Rising China: Competition or Cooperation in the Future of Automotive Technology

Rising China: Competition or Cooperation in the Future of Automotive Technology


let’s begin by looking at the Los Angeles situation we already have Chinese automobile investment here technological innovation going on and people being paid by Chinese companies to assemble Motor Vehicles and so this is an important development that most Angelenos know nothing about and so Stephen could you say something about Chinese investment in the automobile automobile industry in particular in Los Angeles why are they here and what difference are they making sure so first we have to step back a little bit and look at the LA economy in the California economy too to get a better understanding of why we’re actually the leading manufacturer for for these these electric vehicles and there’s vehicles coming from China and why they’re choosing this market so a lot of you already know this because you’re from Los Angeles or around Los Angeles but just to re-emphasize when people come to Los Angeles they always get confused because they only think of Los Angeles City what they don’t realize is that there’s 88 different different cities in Los Angeles County Santa Monica Pasadena Long Beach are all different cities and we have over 100 and incorporated regions in Los Angeles County that make up our region to make it even more confusing when people come to Los Angeles they want to go to places like Disneyland then we have to remind them that’s in Anaheim Orange County that’s not even in LA so the Greater Los Angeles region is what makes up what people think of us Los Angeles so you’re talking about eighteen point seven million people living in this region our GDP last year was close to 1.2 trillion dollars so if we were a nation we would be the 15th largest economy in the world tied with Mexico LA economy as as big as Mexico and you wonder why the Chinese are looking in Los Angeles right so the other thing is we also have to understand our history we were once one of the top car manufacturers in the nation we started in 1902 I think that’s when the first car manufacturer started here in Los Angeles 1940s to 1960s is really when we dominated the manufacturing sector we had over half a million cars produced out of this region every single year and then we start seeing the because of imports coming from Asia specifically coming from Japan that really took over some of that that markets but with that said Los Angeles continues to be one of the most dominant car consumers regions in the United States where the capital of the single passenger vehicles you can see by just looking at our transportation system here so I think a lot of folks see that when they’re successful here the market is here on top of it what you’re seeing is the transit transformation that’s been happening around Los Angeles and California we’re also known as the region to have one of the most if not the most environmentally the environmental regulations are very challenging and in some people’s eyes but we see that as an opportunity so it’s creating this new paradigm and demand for new technology and new vehicles that are being demanded everywhere so the testing technology and the market is actually here so you look at the electric grid system and the design desire and demand for electric vehicles is actually happening here that confluence and that combination of all those different factors is what’s making this region so attractive to a lot of international companies specifically from China that they’re moving very quickly that’s what quickly for that’s why you see companies like Faraday future BYD Nix TV or neo all these companies are already located in Southern California and California to produce and manufacture these cars here because the other factor is they don’t want to actually produce it back in China and ship it over here because they don’t want them made in China factor they want a made in u.s. factor but they want to be a Chinese company so we’re sitting in the very interesting times when a lot of international companies are coming here specifically from China looking at this market and I think we’re going to be doing very well moving forward because of all our environmental regulations and our push to have zero emission coming from this region whether it’s from a city level or from a California level and this goes beyond just electric vehicles we’re talking about electric buses we’re talking about electric trucks which will expand on a bit later but I just want to open with that now that’s great and you know when we’re talking about all these different things you can see too that this you know the way Steven just explained it it’s a no-brainer why would they be anywhere but Los Angeles but of course also we’ve seen that with the hybrids you know something like a quarter of hybrids sold in the United States are sold in California with 10% of the population so the you know receptivity to that sort of thing is clearly here in California now the subtitle of today’s presentation today’s discussion is competition or cooperation China is definitely rising but it’s already risen it’s already a giant economic superpower and somebody who witnessed a large part of that the beginnings in the 1990s up through China’s entry into the WTO in 2001 first American automobile companies going in is sitting next to me Tim and so Tim China has used that size of its market that potential to demand certain things of foreign companies and I was hoping you might say something about that yeah first let put some context to it when I arrived in China in 1994 annual sales were about 700,000 vehicles so I got to China my brother my brother who I’m replacing on the stage today he said come on over to China it’s going to be ripping it’s gonna be wonderful things are gonna happen so I arrived in China having come from Detroit where I grew up and I landed and I started looking at sales and I said 700 thousand vehicles a year but that’s what we do in two weeks here in the United States I go what is going on so my brother said just stay calm and carry on so of course fast forward 25 years to today last year China sold roughly 25 million vehicles in 2009 surpass the United States as the largest market in the world and just more Auto brands more auto models just a bevy of active everywhere everywhere you look one of the things we were I was talking with clay and Steven about before we came on was the title of our of our talk today is cooperation or competition what is it going to be we had a little bit of disagreement from my perspective having seen that growth over 25 years in China I said this it’s clearly competition when Chinese people and anyone who’s been there or worked there they are able to endure so much hardship more than anything I’ve ever seen in my life and get up early stay late work harder seven days a week without complaint because they like to compete and they like to grow and they they see advancement all around them even when there’s not much around them they do see advancement now we look when they’re looking here to the United States they go wow there’s another there’s a new opportunity for us in electric vehicles in autonomous in ride-sharing probably many of you already know China’s number one already in electric vehicles it’s number one in ride-sharing they’re coming out with their 5g in connectivity and all different aspects they’re leapfrogging not only United States but Europe and other places in the world so that competition aspect now when I arrived in China to get the year to your point there was the the playing field was not even it wasn’t a completely open fair market as many of you already know any automaker that went into China could not have a majority equity a Chinese company had to have at least by government law policy at least 50 percent that was you know going back to the early 1990s I think it’s in 2022 finally that that policy is going to be rescinded or taken away the Chinese have had stood up on their own they’ve acquired technology wealth knowledge and they’re ready to compete on a world stage and so again looking back right you can see that China’s desire was of course to have foreign companies come in share technology share managerial expertise introduce markets all of those kinds of things and so they wanted to be partners in that enterprise and so that’s why they made those those demands and yet the state-owned companies that were the partners of Volkswagen of GM of of AMC and now of everybody else they never went anywhere they found it easier just to cash the checks from selling these cars which proved remarkably popular and many American companies have made significant sums of money but it didn’t look like that at the outset certainly in the night you know 1990s there were there was a lot of friction about this and today there’s even more friction partly because China has industrial policy and many of you now know about this plan this target made in China 2025 which includes targets for electric vehicles it includes targets on artificial intelligence robotics all of these different things and so that is one of the things that’s driving the current trade dispute we don’t know we hear that some sort of resolution is in the offing we don’t know the the contours of that but that’s a big issue the question of access to that Chinese market so we know Tesla is trying to go in Tesla’s number to market already is China but they’re running into they’re running into some difficulties right now and one of the difficulties that face all change all foreign companies in China is some of the profit centers that they enjoy here or elsewhere such as financing auto financing they don’t have access to they’re not allowed to play in that space so it’s definitely a competitive environment and we also see of course Chinese investment Chinese purchasing and Chinese consumption South Carolina is one of the top exporters to China what a South Carolina export pork that’s one of the one of the things but it’s not the highest ticket they export BMWs to China they export mercedes-benz and gilli which owns Volvo is building a Volvo factory to export from South Carolina to China so that rising Chinese demand is part of is part of the story now one of the things that has already been highlighted is we see investment coming in and the Chinese on the Chinese side they used the size of their market to incentivize folks I’m curious Stephen if you could talk a little bit about what local government tries to do to facilitate the entry of these investors into the United States there’s been the stiff competition over the last I would say about ten years or so as the Chinese economy is growing over the last ten years in the astronomical style I think everybody was hungry for that investment and so you see states and regions within the United States having really like a bloodbath with each other so there’s something called the Select USA Investment Summit every year I got started with President Obama President Trump is continuing with it basically it’s an investment summit attracting international investors going to Washington DC every year so that they can showcase how Great America is for investment opportunities for around the world one of the largest contingencies always coming from China and when they’re there what happens is the US Department of Commerce and select USA and Department of State they can’t say hey go invest in Los Angeles because if they do senator from Maine or from Florida will be upset and pull funding and the whole thing will fall apart so basically they invite all the local jurisdiction to go pitch which means that Los Angeles California San Francisco Texas Dallas Missouri everybody’s there and we are very friendly with each other but the same time we are cutting each other up and so that competition is stiff and a lot of times it comes down to the incentives what can you offer Texas we know that they’re able to give a lot of cash incentive as well as cheaper land in California we don’t have that option we don’t it’s very difficult most of municipalities don’t have the resources for that and when the Community Redevelopment Agency was dismantled back when the recession was hitting here we lost the ability to really give a lot of great incentives so the short answer is we don’t have a lot of we don’t have a lot of things that we can do there are packages that we can do in terms of Workforce Development so when they’re bringing a team of manufacturers here sometimes the upfront costs to train your employees it’s gonna be very expensive so what we do is we commute but we partner with community colleges or local universities to do a training program so that they can have a steady workforce going directly into our train plus when you hire a certain type of individuals whether they’re that’s or formulas homeless individuals they might get tax credits and then also local locally there’s certain expedited permit process or reduce water and electricity rate that they can use for a couple of years so it’s a mixture of different things is really based on the municipality the thing that what we do to sell la and sell this region is that we tell especially our Chinese investors sorry la is not the cheapest place to be but if you want cheap you can go get cheap but what we always say is cheaper is cheaper cheaper is not better because you can buy a Gucci bag a real Gucci bag when you buy a Gucci bag and you know which one’s gonna last and which one people are gonna recognize right we’re here because of our label because of who we are because of our weather but also because of our workforce they know that when they’re here there have a very steady supply of workforce Los Angeles has over a hundred and eighteen higher education institutions or the only place in the United States I have three top 25 rankings including USC UCLA and Caltech every year these institutions produce over 5500 engineers 1,500 PhDs about 3,500 patents coming out of his region every year so we have a very strong work force that can actually help them especially for international companies especially if they’re coming from China because we also not only do we have these really talented individuals they are also very diverse we speak over 224 different languages here in Los Angeles so you can hire someone with a mechanical engineering degree that speaks a certain dialogue of Chinese alright or Japanese or Swahili good luck trying to do that in Texas or Missouri so I think a lot of times yes you’re it’s more expensive here but how we sell them is that there’s a lot more access and once you’re successful here you can actually export your product to the rest of the United States in the rest of the world a lot easier so you have to look at the long term cost you might save a few pennies upfront but you might actually pay for it down the line so that’s a long answer to your question the the short answer is we don’t have a lot of incentives the way that other states do but sometimes is that we don’t want to we don’t want to make it like a race to the bottom because someone we see other states providing a lot of tax incentives that later on they could never get back as an investment yes and if they’re if if somebody is shopping for the best the cheapest deal they may not be the best you know participant in our community and one of the striking things that that Stephen just highlighted is the attraction of California simply because of our brain power and we see that definitely in China’s tech sector one of the giant companies Alibaba known for you know it’s business to business and business to customer operations it it does far more transactions than Amazon and eBay combined they have six offices in the United States five of them in California one here in Los Angeles $0.10 others coming in for that tech town and one of the things that they like to do in many cases is to hire Chinese students who first came to us universities and now want to stay in the United States but wouldn’t mind working for a Chinese company any number of them by do these these all these folks now one of the things that that you do Tim is to work with the automotive industry to scope out this competition and to talk with them about where opportunities where challenges lie that sort of thing what is your sense it’s not something we’ve talked about but what is your sense of how US companies are responding to the challenge and seizing opportunities yeah it’s a good question and I think again getting back to what the theme of our of our conference here is cooperation or competition they see the local companies they see competition and as even just intimated with all the brainpower here in expertise and infrastructure that’s available it makes it it makes it very attractive for new competitors to come in and the China if the Chinese are nothing else they are hyper competitive and as I said willing to go the extra mile so I think that is despite I think one of someone said yesterday oh the Chinese they’re not the competition they’re not on a level with the United States I think I disagree with that vehemently I think they’re um they’re strong and getting stronger so US companies are in all sectors are aware of that and are paying attention and and specifically with regard to the yeah the automobile companies are they changing their hiring practices have their priorities been affected both by the promise of a China market and by the challenge of Chinese producers yeah I think without a doubt I was over lunch I was speaking with the gentleman from Volkswagen or from Germany and we’re talking about how automakers are a lot of the product planning decisions that are being made in North America in Detroit and in Europe and Germany in particular a lot of it is China focused now because of the size of the market but also because they’re driving there they’ve taken leadership positions in these new technologies or these new spaces such as electric vehicles and autonomous and ride-hailing these sort of things so complete business plans and business operations are being there’s a lot heavier emphasis being put on Asia and China in particular and so I’m gonna go to Stephen in just a second but I wanted to follow up on this so we know you know people have been talking about where’s Japan where’s Japan and of course Japan is still an industrial superpower and there are certain you know technologies breaking technologies and other things where they still have this dominant role you know better than 50 60 70 percent market share in certain technologies are there American companies that are getting rich selling those kinds of systems to Chinese companies or is China very much wrapped up in developing its own technologies yeah good question and I think Stephen and I talked a little bit about this definitely the Chinese coming in with their investments it’s substantial and a lot of its based here in California but it’s even made a good point that a lot of them of these Chinese investors are drawing on US companies who have a long-established base here with infrastructure and brainpower that can in products that can support them so yeah there’s an opportunity for US companies definitely as a at definitely at the outset I don’t know how long it will continue but definitely at the outset and we’re going to open it up to the audience in just a moment but one of the it I don’t need to surprise anybody by suggesting that there’s considerable tension in the us-china relationship today and one of the areas of this tension is whether or not from the Chinese perspective how open the United States is to Chinese investment and there’s even now worries about how open are we to Chinese students Chinese visiting scholars Chinese specialists in various fields we’ve had visas revoked and things like that and there’s greater scrutiny over people that u.s. see in other places invite you know to come to visit and so one aspect of this is national security and so we have this thing called cepheus this Committee on foreign investment in the United States that looks at some of these things and Stephen has been following the expansion of sophia’s the things on cepheus is plate and the desire on the part of some american political officials to expand their mandate to have them looking even farther so it’s a quite interesting because when we in the u.s. look at IP issues and it’s it’s well-documented and it’s been well advertised that’s you know the accusations China’s not playing fair when we don’t have direct access so around the world that’s kind of been been been resonated but we see it from our perspective but when you’re in China all of a sudden you hear a different perspective from them saying look you’re seeing that your free market that and that we’re blocking you but our companies are coming in here and because of your claim of security and national security issues we’re not able to make certain investments so the most recent ones you’ve seen our companies like Huawei or ZTE into IT ICT infrastructure to the development because it might basically be a security risk for our companies or the United States whether our system to be open to Chinese technology and they’re saying that there might be spyware that’s involved with it so Sophia’s as clay was talking about there are discussions about expanding those those categories that were covered what’s considered national security now transportation is now considered on that list and specifically they’re talking about maybe certain categories of transportation including buses so if that’s the case and you’re talking about transportation it’s a very vast range of products so as some of you might already know Los Angeles were were we’re blessed with the weather and that’s why everybody’s here but because of that were also cursed with traffic that everybody knows about so we’re not okay with that so last year we passed measure M LA County so we’re gonna be generating about a hundred and twenty billion dollars on infrastructure development project specifically dedicated LA County transportation projects over the next 30 40 years most of it hopefully will be spent in the next nine years in preparation for the 2028 Olympics right so all of that said this is going to be the largest transportation and infrastructure project in the history of the United States spent in Los Angeles in the next decade we don’t have all the solutions and technology that’s why a lot of international companies are coming to bid for those projects so over you know the past few years we got you know kinky Shahriyar from Japan and SATA Bretta from Europe and CRC China rail from China that have successfully bid it for some of these projects and so now they’re part of this process now they are part of the the ecosystem as the economic development agency so these companies are coming in bidding for the contract our goal is to get them to open up operations so they can create good jobs here companies like BYD that’s occurred contract with LA metro is now creating over 900 jobs up in Lancaster for manufacturing so if they fall under that category of Sophia’s that basically will be blocked from making those investments retroactive Lee I mean how does that work what’s going to happen to those 900 employees that were living in Lancaster which at certain point during the recession was up to 24 percent an unemployment rate so this is a huge issue for us to be able to continue to crack company’s coming over here so it hurts my ability to basically go around the world advertising saying hey the US is open for business we want to attract you to come to Los Angeles and open up business and this is another part that’s really challenging for me it’s not like I can go to Texas and say hey come to LA because we’re cheaper we don’t do that that much because there are very few companies coming into California Los Angeles if here you’ve been hearing that a lot of companies are leaving this region once you’re mature and they’re certain size so the best way for us to actually increase our our size of the number of companies coming in it’s through international cooperation so without that ability for us to say that the United States and California is open for business that they’re actually examples of a thing they will block them that becomes very challenging for us now without all that said I want to give the caveat obviously we want national security to be to be completely safe proof so that we’re not going to be exposing ourselves to to bad players so this is the the very challenging part where does it get political where does it actually becomes the national security issue and where does it become some of the u.s. lobbyists with what their hired lobbyists in Washington DC basically saying I don’t want competition from foreign partners and do we just concentrate on just Chinese partners or we also blocking Japanese partners from coming in or European partners like when does it where is that line drawn and this is getting very very muddy right now yeah so this and this is not just obviously tied here to Los Angeles although the example that Stephen just gave is very local we see a battle right now over the DC the Washington DC metro and whether or not they’re going to be they’ve already signed contracts on purchasing Chinese technology and there are people pushing back on some of those things now this is about the future this is about the future China definitely wants to dominate electric vehicles to be a major player in autonomous vehicles and things like that now somebody who is a longtime observer of the industry is sitting in between us here Tim and one of things Tim is frequently in the media Chinese media as well as American media and he had a discussion with a reporter in Dallas about ride-sharing and the cost as an individual of ride-sharing and things like that and before I throw it to him to tell us what what the future holds I would like to take you to one of the giant bicycle graveyards in China because of enormous amounts of venture capital you had all kinds of bicycle sharing programs and this meant that there were bicycles in front of every door and some of you have seen the pictures of these things and you know the anger in local communities about I can’t get to my door because you got 18 yellow bicycles piled up there and now there’s this big ratcheting back certain communities have started to ban that we have that in the United States with regard to scooters Tim where is is our autonomous vehicles which are already of course you know functioning in certain environments are they the future and if they are when does that future arrive the second part of your question is when will they arrive I don’t know the answer to that first part of your question are they the future I think yeah yes they’re the future when we look at all the different aspects autonomous electric and one thing I want to make clear is and because when we read it in the newspapers people talk about electric vehicles if you look at the data today and going forward electric vehicles that those that battery only vehicles those are still a very small proportion of what are consider electric vehicles the the vehicles like the Toyota Prius hybrids make up a much greater proportion of those sales today and if we look out say 15 20 years for example in China and say 23rd the Chinese market might be 35 million total vehicle sales roughly half of that will be spread between maybe ten half of that will be either hybrid or electric but electrics maybe five million in hybrids ten million so while there is advancement in electrics we we need to be a little bit more specific about what some what we’re talking about but yeah I think especially with 5g coming on we talked about all right I I’m not an engineer but I read a lot and I talk to a lot of people and ice when I heard Oh 5g is gonna be anywhere from a hundred to a thousand times faster I go okay it’s not I’m gonna be in an autonomous vehicle it crashes like my my iPhone or my computer on my desk so I think once they get that sorted out we’ll see we’ll see that and so the last question Stephen one of the advantages China has is with a command economy they can say let there be plugins for vehicles along this road we will build this every gas station will become that sort of thing that’s not happening here and it can’t what’s the solution there’s no clear solution so if there’s one region that actually has experience with that that trial near it’s actually LA so there’s a movie called who killed electric vehicle I don’t know whether you remember that I was actually based in a long story here in Los Angeles that we were one of the first cities to test out this electrical plug system charging station back then and basically it didn’t take off and took another decade before we’re able to move forward with it again and the reason why you know the the the demand that you is talking about with electric vehicles is so large here is because we have the infrastructure for people to even consider it a lot of other regions are trying to catch up but it’s gonna take a while for them but they can leapfrog over Los Angeles the way that China and Japan they have leapfrog over the United States with a manufacturing side so it really there’s no no clear solution if you’re not a country with the government systems I can just basically push it forward it has to you have to as a mixture of incentives and regulation that comes in to play and we’ve been trying to incentivize folks for a long time to adopt you know lower emission vehicles whether HOV lanes and then you know with incentive to buy these electric vehicles and like we’re talking about is still very small percentage of the total consumption of what’s been happening around the the LA region so I think it’s gonna be a while before we come to the point where we we can actually have those kind of customer demand what’s great is basically this is the part where public policies and and and and public policy guidance can actually drive consumer demand as well so for example the the various cities around Los Angeles 88 cities many of them are now adopting zero emission fleets they’re moving forward and getting rid of their their vehicles so LAPD for example has adopted a new line of electric cars the fire department has tested some some for their their inspectors rather than emergency crews so they’re moving towards that direction already and if you have all 88 cities being able to do that now you’re transforming because now you’re really forcing the city to the cities to invest in the charging station infrastructure and with that with more infrastructure than you’re incentivizing other folks to be able to do this as well and as the cost for battery store system and all these are coming down it makes it easier and and and more more quickly that people are able to adopt this technology thank you the the whole fleet sale part of this is not something that we’ve necessarily talked about but you definitely see that in China where governments are incentivizing production in their provinces by saying we will do this if you build these vehicles every city car is going to we’re gonna buy that and there’s a long tradition of that in China there’s a reason why Volkswagen owns the the cab market in China ladies and gentlemen you’ve been very patient and we’re grateful for your attention and now we’re eager to hear your questions if anyone has one we’ve got a mic coming around please thank you two things and then a question clay you mentioned about come be like my former employer BMW building cars in South Carolina and and exporting them to China and Duvall apply and do the same thing but a night on the inverse people are already driving Chinese built Volvo’s in the United States they probably don’t even know that and Chinese built Buicks inland right exactly and soon will be driving Chinese built BMWs in the United States whether they know it or not and Steve and I know your job is to promote LA and you do a great job but my question I guess is what are the challenges for a Chinese electric vehicle company that’s building their Oh I should also say that from my former company BMW their highest quality plant in terms of problems per vehicle in their global production realm is actually in China in fact they send people from Munich to China to learn not teach to learn so with that said what are the challenges for an electric vehicle company like the one I work for now that’s going to build cars in China and sell them in the United States so the the first challenge is the US consumers as the whole are not ready for made in China public so if it’s a Chinese brand right so for example there’s a company called great wall motors that’s been wanting to come to the United States and want to sell their vehicles here let’s be honest I don’t know how many L that’s gonna do great wall motors here in the US especially what the trade tension that’s happening right now because the public perception is it took a while for example for folks to start adopting Toyota and Honda and Mazda you know as reliable vehicles and then you have the second phase of Kia and Hyundai before people can even pronounce Hyundai so it took a while for that I think it’s gonna be a while before China the Chinese vehicles are going to be accepted internationally especially in the United States as a reliable vehicle so that’s one second it’s also ever manufactured in China coming over here and basically getting the certification just going back to the company we talked about byd is producing electric buses but originally they wanted to come here to actually manufacture their electric vehicles and ship them over here first to sell into this market that plan got scrapped because it just basically is not feasible so whatever happened to the ten cars that the LA Housing Authority had I tested one of them I think it’s somewhere in the fleet I don’t think it’s a I think the City of LA actually tested them anything including my favorite was actually the electric mini coopers so there there are many things that again the city of Los Angeles able to test but the the first part is basically consumers demand for for Chinese made vehicles second is once you ship it over here even if it’s manufactured here the road certification and different things if it’s made in China there’s still a number of different processes they have to go through before they can actually sell it here so those are the two main challenges I would say that they have to face but I think the first challenge is so big that people are not even going to look at the second factor because if you don’t have the demand a consumer market here for it then what’s the point do you concurred yeah I know no I think I don’t think I can add anything to that I think you yeah I agree so you talked about we’ve seen this great influx of Chinese investment in LA with starting these new car companies in Los Angeles we’re also starting to see sort of the inverse of that with companies like Faraday future employees on furlough and having financial issues are you where the concerns on the financial impact that if more Chinese companies start to have is there a domino effect that could be happening is there a Los Angeles risk of you know suddenly we have a huge workforce looking for jobs as I didn’t issue that you guys are seeing ask the state of Nevada yes so I’ll expand on that a bit so this is nothing new to Los Angeles because Los Angeles is such a diverse location we’ve seen investments coming from around the world over the the past few decades the most recent example that we can point to that people still remember are the Japanese investors that came back in the the well they’ve been here since the 50 60s but really the 80s and 90s really the 80s is when they lost her skin here because they invested so heavily and basically the market crash and they were never able to recover from that so we saw about the Chinese investments coming in and they’re ready a lot of us who are looking at promoting the investment coming over here knowing that can be a risk however what we’re seeing is a different type of investment because we keep on talking about this concept of leapfrogging a lot of these international companies learn from the past so the way that they’re investing in it is very different than the way that the Japanese companies were investing which they’re buying existing buildings and they’re investing in existing portfolios the Chinese companies are doing Greenfield investments if you look at downtown Los Angeles you see next to the Staples Center for example you have Shanghai Greenland doing the metropolis project you have Oceanwide doing the ocean my project so it’s 1.2 billion 1.5 billion the shinjin Hazen’s is seven hundred million dollars so all together around there just within the one-mile radius you have three four billion dollars in a matter of two three years so these are Greenfield investments the different structure however we are hearing that there are some financial issues that they can’t get the money out of China or whatever the issue is and there’s the work stoppage for the ocean-like project you know Faraday future is another example so people watching very closely however the market is doing so well what the influx what they’re doing this because they’re coming over here it’s also drawing attention from other companies going back to electric vehicles BYD was coming in here kind of competing for the contract and in doing so we also got other companies from like New Flyer or port era competing as well but because PYD was manufacturing here we can go to prepare a new flyer basically saying look if you want that contract and you want us at la ADC or any of the local agencies to support you you better open up your operation here so now you have multiple factories opening up so if someone lose their job in one one sector they might be able to transition into other sector that doesn’t mean the risk is not there we’re very very fearful of kind of this effect where you’re depending on on one putting all your eggs in one basket that’s why we don’t just rely on China we’ve always had a multi-pronged strategy that’s why we’re working very closely with our friends in Germany and the UK you know with brexit happening we’re also very wary of that so now we’re working oh not now but we’ve always worked with Canada and Mexico yes MCA is not we’re not quite sure what’s happening there so we’re working with Australia we’re working with the Middle East so we have a global strategy to counter that so we’re not comfortable with the fact that you know all they’re there there’s some financial issues with a capital flow restriction coming from China and that’s why we’re seeking other sources of investment to make sure that we even out the entire markets yeah and the Farraday case is not the capital controls they they have business problems and so but definitely the capital controls but also the Faraday example suggests maybe providing incentives is not you know in terms of land and financing and things like that not necessarily the best route now Stephen just mentioned the u.s. Mexico Canada trade agreement what used to be NAFTA this is you know now after 2.0 and there’s a and there’s an automotive part of that and Tim maybe you could say something about that how that might affect some of the strategies and some of the opportunities yeah well we just mentioned we heard vehicles coming from China Volvo’s and BMWs and Buicks and I think with the current administration when they came into office they said hold on let’s slow everything down take a step back and go boy we’ve got our own North American continent here with half a billion people and so we’ve got high-technology we’ve got lower labor costs at our disposal if we all work together so and I think that was a I think that was a big shift a big shift in the last two and a half three years we’re saying why don’t we were working at cross-purposes with ourselves if we’re offshoring to places outside of North America when we can be helping ourselves to in the automotive space before we go there if I could ask another question regarding that so the US and Mexico China agreement and the current form that’s negotiated also president Trump came in and said you have to have what 60 70 percent North American contents and there’s a minimum wage requirement that you have to meet I think 15 or 16 dollars minimum wage which is great for Los Angeles in California because our minimum wage standard is now moving towards $15 which is going to be very very difficult to for us to compete so if Mexico is also has $16 you know that puts us in a place where we can go to the manufacturer and say you can manufacturing in Mexico for $16 but you can come here for 15 more cheaper than Mexico the problem is this currently if we’re understanding correctly Mexican workers they’re manufacturing are usually about five six dollars to go from five six dollars to fifteen sixteen dollars that’s a big difference is it even feasible under this requirement for for manufacturing to happen there and actually have their car be competitive and affordable I don’t I don’t I don’t feel I have enough information to answer that yeah actually my sense is that the five or six is when you’re talking about the assembly lines and things like that that’s not what workers in Mexico are getting paid and in fact some people who have done work on this at Stanford argue that China’s challenge is to upgrade secondary education so that workers there can be as competitive certainly on the coast that’s not an issue but there are places in China where secondary education is not as pervasive and not of the same standard and so some people who have worked on this at Stanford argue that this Mexico is more competitive on that front they haven’t been to the BMW factory apparently to see the performance to see the performance there but many people in government that I’ve spoken to argue that that requirement was specifically to target China and specifically to target not Chinese automakers in the in the sense of the brand that’s on the car but rather the parts manufacturers the requirement that you’re referring to is the parts that’s 60 70 % or they wage whether those two requirements one is local North American sourced and then the second is built with labor that gets paid a minimum of 16 bucks so there was my understanding is there was a big loophole that was that this was another one that’s closed as many companies were shipping into Canada or into Mexico assembling there and then taking advantage of NAFTA rules there so that’s been for the most part shut I know in Canada their growth or at KDP growth rate has been significantly negatively impacted and I think from my understanding this is the cause ladies and gentlemen you’ve had a long day into the future we want to thank you for sticking it out and again we want to thank the hosts the Los Angeles world affairs council and of course the Petersen museum but we especially want to thank you it’s a beautiful day outside and you chose to be inside we hope it’s been worthwhile thanks you [Applause]


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