Interview with Alexander Yevzelman on the Future of the Automotive Industry

Hello everyone. My name is Ian Peterman. I'm host of the Conscious Design Podcast, and I'm here with Alex Yezelman, who's a 30-year veteran in the automotive industry across a wide range of OEMs. And we're here to talk about his unique perspective that he can bring in electrification and where mobility is going. Great to have you here, Alex. Thank you.

Thank you, Ian. So thanks for the introduction, and I guess I'm one of the very, very many experienced professionals in the automotive industry that have probably very defined, well-defined point of view on what automotive industry is going to look like in 5, 10, 15 years. And, you know, every single one of us sometimes think that we have a crystal ball, but, you know, I think things may turn out or have turned out in the past a little differently than what we thought. However, It's always a good exercise to think ahead and think about the future, and some of us were right back in the '80s and in the '90s and early 2000s and so on and so forth. I, you know, in my line of work, I work mostly for in fact, exclusively for Tier 1 automotive suppliers. For the folks who don't necessarily understand automotive industry's ins and outs, that means that we were supplying our product directly to the automotive manufacturers, which is what OEM stands for, like General Motors, Nissan, Chrysler, so on and so forth. And so that's probably one of the most difficult positions to be in, in automotive industry, because obviously you have a tier 2, tier 3, and tier 4 going all the way down to the raw materials. But dealing with increasing demand and cost and quality efficiency from modern OEMs, is definitely a very challenging task, and to be able to compete effectively and profitably in modern automotive environment is really not an easy task. In fact, it's almost an art. You know, that is why there's a lot of people have gone out of business for different reasons, but, you know, it's definitely a challenging environment. And, you know, I've seen automotive industry going from making it all kind of a concept, meaning if you remember General Motors back in the '70s, they had Delphi and Delco divisions. And they were making everything from vehicles to washers and dryers and everything you can think of. So in the '80s and '90s, that concept changed from make it all to buy it all, and eventually some of these big divisions were sold off by not just the Big 3, but a lot of other OEMs around the world. And I've seen automotive industry being in financial distress. A recent example was 2008-2009 economic crisis that we all remember. And, you know, different things happen. You know, General Motors came out of this a lot stronger. Fiat Chrysler, for example, who's been through multiple partnerships and came out as a part of the Stellantis Group now. So those changes are kind of continuous and inevitable. But what I want to talk about a little bit today is electrification. And to me, this particular rearrangement of the automotive industry is a little different than everything we've seen before. I think in the past, a lot of A lot of changes were driven by economic conditions, simply profitability and market forces. I think this time around it's consumer consciousness and manufacturer consciousness as well as environmental concerns and also tremendous advances in technology drive the electrification. And, you know, Ian and I, we talked about a week or so, 2 weeks ago maybe, and we discussed how these electric cars will eventually become flying cars and all that stuff. I'm not looking at it this way. I'm a little bit more down to earth kind of when it comes to these kind of things. I think we'll still be driving on the ground, but the way we're driving and the way we're buying and the way we're making cars is gonna be substantially different. And that's why I think being an insider of the automotive industry and understanding how things are put together and what's the difference between the way they're put together now and are going to be put together in the future is where I'm mostly interested in and what I consider to be a major differentiator between the way they are made right now versus in the future. I don't see that to be really very visible to the end consumer because, as I already said before, you know, the car got probably gonna end up still having 4 wheels, gonna still have brakes and a steering wheel, and you still have to have to sit in a seat in the vehicle. So a lot of things that currently exist in cars are going to be the same or similar or— Possibly better, maybe worse. You never know. But certain things that affect people like myself, a company I work for, a company like I work for, are not going to change at all. And if they do, it will be very subtle changes. But what I think makes a huge difference right now for the manufacturers and why you see this announcement like General Motors just announced, I believe, and I don't want you to quote me on this one, but I believe by 2035 they said their passenger car fleet they're going to be producing is going to be entirely electrical. And that is a big announcement. That's You know, just under 15 years from now, which is in automotive terms, it's not a very long time.

They're not alone. There's a lot of companies launching that, the same and similar initiatives with electrifying entire lines of vehicles.

Almost every single one of them, but I can't recall— well, besides General Motors and Volvo, I don't know if anybody committed Really committed to electrifying their fleet completely, entirely?

Yeah, not completely. I know a few, like Mercedes, have announced that they're going to stop R&D on their internal combustion engines, but that doesn't mean electrification. That just means R&D budget change. So a little bit of a different announcement.

Well, you know, that, that bears another question: how much R&D you can do on something that's been produced for probably 140, 130 years for now, but it's the same principle, right? I know that the engines are a lot more efficient, but anyway. So I wanted to also talk about what really— when did we reach this turning point in automotive industry where companies make those kind of announcements with confidence. And I think there is a number of elements. Number one, we finally have all necessary tools. Number one is better technology, right? Even though I do believe that to To gain a substantially larger number of consumers that would be committed to buy electric vehicles, you probably have to reach 5,000 to 7,000 miles range on a single charge, which is a big task. But I think considering the progress that electric companies made in the last 10 years, which I believe it started off with—

15.

30 to 40 miles. Now 300 miles is, I think, not a— it's not only done by high achievers, but I think a decent vehicle these days, electric vehicle, is definitely within this range. And so better technology, self-driving technology, connectivity, Finally, can you really look at the market and say, we can do what Model T has done back in the turn of the previous century, which is mass-produce the vehicle that will have the same success as Model T had, which was affordable? simple to operate, inexpensive to operate, and available to mass population and kind of makes sense. Now, back then, the competition to Model C was a horse and buggy. Right now we're looking at the internal combustion engine that is producing And I looked up the numbers. I believe right now in the world there is roughly anywhere between 70 to 80 million cars, passenger cars. I'm not talking commercial vehicles sold every year. Well, United States by itself is around 17 million during normal years. 2020 was not a normal year, so we really cannot— it's outlier. But so that's what market is. And so In 2020, there was roughly 3.1 million electric cars sold. So that gives you a rough percentage. So it's under 5%, roughly, with China and Europe leading. We had roughly 300,000 electric cars, purely electric cars sold in the United States.

Wow.

Mm-hmm. In 2020, which is actually below 2019, which had close to 330. But that's expected to go up. So the reason why US is a little bit behind is, as far as sales is, it's simply economy stupid, right? So that's what we say. And US gas is still very cheap if you compare it to Europe. So it's, you know, I actually looked at electric car when I bought my car about 3 years ago. Back then it was still a very exotic creature to purchase and it simply didn't make sense to me at that time. And my main reason was long-range trips, anything over 500 miles.

Right.

I know that you can probably charge it right now and there's charging stations that have been created all over the United States, but it's a time that it takes to charge and that discomfort, that lack of knowledge that I had at that time that That stopped me from doing it. But again, once the sentiment goes away, it's gonna be different, totally different game.

Well, you talked about, like when we talked before about this infrastructure component is a huge part of adoption, right? The whole range fear and things like that is the charging, but it's also Am I going to find a charger where I'm going? Right? You can find a gas station in every town, including the smallest towns in the US, right? Anywhere will have gas, whereas electric is a little harder to find. There's not that comfort of we've had gas stations for half a century without any lack of them.

Right. Right.

And so there's that component. And then I think you mentioned too before, is like the customer buying experience and all of that is shifting somewhat with this electrification as well. And that's good and bad, I think, for some people that aren't used to that method. They're not quite there. And so, yeah.

So I'm in complete agreement. And I believe there is a— so the electric charging got to become mainstream commodity, meaning that just like you walk out down the street, you probably see 2 or 3 gas stations right there. How many of them have electric charging ports? Some of them do already. And these folks got to get on that train relatively soon because before they know it, they'll probably be struggling to stay in business because, you know, especially— I don't think the situation is going to change for long-range travel that much, but in town, it's going to be hugely important. And now, with this electrification, I think If you think about consumer that buy vehicle often for in-city commute as well as long-range commute, you think about some of these delivery services like FedEx, Amazon, the folks who do short-range driving regardless. They may be putting 1,000 miles on the vehicles a day driving within 20 square miles, but the thing is they never Too far from their hub they deliver it from. So if you think about that, they can always stop by and recharge the vehicle within, let's say, half an hour and they're back on the road. It's a small price to pay. So I think that market by itself— you're talking about all the delivery vehicles, mail trucks.

Yeah, I'm waiting for them to electrify mail trucks.

This is huge.

Seems pretty straightforward because it is, like you're saying, it's short range and a 30-minute— that can be their lunch break. They can—

Exactly.

Halfway through the day.

Exactly. And so I think this fleet is going to explode in numbers way before passenger car market is going to take off and become really mainstream. And we already see that Rivian, And I think a couple of other manufacturers have large contracts with Amazon and other services. So it's going mainstream, that's for sure. That's for sure. And so, and yes, the other aspect of this electrification in my mind is besides the the consumer sentiment, technological capability of the— not necessarily supplier capability, but development that happened in other different areas of technology sector that allows that to happen. Those are the two 2 main things. The 3rd one is, to me, that relates to not necessarily to rocketing this electric car concept up in the stratosphere, but mostly to the area of, to me, unknowns and changes that consumer is probably gonna enjoy and some areas may regret would be sales and services, that's for sure, just like you mentioned, something we discussed last time. When it comes to sales, I don't know about you, Ian, but I have a personally absolutely dissatisfied with the dealership sales and purchasing scheme that they deploy right now, which is to me, in a way, it's a joke because really the commodity of— second most expensive commodity in a household after the house, you go out there and bargain and And I can tell you based on my personal experience, for the same vehicle, if you're not savvy enough, if you don't really understand the incentives that are offered there, and if you have a really dishonest dealer that you're dealing with, the price range on the same vehicle could be within 10 to 15 to up to 20%. Going from dealer to dealer. I have firsthand experience in that. And that's why I hardly ever show up at the dealership except for the time that I need to drive the car. And then all negotiations take place via email or phone. And so I think Tesla concept, and I think some of the others are getting on board, which is price is what it is. And it may depend on options, but it is what it is. And at least you know going out there, From the get-go what you're getting into is a good concept and I think people may ask, well, why is it, why would it become different for electric cars? Well, because of this technological part of the vehicle themselves and connectivity and all that stuff. I think that's what drove Tesla into this amazing online experience when you buy a car. The other thing is that the dealership concept is probably going to become less important simply because electric cars are substantially simpler from a componentry standpoint. The number of components that go into a car and reliability and the service aspect of the vehicle than they are right now. And I'm not exactly familiar with how Tesla performs its services right now, but I believe there are service centers you can take it to. And I do know that, again, you will always need to have new tires and possibly a brake will wear out. And if you need a body shop, it's a different story. But from a complexity standpoint, those are definitely easier vehicles to work on, as well as number of components that go into the vehicle is— electric vehicles are substantially reduced. Powertrain itself is almost half of the components that it used to be. And I'm not talking even about complexity of components themselves, like electric motor versus internal combustion engine. It's substantially different animals and what it takes to produce it.

Well, and I would say the diagnosis process too is far easier. You know, you have an electric motor, whereas I've pulled apart an internal combustion engine. There's a lot of different things that can fail that you can't see from the outside. Necessarily. So there's that diagnostic process even. I feel like Tesla probably knows more about what's going on with the car or what is the problem before it's even brought in sometimes. And then internal combustion, it's, oh well, it's smoking or it's making a noise or something like that where then you have to go figure out what is actually even happening with it. Right.

I certainly hope that it's going to be more of a plug-and-play kind of a situation where it's relatively easy to replace a component. Because in a modern vehicle, you know, there's a requirement that's been established in, I believe, in the '80s where you got to be able to plug in a scanner and you can read the error code and When your engine light check comes on, right? The problem is, yeah, you can read the code, but what do you do with that, right?

Yeah.

So often you don't have a clear path to fixing a problem. It could mean so many different things. So I certainly hope that electric car companies take a look at the inconvenience of modern vehicle repairs and, you know, I do realize that it requires a certain level of expertise and knowledge, but I hope we came to the point in vehicle complexity, especially related to electric cars, that it's a pretty straightforward answer. Even if your electric motor needs to be replaced, then it may take expert work, but at least you can immediately see the impact and at least estimate the cost associated with it.

Yes, that would be helpful.

Yeah, it's not like your EGR sensor reads in the scanner and then you know that 20 other things need to be replaced to fix it, and instead of $30 sensors, it becomes a $3,000 problem. So it's a different story, right? So that's what you would hope for. Yeah, so Yeah.

Awesome.

So to me, those are impacts on sales and services that I'm certainly looking forward to and hope that this is incorporated in ideology. And, you know, You probably already sensed my deep, deep love for dealers and dealerships. And so I'm not trying to put anybody out of business, but I certainly hope that consumers will have a lot more knowledge, understanding what's going on with the vehicles. And I think that the path is clear because of the way the vehicles are these days, electric vehicles are these days. It's hopefully just, you know, if it's just a plug-and-play kind of thing, even if it's going to cost you money, at least you know where to go with that. So that's important. So another thing we already touched on, and, you know, it's charging infrastructure, right? So I'm certainly hoping that the US and world regulators get on board very, very soon so we can have very standardized way of charging the vehicles so we don't have to worry about what kind of adapter and cable to carry with us and all that stuff. That's, you know, we experienced that with our cell phones for a while until we became kind of a 2-tier society, either Android or Apple, right?

Right.

So that's important and hopefully that that the oil and gas industry gets on board very quickly, understanding that this is opportunity and not a threat.

Yeah, and kind of just to wrap this up as a last question, you've worked with Tier 1 companies, you understand that. Is there this momentum behind it? Is it just GM? Do you see movement towards these things at the supplier level and even thinking and having the conversation of we should start thinking about how to prepare for this? Or kind of what's the inside view from the tier 1 level of what do we do with this shift?

Oh, absolutely. My thing is that I'm currently in commodities that that are not going to get impacted by this change. They're going to remain pretty much the same. It's not going to— electrification of the production isn't going to impact us because we produce plastic components. And other than possibly switching, going to different materials, more environmentally friendly materials, or or going from injection molding technology to plastic printing technology, there is really no direct correlation or threat for us in my line of work. But I know for a fact that the people I know from my previous years in the industry, they all talk about it. And the main threat they is for people who've been heavily involved in the powertrain, you know, exhaust systems, engines and transmissions, and multiple other systems that are affected by electrification. They do need to adapt. I do know for a fact In the past, every time there was a threat, whether it's changing technology or economic threat, people were always able to come up with ways of changing. Sometimes it's costly, sometimes it's not sustainable. Some of them are going to are going to end up going out of business. But I do not see, especially in automotive, a significant number of major new players coming in who don't have any automotive knowledge or experience. This is unlikely, maybe few. I can see that companies have been in the business of producing electric motors, which is high-power electric motors like they use in electric vehicles probably have a leg up on some of the folks that produce powertrains right now and engines. But other than that, I don't know if it's gonna change substantially. But I do know that that is on everybody's mind, everybody I talk to. Some people believe it, some people don't, but everybody talks about it.

Awesome. Well, thank you so much for your insight and talking about this. It's been great, great to hear someone else's thoughts on this because it's— I see it as an impending and unescapable shift, barring some huge shift in the opposite direction. It seems to be something that's gonna definitely move every company forward in one way or another. So really appreciate your time.

Yeah, thank you for the opportunity and please reach out again with any other changes and challenges and I will definitely keep you informed on what the latest trends are.

Yeah, and if anybody wanted to reach out to you, is there a good way to get a hold of you or contact you?

Yes, I, I believe, I believe you have my email address, right? So it's alexander.yabzelman@gmail.com. That's probably the best way.

Alrighty, well, thank you and great having you on the show.

Thank you very much, Ian. Have a good one. Thank you.