Biggest electric Utility Company in america he was going to give lots of people to the electric system and what a great market it would be. Didnt work out. There are two more episodes and finally we are here today. It is challenging to write a book on the subject to write the book that levi tillemann, several requirements necessary. You have to know cars and need a sense of Automobile Technology you have to know chinese and japanese and 4, you have to have the sense of National Politics and international competition. You wont make people who meet those requirements that you do meet them. To get started remember when this was a originally an idea. Give us a sense of what made you think, when you started the book, we are going to run out of oil, it will be 500 a barrel the electric car has its energy, today oil is 50 a barrel but nevertheless last year 125 electric cars were sold in the United States so tell us how you got involved with this and what made you decide to write on the subject . A lot has changed since i started the project. One thing seems to never change which is the patriots always win the super bowl and we may have different feelings about that. When i started the book in 20082009 the inspiration for me to look at electric vehicles came from the meeting at ford motor co. I was meeting with a person who charged all the Product Development named derek his role, Long Term Strategic Development Plan and i had a Startup Company i was working on we were working a radical small, we hoped that was going to be the future of unloaded technology and we expect that. We didnt take batteries very seriously but when i had my meeting, the lights came on and he congratulated me that this was a really interesting design but i am not going to put money into it because it will cost billions of dollars and within 15 to 20 years everything is going electric anyway so i have a technology called ego boost, then we are moving to electric vehicles and that was a huge shot for me. I walked out of the meeting with my partner and turned to him and said you think he was serious about batteries . My partner said i dont think he was joking that. Wasnt laughing. That made me return to the drawing board and take a look at electrification and the Drivers Behind electrification and there were some clear macro drivers, things like oil scarcities of we thought was a big deal at the time at the cotton constrained world and it hasnt changed but the idea of industrial leadership and the fact that there would be big countries, big economies that new the automotive sector would be part of the superstructure Going Forward. The iris engine is kind of on ice right now. Lets just say in electrification, and i know such engines are going to be part of the transportation picture for the next 20, 30 years but increasingly there will be a move toward batteries. One other thing that was very significant for you once when you were at shanghai and you saw what the chinese were doing an electric cars was that any tiffany as well or were you already committed to the subject . The thing that was amazing to me was how much changed since 2010 when i was at the world expo at shanghai. Gm and their chinese partners, had dont know how many of you are familiar with the structure of the chinese automotive economy but you have these big multinational automotive manufacturers and in order to sell cars in shyness, to produce and sell cars in china they have to partner with a local company so the largest of these is the shanghai automotive industrial corp. And they are rigged with a number of companies, General Motors so the world expo, they were asked to put together a vision of what the future of shanghai looks like so they created this absolutely dazzling display where you walked into a stadium seating amphitheater there was a huge imax screen, you stretch into a harness and it flew you through this technologically advanced, incredibly clean, electrified world where all the vehicles were autonomous, no spotlights, flying people who could drive around the city freely, mothers making it to the hospital on time to deliver their babies because they had an efficient electric cars the interesting thing is that looks like something that was certainly not going to happen by 23 and might never happen but in 2015 it is pretty reasonable to assume Something Like that is going to be well on its way characterizing the Transportation System of 23 and we already have things like the google cars that are on the streets today, every major automotive manufacturer has the Vehicle Program under development and every major automotive manufacturer has a serious electric Vehicle Program. From this discussion after reading the book you get a sense that you will be able to form your own opinion as to what kind of car youll be driving in 5, 10, 15 years and come back to that subject at the end of this. The architecture of the book is Competition Among three countries, china, japan and the United States. Why did you organize in terms of countries . That is a good question and a lot of people have asked me about that. Automakers, gm sells more cars in china today than it does in the United States. One of the things that drive technology and one of the most important things driving the evolution of auto sector today is regulation and regulations still happens on at National Scale and sometimes happens on a sub National Scale so in the case of the United States you have a big regulatory why you chose those three, why did you choose russia or germany . They are the mostthe largest single country economy is in the world and i convenient mes up the chinese and japanese, that made it an easier choice. My german needs a little work. Portuguese i could have added brazil to the mix. Substitution and industrialization but it was not quite as sexy. You get to the center but you talk about china you talk about the United States, you talk about japan and you talk about what may be the most powerful and known agency in the world California AirResources Board and the long reach of how important that is. Tell us why california which at this point is still part of the United States we treat as something separate . California was subject to a role in Environmental Crisis, a smog crisis. The problem in the 1940s, no one knew where the smog came from. Account crazy today, hed seemed obvious it comes from industrial emissions and automobiles but at that time people didnt know. There was a californiabased scientist who did some Cutting Edge Research and figured out that most of the smog in los angeles in particular was coming from cars. The result of that was over the next 10, 20, 30 years california built up what was by far the most sophisticated Regulatory Infrastructure for researching and regulating the emissions of automobiles and other forms of environmental pollution. In 1970 when the clear act was passed in washington d. C. The federal government recognize that. California was actually far ahead of them in terms of understanding the science of smog and also how to regulate smog and how to drive manufacturers towards bringing new technology to market. They created a special cutout in the 1970 Clean Air Act that allows california to have regulations for emissions. That meant the decision made in 1970 than actually is quite a long time ago, has of big impact on the electric car today. It reverberate strongly in the present day and even more impact full because other states are allowed to opt in to a strict air pollution requirements and those requirements are the root of california. Wind did you get the impression carb was saying wheres the electric car . A lot of it comes from california from carb. That is what your book says. Sometimes i have disagreements with myself. Tell us how carb got where we are now what carb did to get the electric car on the road . Interesting story. General motors was in a bad place, they were the japanese were flooding the u. S. Market with low cost automotive imports and it had gotten so bad that Ronald Reagan made a political deal with the japanese government, to have voluntary export restraint where the japanese throttled back the number of vehicles they would export to the United States. So things were not looking good. Chrysler had gotten a billion dollar bailout from the federal government and General Motors decided that they were going to a more complicated story than this but they were going to enter a solar rays across the australian outback to show how cutting edge they are that they were not losing to the japanese and competing up world stage. They crushed the competition. It was a week long race, they were three days after. What did that have to do with carb . It was an electric car. They decided to continue the Development Project and build a concept car and leadership decided to, but impact they had a huge impact on Automotive Industry because regulators from carb drove it at the Los Angeles Auto Show and decided this was their perfect weapon. It was called but a gun on wheels. Maybe. Not sure i have heard that terminology but it is called a lot of things. That was the forerunner of a vehicle called the e d 1 that many people have probably heard of through the documentary who killed the electric car but it was the impasse that convinced california regulators that the electric car was a viable Consumer Option and it caused them to develop a set of rules cut into a much larger package of air pollution related rules that essentially set out a timeline for innovation and said by 1998, 2 of the cars that are sold in california have to be electric and by 2003, 10 . I would say it didnt fail. It was postponed. One of the good things about this policy was there was a builtin review mechanism. Every couple years it would come back, is it working and not working . Why is it not working . Is the Technology Ready and they would fight with automakers about it . How do auto makers feel about the car . They didnt like it. Tesla liked it but it has been an evolving relationship. At various times the relationship has been more or less fraud betting general that has been characterized by a cs of cantankerous lawsuits. What is carb requiring today and how is it working . Today you have a situation where 7 states in addition to california have bought into the great race the global quest for the car of the future carbs zero emission requiring automakers if they are going to sell cars in california or seven of the state have to sell a certain proportion of electric vehicles. The interesting thing they have done is overlaid the market on top of this mandate which is enormous inefficiency enhancing. It means rather than just saying every single automaker has to sell 2 electric cars or 3 electric cars next year and automaker can make a strategic decision whether it makes sense for them to build electric cars themselves or by credits that are awarded to automakers when they sell an electric vehicle, they can buy them from another automaker. How much does it cost . It changes depending on who is selling more, a couple years ago the tesla models was producing about people estimated 35,000. Tesla in addition to selling the car making revenues from selling the car was also making revenue from selling credit. In q3 of 2014 tesla made 76 million through the easy credits alone. Lot of money in it has a big impact on the Business Model. How many electric cars 120 were sold last year. What proportion are in california . Lots. If you look at california it is almost all of them. It is hard to get really good numbers on where the cars are being sold. California put out an announcement november of last year together with its partners, sold them to 70,000 electric vehicles, and that was win the u. S. Electric Vehicle Market had cumulatively sold 250,000 vehicles so it is not all of them but it is a lot. Lets turn to china. We were having this conversation five years ago, News Coverage the articles were how china was going to have everyones lunch from the electric car why was china so committed to the electric car to the question of how it worked out or hasnt worked out the electric vehicle makes a lot of sense. They have horrible air pollution problems. Anyone who spends time in china has seen this. When i go to china i wake up early, look out the window you can see the sky, i strapped on my Running Shoes and go running because theres a chance you wont be able to do that again for the next six seven days, the pollution is so bad that frequently you cant get a good view of the buildings across the street from you. They have an Environmental Crisis similar to the california crisis of the 1950s. You are from california or originally. I remember the painful smog. It is just as bad if not worse in china today. Is a lot worse in shine at day. The second reason is energy imports. Imacs economy is going very quickly, not as quickly as it was over the past week in years but it is still growing at a rate of 7 a year and that translates into increased energy demand. The electric vehicle is a means by which china can gain increased mobility but not increase their oil imports. The third reason to me is the most interesting and it is the real reason the chinese are interested in the elected vehicles which is the current minister of science and Technology Used to be an audi engine here. He came up with this idea injure many of leapfrogging the west into the era of electric vehicles. He knew because he worked at audi, how hard it was to build a Production System that could produce these kinds of products that a worldclass scale and he knew it was going to be difficult for regina to catch up. Germany or japan or the United States in these critical technologies. If china instead looked to the future and focused on electric vehicles and they could lead fraud and command the market for the emerging age. They saw this as a way to the Global Player in the automobile business and his view was they could not become a Global Player because they were too late. What happened, he met the then minister of science and technology and quietly brought him back to china. It seems like a lot of decisions were made, they installed him that one of the best universities in the country and quickly promoted him to president of that university, in a charge of three programs, the Chinese Government program for developing leadingedge technologies. A very important thing. Like nasa plus. Nasa and bar and the National Science foundation all rolled into one. And a member of the communist party was a member of the state council, minister of science and technology and that was an unprecedented thing. It hadnt happened in 40 years that someone who was not a member of the communist party was a member of the state council land still driving this thesis of electrification from a central level in china. So the program, leapfrog hasnt happened yet. As you read the great race the global quest for the car of the future you sense china started very strong what happened there . And enormous amount of money in the program and an enormous amount of enthusiasm and propaganda. It underpins chinas electric vehicles program. That is what this gm expo exhibit, a lot of pressure on gm inside to demonstrate to the world what the system of the future is going to look like. The problem is they got the incentive wrong. It couldnt be more diametrically opposed california made a bunch of mistakes. They had already been involved in this tugofwar with the industry over the 1990s and before that was emissions technology. And auto makers understood what the incentives, automakers responded to, the chinese on the other hand, political pressure on the heads of major Stateowned Enterprises who are not just ceos but politicians, they put a lot of money behind the electric vehicles program, giving huge subsidies, 10,000 from the Central Government many cities and provinces behind electric vehicles. Hasnt taken off in the same way. That is one of the most fascinating things because it shows propelling these Industries Forward is not just a question of money or how much money you throw at something but whether you get the incentives. There is the third player in this great race which is japan. How did japan get into the game. Japan has a terrific place in the narrative. We will talk about the utilities and there are people here in the japanese utilities, tell us how japan got into the game. At the beginning japans role was kind of almost as a spoiler for the auto manufacturers starting in 1970s, lot of pressure on the big three to reduce their emissions and they came together and form a Study Committee that was working on developing emissions but were promptly sued because the federal government whether they were including to keep more expensive than better