Subtitles section Play video Print subtitles Hello and welcome to another episode of CNBC s Beyond the Valley, I m Arjun Kharpal in Guangzhou China Ralph how are you, thanks for joining us on CNBC s Beyond the Valley. RALPH: Happy to be with you. ARJ Q1: So let's kick off the conversation. In a recent report, you guys noted that the electric vehicle market will start rapidly scaling around the year 2024. So what's happening now and until then, what's going to be driving that? RALPH A1: now a lot of plans that have been issued, the years before are materializing. The products are coming to the market. is the number of vehicles electric vehicles, which are available for customers are quickly racing in between 2022 and 2025, from 100 to 200. And there are more plans to come. And we see that also on the very top. Mercedes, for example, just launched the EQ s, the electric s class we saw from Porsche they take on Audi is launching. So as cars, GM is coming. The Japanese Nissan is strengthening their plans, Toyota is doing a lot QIA has introduced an entire verity of electric cars. Car producers, car manufacturers, you have now a bundle of different cars to be purchased. So that we have, let's say, first time, a situation where we are not just discussing electromobility. it is reality. ARJ Q2: And are consumers ready for electric vehicles at this point, and has the COVID pandemic accelerated that in any way? RALPH A2: Yeah, we do believe they are ready. in the beginning, there was a lot of uncertainty in terms of mileage, of battery costs, recycling topics, charging, etc. It's getting now more and more clear to customers how to deal with these things, we see that leverage ranges 300 to 400 kilometers, you can drive those cars with a high level of reliability, you can charge them, it's not a significant problem anymore. And we see that during the COVID pandemic, there was a lot of stimulation programs being issued by different governments, for example, in Europe, if you take Germany, it's 10 or more 1000 euros, direct subsidization for purchasing an electric car and hybrid plug in hybrid. So that this is a simulation, for sure. And this is helping the car manufacturers introduce those electric cars, despite the fact that the cost for those cars are still higher than for producing combustion engine cars. ARJ Q3: Let's talk about the position of traditional automakers in this market at the moment, because one thing we have seen is a number of technology companies jump into the electric vehicle market in the smart car market, or should the automakers the traditional automakers be worried? RALPH A3: if a fundamental transformation is happening, this is less not less than a disruption to the industry, which has been in stability for 100 plus years. You need to be careful. And for the moment, we do believe that traditional automakers have understood that they need to change and transforms themselves fundamentally. Volkswagen, for example, they have separated the abilities of software competence center, they've separated it, they are aiming for 10,000 software engineers. They have introduced plans to build a range of six battery factories across the world, etc. So they have understood what does it take to really be successful and come up with totally independent electric vehicle architectures for those new cars. It's not compromise. So put all in and have sent finally something. They have learned their lessons they have understood, what does it take, and they can now play their strengths. And their fundamental strengths are they have a big customer base, they have a solid, aftermarket business contributing cash wise, they have access to a lot of customers effort, they have a brand which normally gives them reputation in front of customers, they have a financing branch, which allows them to make, let's say, cost affordable by putting together the right deals. So there is a lot on the other end, there's heritage, there's a lot of infrastructure plants, you may not need it in the future anymore. So this is a challenge for them. ARJ Q5: Let's talk a bit about electric vehicle adoption, what would you say are the biggest challenges at this point to electric vehicle adoption. RALPH A5: And we see that they are out of the studies we made is four or five criteria that drives customer decisions. First, it's uncertainty about, let's say the reliability and let's say usability of those cars. I think you said it earlier as this could be solved or is already solved as a problem. Second is charging. So he says sufficient opportunity to charge my car in my surrounding in my environment. So governments and industry have understood that they need to speed up and ramp it up quickly and initiatives are underway. So we do not see that this is on the long run. Because significant hurdle. So that is the cost of cars compared to traditional offers. So as I said earlier, as your subsidy programs in place, making up let's say for the price difference, you normally have those This is for the moment, not a big deal. And behind this price difference, the major impact is created by battery cost. And we see that cost of batteries are coming down very quickly. And the concepts of let's say, putting, let's say the right size of battery in the cars is advancing so that we see that in 2425, there will be a cost parity. And finally, it's a cost of ownership. And there we also see that, let's say electric cars impacted by the cost of purchasing the car, make up and finally it would be in favor of electric cars and there's Also, let's say from governments, co2 fines, etc, the taxation of combustion engines is handled in a way that it's getting more expensive. a lot of arguments are playing in favor of EVs. ARJ Q6: Let's talk a little bit or look a little bit further into the future and talk about autonomous driving, because this, of course, is something that the automakers are getting very excited about. But there's also a discrepancy in terms of which markets are ahead in the development of that, you know, we know the US is pushing quite aggressively in this area in China, of course, as well. But you know, mass adoption of autonomous driving still feels like a long way off. I mean, in your view, what are the steps to get there, and how far off might we be? RALPH A6: First, we also thought that autonomous driving would come much earlier, because we underestimated the complexity of this technology. And it is not about making a car and driving straight in an autonomous mode on motorways, without cross traffic. The problem is coming if you have free flow system, in a in a crowded city, for example, with a lot of unexpected events happening. So this was underestimated. And there's consensus in the industry, that in such situations, we will be able from maybe 2028 onwards, to have this technology in an affordable way. the different story is Robo caps, where you have, let's say, an autonomous driving mode in a fenced and defined area so that you can make it part of a public transportation system in the city etc. And not just for people but also for for goods delivery. And we do believe that because technological challenges, not as high as in this free flow mode. And the regulator situation is a different one, this can come earlier. And say we see that up to mid of this tick 2025, we will have, let's say situations, especially in China, where you have, let's say the government driving this and pushing this significantly. Then we will see and certain areas in US because regulatory situations are different to European Union and European Union will be quite often a bit behind because complexity of regulation is higher than in other areas, because we need to link, let's say the cross country traffic, also in an autonomous way. And there you have, let's say was 28 European countries a different situation. ARJ Q7: Now, Ralph, if you then looked on a global landscape about electric vehicles, and you were to use a metaphor of a race to electric vehicle adoption, between the US between Europe and China, I mean, who's ahead right now, then who's going to win? RALPH A7: We have a bit different perspective. It is not, let's say having a complete country, being front running or running behind, we have a situation where we need to compare urban areas, for example, New York can be compared to Shanghai. Because the problems everywhere is the same. So we see that from an regulatory aspect. The government need to influence mobility in a way that there's no traffic collapse happening and you need to come up with different solutions for public transportation systems etc. Despite this, China in the in the urban dense areas will be first in us and then we have in Europe or certain areas like Amsterdam, we have let's say half of The population of the Netherlands commuting around this area or Berlin or something Paris, London has those big areas. And then you have, let's say the more rural areas, we will see compression engines, quite long as it's the same in China, we will see that in India, Delhi, Mumbai, Bangalore, Chennai, etc will have a significant level of electric mobility, but the rest of India will be still on combustion engines. ARJ: Ralph, great conversation. Thanks so much for joining me. RALPH: Appreciate. Thank you. ARJUN LINKS 2 ARJUN: Let s just turn our attention to China I m pleased to introduce brian Gu, whos the president of the company. Good to see you Brian how are you? GUEST 2- Brian Gu BRIAN: Great to see you Arjun ARJUN: So let's kick off the conversation. Of course with the China market. This is where you're operating quite heavily So, as you look forward now, and what we've seen the start of 2021, what's your outlook for the China market over the coming years? BRIAN: Well, I think the China Evie market continue to have a very robust growth momentum. So I think the growth in the next few years, will probably be ahead of the government's prediction of 20% by 2025. So that's very exciting for all of us. ARJUN: One thing that's been really interesting in the China market is the increasing number of players of course, in the electric vehicle space from from startups to the traditional automakers. But more recently, we've seen a number of large technology giants also enter this this automotive space.