it looks like, what if this doesn't really happen? We've got a decision to make, like you can either lean into what you've been good at all along, which is they make a lot of money on big trucks and SUVs, Cadillac Escalades, or do you continue to lean into this EV transition, even though you're losing money on it?

And I think at the end of the day, all of the traditional automakers have no choice because, sure, you can be protected by tariffs on the short to medium term. But Jim Farley has said this, other CEOs have said this as well, "I don't want to be counting on the whims of government officials to protect me from competition. We're going to have to compete."

And I think the, those global forces are probably the biggest thing. There's other reasons. People love EVs. The people who drive them—they're quick, they're quiet, they feel like you're driving the future. You know, Tesla has super high brand loyalty, that's for a reason.

There's other reasons why. I think it's also EVs just fit with what the car companies want to do in terms of more digitization and monetizing the data that comes off the car, autonomous driving, assisted driving. You can do all that stuff in a gas car. It's easier to do in electric cars. And so, there's just a lot of reasons why. It's going to be ugly and painful for a while for a lot of these companies, but I think it's going to continue to move down that path.

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We've talked about the Chinese OEMs as being an existential threat to this industry, and it truly is. But we feel protected. Again, I think sometimes that complacency creeps in 'cause we don't see that product. So we're like, well, you know, how could it be that great? I'm sure it's okay. MG—classic British brand, right? I had an MG sports car when I was 17, and I loved it. And then, the Chinese bought the brand, and now, produce as a taxi driver told me in the UK last year, they call it a throwaway car. It's known to be a cheap car, but it's a car that people like because it's affordable. It's like an SUV. And I went to Mexico last year, and they're everywhere—there's MG dealerships everywhere. People think that it's the British brand and now they think it's not the British brand. It's a Chinese OEM. And part of me worries that, you know, will BYD come and buy Jeep and Ram? You know, what if that happened? Would that be the same kind of thing? I mean, these are all what-ifs, but these are things that are happening outside of the US. So, could it happen here? Well, I don't know. I guess time will tell, right?

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Consumers are eventually going to demand if you've got these quality cars that are affordable. We've already got a big for affordability problem, right? In the industry. I think the executives who I talked to realize that these tariffs aren't bulletproof. We've seen how government policy can change very quickly, especially, in this country, and they're gearing up, even though it's really hard right now, to eventually compete with China, but they're several years behind. And I think that's what the next few years is going to be about—how this market matures in the US and how the companies can go about shoring up some of these losses and actually getting to profitability because, obviously, that's going to be the name of the game for the companies.

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[00:38:13] Mike Colias: Oh, thank you, Jan. I had a ton of fun talking about this, so I appreciate having me on.

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