There are stacks outside if anybody gets hungry here. Are you ready . High, everybody. Im daniel yergin, director of new america and im pleased to welcome you to this discussion today on the electric car. And also very happy to welcome the viewers on cspan2 our discussion. We are going to be talking about a terrific book today called the great race by levi tillemann. Its a very timely book. This is really the fourth time that the electric car has appeared on the scene and the first time was when Thomas Edison was a great proponent of the electric car and spend 1 million in the dollars of that day which would be many millions of dollars to date over a very continued trying to develop it. He promised the head of the biggest electric Utility Company in america that he was going to give them lots and lots what a great market would be. It didnt work out. There were two more episodes and then finally we are here today. It is challenging to write a book on this subject, and to write the book that levi has written. Several requirements are necessary. One, you need to know cars. To, you have to have a sense of automobile technology. Three, you have to know chinese and japanese your and four, you have to have a sense of National Politics and international competition. So levi, theres not many people who meet those requirements that you actually did meet them. I think it would be to get started i remember when this was just an idea. Can you give us a sense of what made you think because when you started the book we are going to run out of oil, oil would be 500 a barrel, and the electric car, today, oil is 50 a barrel but nevertheless last year 120,000 electric cars were sold in the United States. Tell us how you got involved with this is what made you decide to want to write on the subject. A lot has changed since i started the project. One thing seems never to change which is patriots always win the super bowl. We may have different feelings about that but when i started the book and really 2008, 2009, the inspiration to look into electric field came from a meeting i had the the ford motor company. I was meeting with a person whos in charge of all of their product to fill the. His name is derek and his role was really set the longterm Strategic Development plan for the company. I had a start up company i was working on. Were working on a very radical small efficient internal Combustion Engine and we hope that would be the future of Automotive Technology. In fact, we didnt take batteries very socially but when i had my meeting with derek, the lights came on and he congratulated me that this is a really interesting design but im not going to put money into it because it would cost billions of dollars. And within 1520 is everything is going electric anyway. That was a huge shock to me. I walked out of the meeting with my partner editor jim and i said, do you think he was serious about batteries . My partner said yeah i dont think he was joking. He wasnt laughing. So that made me return to the drawing board and take a look at electrification and what were the Drivers Behind electrification, and there were some very clear macro drivers things like oil scarcity that we thought was a big deal at the time. Its like carbon constrained world that we are moving towards which hasnt changed, but also the idea of industrial leadership and the fact that there were these big countries, big economies that knew that the automotive sector was going to be a critical part of their infrastructure Going Forward speed what happened to the engine . It is on the ice right now but lets say i bought into electric asian and i know into Combustion Engines are going to be a part of the transportation picture for the next 20, 30 years. But increasingly there will be a move towards batteries and have fuel cell vehicles. What was significant to you was when you in shanghai and you saw what the chinese are doing with electric cars. Was that an epiphany as well are we already committed . The thing thats really amazing to me is how much has changed since 2010 and i set the world expo. Their chinese partners of the howling of your family with the structure of the chinese automotive economy but basically you have all of these big multinational automotive manufacturers and in order to sell cars in china, in order to produce and sell cars in china they have to partner with a local company. The largest is the shanghai Industry Corporation at the apartment with a number of these, with General Motors. They were asked to put together a vision of what the future of shanghai could look like. So they created this absolutely dazzling display where you walked in to a stadium seating theater. It was a huge imax screen. You strapped into a seat and it flew you through this incredibly technologically van, critically clean electrified world where all of the vehicles were autonomous, no stoplights, flying people who could drive around freely. There were mothers who were making it to the hospital on time to deliver their babies because they had an efficient [inaudible] that looked like something that was sort of going to happen by 2030 and might never happen in 2010. But in 2015 its pretty reasonable to assume that Something Like that is going to be well on its way towards characterizing the Transportation System of 2030. We already have things like the google car out on the streets today. Every major automobile manufacturer has a serious Autonomous Vehicle program under development in every manufacturer has a very serious electric Vehicle Program as well well. So from this discussion after reading the book you get a sense that you be able to form your own opinion as to what kind of car you will be driving in five 10 or 15 years. Well come back to the subject at the end of this, but the architecture of the book is really a Competition Among three countries, china, japan and the United States. Wide rather than companies did you organize this into countrys . Thats a good question and a lot of people have asked me about that. Automakers are multinational. Gm sells more cars in china today than it does in the United States. But you see that one of the things that drives technology on one of the most important things driving the evolution of the auto sector did is regulation. Regulation still happens on a national scale. Sometimes it happens by seven national scale. So when the case of the United States, you have a big we will go into that in a minute, but why you chose those three countries. Why didnt you choose russia or germany . Why did you choose those three . They are the largest automotive economy in the i conveniently spoke chinese and japanese so that made it an even easier choice. My german studies a little bit of work. I couldve added brazil into the mix. But it wasnt quite as sexy. You started to get you talk about china, to talk about the United States, you talk about japan. Then you talk about what me the most powerful and agency in the world, California AirResources Board, carb, ma and you talk about the long reach of carb an important that is. Tell us why california which at this point is still part of the states you treat as a separate sovereign. Starting in the 1940s california was subject to really a rolling environment or crisis which was a smog crisis. The problem was in the 1940s nobody knew where the smog came from. Sounds crazy to date the seems obvious small comes from anna eshoo emissions automobiles but at the time they didnt know. Technology 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 also regulating the emissions of automobiles but also other forms of environmental pollution is. In 1970 when the Clean Air Act was passed in washington, d. C. , the federal government recognized that. To recognize california was far ahead of them in terms of understanding the science of smog but also how to regulate smog and how to drive manufacturers towards bringing new technology smarter. They created a special put out and a carpet in the 19 sand cleaner act that allowed california to set its own regulation for a missions. So that meant that decision made in 1970 then actually quite a long time ago and has a big impact on the electric car today. It reverberates very strongly to the present day. And its even more impactful because of the fact that other states are allowed california has very strict air pollution requirements and those requirements they are really the root of california ended carb from reading the book you get the impression that carb, if you try to say where does the modern car come from, a lot of it comes from california from carb. Thats what your book is as. You agree with your book. You havent changed your mind. Sometimes i have disagreed with myself. De la salle where we are now, what carb did to get the car on the road to . An interesting story but in the 1980 General Motors was in a bad place. They were being drubbed by the japanese who were flooding the u. S. Market with high quality lowcost imports. And effect it had gotten so bad that the free trade Ronald Reagan made a political deal with the japanese government to have something called voluntary export restraints with the japanese throttled back the number of vehicles they would export to the United States. And so things were not looking good for the u. S. Auto industry. Chrysler had just gotten a billion dollar bailout from the federal government. General motors decided that they were going, although more obligated, but they were going to enter a solo race across the australian outback to show just how cutting edge they still were. That they were not living up to the japanese, that they could still compete on the world stage in the most Cutting Edge Technology of the day. They crushed the competition but i think it was like a weeklong race and they were three days faster than the closest competitor spent what does that have to do with carb . It was an electric car and he decided to continue this project and they built a concept car. They wanted to call the santana the leadership to such code the impact. It had huge impact on the Auto Industry because regulators from carb drove it and they decide this is the perfect weapon. Is that the windows called the aegon well . Maybe. Egg on wheels. That was the forerunner of a vehicle called easy one. Many people have probably heard of through the documentary who built the electric car. But really it was the impact that convince california regulators that an electric car was a viable Consumer Option and it cost them to build a set of rules that would cut into a much more package air pollution related rules that is such a set out a timeline for innovation and said by 1998 2 of the cars that are sold in california have to be electric. By 2003 10 . But that failed. I would say it didnt fail. I would say it was postponed. One of the good things about this policy was there was a builtin review mechanism to the couple of years and come back say this is working, this is not working, why is it that working . Is the Technology Ready . Then they would also fight a lot about the automakers. How did the automakers like to . Not very much. Probably testimony liked them. Its been an evolving relationship. In general the relationship is being characterized by a series of very cantankerous boss is. So what is carb requiring today and how is that working . So today you have a situation where seven states in addition to california have bought into carb your emission mandate which basically requires that automakers if theyre going to sell cars in california or the seven other states have to sell a certain proportion of electric vehicles. The interesting thing theyve done is they overlaid a market on top of this mandate which is enormously efficient. It means rather than just saying every single automaker has to sell 2 electric cars this year, 3 electric cars next year, and automaker to make a strategic decision whether it makes sense for them to build electric cars and so or by credits that are awarded to automakers when they sell an electric vehicle. They can buy them from another. How much do they cost . It changes to anyone who is selling more or fewer electric vehicles. And sometimes the price is really high. A couple of years ago the max to testimony model was producing about, people estimated 35,000 worth of credits per vehicle. So in other words testimony in addition to making revenue was also making revenue from selling credits to . And still are. Testimony made 76 million through the credits alone in 2014. Its a lot of money and has a big impact on the Business Model for these electric vehicles. How many electric cars are a bit, 120,000 that were sold last year what proportion are in california . A lot. If you look at california plus the states the following the mandate, its almost all of them. Its hard to get good numbers on exactly where the cars are being sold. California put out an announcement, i think november of last year that it and its partner states have sold 250,000 electric field goals. That was when the u. S. Electric Vehicle Market had sold the 250,000 electric vehicles. Its not all of them but its a lot of them spin lets turn to china. We were having this conversation five years ago the news coverage, the article forgot that china was going to eat everybodys lunch with electric car. Why is china so committed to the electric car . And then once you do that we will come back to the question of how it has worked out and how it hasnt worked out. Theres a number of reasons why the electric field makes a lot of sense. First of all they have anyone who spent time in china has seen this, i know when i go to china i wake up early. I look at the wind and the you can see the sky i strap on my Running Shoes and i go running because theres a good chance youll not be able to do it again for the next six or seven days. The pollution that there is so bad that precooling you cant get a good view of the building that is across the street from you. They have an Environmental Crisis that is in some way similar to the california crisis of the 1950s. Youre from california so i can remember the painful smog, yes. Its just as bad if not worse in china today. Actually its a lot worse. Thats the first reason. The second reason is energy imports. Chinas economy is growing very quickly, not as quickly as it was over the past 10 years, but its still growing at a rate of 7 plus per year. That translates into increased energy demand. The electric vehicle is a means by which time you can still getting increase mobility but not increase their oil import. The third reason though is to me the most interesting, and i think its the real reason why the chinese are interested in electric vehicles, which is the current minister used to be an audi engineer. A very interesting story. He came up with this idea when he was in germany of leapfrogging the west into the air of electric vehicles. He knew because he worked at audi which makes him the best most in the world he knew how smart i was to build a Production System that could produce these kinds of products at a world scale any of it would be very difficult for china ever to catch up to germany or japan or the United States in the critical technologies. So they saw this as a way to the a Global Player in the automotive business, and is he was they could not become a Global Player with conventional . Exactly. So what happened was he met the then minister of science and technology very quietly brought him back to china but it seems like probably a lot of decisions were made by the time he came back. They installed in that one of the best universitys in the country. They promoted him to president of that university and making in charge of the chinese Governments Program for developing leadingedge technologies and then speed youre skipping over its a very important thing in china. Huge. Its like nasa plus. Nasa and darpa and the National Science foundation all rolled into one. And then they made him was not a member of the communist party a member of the state council. And made him minister of science and technology, and that was just in unprecedented thing. It had not happened for 40 years that someone who is not a member of the communist party had been a member of the state council. And he is still driving this electrification from a central level. And so the program the leapfrog hasnt happened yet. I mean, i think as you read the great race you have the sense that china started very strong and has picked up the pace. Would have been . They put put any numbers among them an Interest Program and it was an enormous amount of enthusiasm and a lot of propaganda that underpinned chinas program. Thats what the exhibit was. It was the Chinese Government putting a lot of pressure on to demonstrate to the world what chinas system of the future was going to look like. The problem is that they really got the incentives wrong. It couldnt be much more opposed to a things worked out in california. In california they made a bunch of mistakes in the past. They had alr