Bloomberg Audio Studios podcasts radio news.
I'm Hannah Elliot.
And I'm Matt Miller. This is Hot Pursuit.
This week, Matt is in Detroit at the Detroit Auto Show where he just sat down with Ford CEO Jim Farley and the CEO of Oracle Red Bull Racing. Plus, four-time world champion and Red Bull Racing driver Max Verstappen joins us later on. And I'm working on a story about Tesla, specifically why people are leaving Tesla. And here's the hint, it's not just about Elon.
First, let me tell you about this Tesla story, which came to us really based on the news that BYD had finally surpassed Tesla as the bestselling EV maker in the world, which is a really big deal. Tesla had such a long head start. Let's not forget Tesla was making electric cars as far back as 2012 and even before. But really, the Model S came out in 2012. And at that time, Tesla was really the only player in the game, so to speak, for EVs. Now, of course, basically every automaker has an electric vehicle option. So, it's interesting that now the head start has basically worn off. Obviously, the Chinese automakers have really caught up in terms of being able to make new cars fast, affordable, and very well-made, and that has really eaten Tesla's lunch. But there are some other reasons too why especially buyers in America are leaving Tesla. We've known that there have been pools of buyers who have been uncomfortable with Elon Musk and some of his political posturing, some of his antics, some of his workplace behavior, etc., etc. But actually, there's a bigger contingent of folks who were uncomfortable with him maybe, but actually kept on to their cars until recently. And now we're seeing sort of a gradual eroding of some of these buyers who are deciding to go into other things. Maybe a Rivian, maybe an electric car from Porsche, maybe go back to a hybrid or even a nice vehicle. So, we'll have a lot more on that next week. This week, Matt is reporting from the Detroit Auto Show. He sat down with Ford CEO Jim Farley and Oracle Red Bull Racing CEO Laurent MCase.
It's a pleasure, gentlemen. I'm very excited as a fan of the brand and the league. Let me start, Laurent, with you because you've said that this is the steepest hill F1 has ever had to climb. New regulations this year are sweeping. It's not just a tweak here and there. And you're starting with a brand new partner with Ford who is going to build the engine with you as a collaboration. Why choose Ford as a partner?
You're right. It's the biggest regulation change probably in the history of Formula 1, at least in the modern history of Formula 1. And it's also on that very same year that we chose the, let me say, crazy challenge to go and build our own power unit. And if you do that, you want to partner with the best. We are in a lucky position where we have managed to strike this strategic technical partnership with Ford in this crazy adventure of building from absolutely zero our own power unit, and we go together in these new regulations.
Jim, for you this must be exciting because you've built a new legacy for Ford in terms of racing. I mean, on the one hand, you've got the new industrialized America here. On the other hand, you're going back to Le Mans with a hypercar in a couple years. You're essentially doing DFV 2.0, right? This is like the Cosworth of old. Why do you, when you're talking to Bill Ford, when you're talking to the shareholders, how do you justify this spend and this drive to go racing?
Well, a couple things. First of all, the tech transfer, this sport that Laurent leads, this team that Laurent leads, leader in aerodynamics, predictive failure components and software, software control, the hybrid system, high discharge batteries. These are all core capabilities that we need for the next 5 to 10 years as a company. So the tech transfer is very relevant for us like maybe four valves or overhead cams were in the 60s, but the tech transfer is totally different today. Formula 1 is a complete digital sport. And that's where we're going as a company. Number one. Number two is, racing, especially in the off-road world, gives us credibility for customers that the product they buy has real capability that's been tested in a way that a brand who doesn't race can't say. And that's what Porsche, Ferrari knew for a long time, especially for us in the off-road world. This is really important. Racing is a fundamental part of our company's business because to beat all the great off-road brands and to establish ourselves, now we're 2x Jeep sales in the US, to keep that going and keep growing the off-road brand, off-road racing at DAR Baja is where our customers will say, hey, that Ford has the real deal. It's the real deal. It's not a poser product. So racing is integral to our credibility as a company.
And you've obviously got a deep, rich history there and you're bringing your software and battery technology, those capabilities to Red Bull Racing. But for you, Laurent, this is a whole new thing, right? Building the engine. I know you're getting a lot of help from Ford. What are they helping you with on the fuel side?
They have been helping us on many different topics and that list of topics is expanding every day. But let me give you a couple of practical examples. Jim's team have unique advanced manufacturing capabilities that we use to produce some of the most critical parts of our engine. And not only are they able to manufacture this part for us, but also they do it in less time than we would do otherwise. And that gives us a crucial, our business is a time to market business. We call it a time to race business. And when we are able to manufacture complex components in a shorter amount of time at this incredible level of quality that we are looking for, that's a key competitive advantage, especially since I think you've said you gave up some time focused on last year's car. So you're in a hurry to make sure that this year this new car when Max gets in it in Bahrain, that it's a winner and not a learning moment. How do you make sure that you're winning straight out of the gate?
You will have to bear with us a little bit. The scale of the challenge is monumental. We have started to design and build these engines in what was a field. We've made the factory, we've bought the dyno, we've put together an unbelievable group of people and group of partners such as Jim and his team. And it will be foolish and naive to think that from the first day you are going to be at the same level as people that have been doing it for 90 years. So bear with us. It will give us a few sleepless nights. It will give us a few headaches. We feel we have the right people, the right tools, the right spirit across what Red Bull means and what Ford means. We will eventually come out on top, but the first few months will certainly be full of learnings.
Jim, what can you bring back from this laboratory, if you will, to the Ford customer here in America? Because yesterday we saw figures from the Bureau of Labor and Statistics that showed prices for the average passenger car, not Ford, but across the industry are up more than $500. Prices for the average truck across the industry are up more than $1,000. What can you bring back that puts value into those price increases?
Matt, I think Laurent said it really well. If there was an initial premise of what those transfer technologies would be to help the company, but what we're learning working with him over the last several years is actually that list is growing and it's more diverse than we thought. Of course, we thought it was aero and high discharge batteries for performance hybrids. Well, now it turns out performance hybrids are really important for the company. 25% of F-150 is now hybrid sales. People are buying it because of Pro Power on board, not just because of efficiency. And every day, honestly, the list of things that we can take from the effort with Laurent, his team, because the sport is so hard and the time pressure is so high, that list is getting longer every day. I could give you a long list and most of the value that we're seeing on the tech transfer side are things that we didn't even have on the list when we started four years ago. It's a long list. But I would say that the real signature for me is really the software, the control software for the hybrid system, predictive failure components. These are the essence of the new software-defined vehicle globally to beat China and they are really good. We need these capabilities from Formula 1 and we can put them right into a Transit van. He can help us with the language models and the logic of predictive failure for a component on a Formula 1 race. We can use that same know-how hopefully to help our customers in a Transit know that something's going to break way before it breaks. And that's the same capability he has to deliver for Max. This is really the cool part of Formula 1. It is such a high pressure, high-tech sport that actually the list of value like lubrication, it's just going to keep getting longer.
Laurent, the president of the United States was with Jim a couple of days ago here touring their plants. As the US turns more inward, it's interesting that you're participating in this sort of global sport, right? We've just learned of new visa restrictions on people from many nations including Brazil. Do you find it harder to get people in to Miami, to Las Vegas, to Austin? I know there have been problems already holding up gear at the border.
Really, it's not an issue today. We are a global sport as you have said. We are enjoying racing in pretty much every part of the world or nearly every part of the world. We have incredible logistics capabilities, which is also something that we are brainstorming and exchanging with Jim and his team, and these teams together with the help of Formula 1 makes it very smooth to go around. We have back-to-back races from the US to the opposite side of the globe without any issues. So, it's a privilege that the sport has as a global sport to be able to move around very freely.
Jim, how are your discussions with President Trump? I know that you have pointed out in the past that the tariffs as they're set up now, as they're designed, put you at a disadvantage to somebody, even an American auto manufacturer that produces in South Korea or Japan. Have you had a chance to talk with the president? Have you made any progress in getting maybe carveouts?
We're really encouraged. I mean, look, Ford is the most American car company. We produce the most, most hourly workers. We export the most. And so, the administration's been great to work with. They always answer the phone. But there's a long list of things we got to work through. I think we made progress on mitigating some of the tariffs, but we have more work to do. For us, we have a high exposure to aluminum, for example. The EPA changes are really welcome, frankly. And we're seeing that play out really in our business. Part of the reasons why our valuation is increasing is because people understand we can build more profitable vehicles now and that's more employment in the US. But there's a long list. We got the USMCA coming up. Very important negotiation for Ford. We need to change USMCA. But we built our entire vehicle business as an industry between Canada, Mexico, and the US. We have to get this revised but it'll be very important. I think continue to work with administration on tariffs. How we handle China. You know if you look at what's happening in Europe right now in the UK, the Chinese are now quickly almost 10% of the marketplace and electric car is even higher. They pose a lot of threat to labor locally. They have huge subsidies from the government that they're exporting. As a country we need to decide what is a fair playing field from a cost. How do we handle these vehicles? If we're scared of a balloon, you can imagine a car with 10 cameras that can drive itself. These are incredibly sophisticated technologies. And when we deploy that in China, it has to be approved by the defense department because those vehicles can be guided into all sorts of things. Well, we need the same. We have a good starting point for that philosophy of the ITC of the vehicle, the digital footprint. Now, we have to make sense of that for the China threat. I know that the president talked about that during his visit at the economic club. How do we handle Chinese cars? His personal opinion was we should let them into the US, but maybe, I think we need to work through that as a company and as a country. I think there's always a lot of big topics for the car industry because it's so important for our country.
Well, we'll be covering all of those here in Detroit with you, Jim, and you, Laurent. Thank you so much for joining us.
And that was Matt Miller, coming to you from the Detroit Auto Show. Coming up, Oracle Red Bull Racing driver Max, and you might have heard of him, joins us. I'm Hannah Elliot. This is Hot Pursuit.
Welcome back to Hot Pursuit. I am very excited for our next guest. He needs no introduction from Red Bull Racing, four-time F1 world champion Max Verstappen. He spoke with our Matt Miller. Max, the second half of last season was about as exciting as they get. You were at a 104 point deficit, but ended up only missing out by two points in the last race. How did it feel to you?
Take a race by race to be honest. We had a bit of a tough first half with some good moments and some bad moments and a tough start, but second half was a lot more enjoyable. Also on the team side, you start to feel more comfortable, confident when things are going well. Of course even in the second half we had a few tough races but overall way more competitive and I think it's always nicer to end the season like that. I mean, it was a great way to end even if you didn't win the ultimate championship.
I can't imagine working that hard with that set of tools and then having to switch to a completely new set of tools this year in like the most serious rule change that Formula 1 has had, at least in my memory.
Yeah, but even heading into that season, it's not like it comes as a shock. The team is prepared for that. And it's also a bit of a new challenge. I mean, I enjoyed the cars the last three years, but at the same time, sometimes it doesn't hurt to have a bit of a change. It can also really upset the grid. You don't know. So, we'll see how that goes.
