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Are Electric Pickups the Way? - An Interview with Kevin Tynan of Bloomberg Intelligence

Kevin Tynan, Sr. Automotive Analyst at Bloomberg Intelligence, is a serious car guy and a good friend. Bankers, portfolio managers, and other professionals seeking insight into the automotive industry fire up their Bloomberg Terminals on a daily basis to profit on Kevin’s deep industry knowledge and analysis. He has a lift in his garage, wrenches on his own cars, and keeps an up-to-date list of the 21 cars he’s owned on his phone - 1985 Mazda RX-7 silver, 1990 Nissan SE-V6 Pickup black, 1994 Mitsubishi 3000GT yellow…

I first met Kevin in a Manhattan Irish pub about 8 years ago while doing PR for General Motors. We ate burgers and talked about muscle cars we loved and how the industry tea leaves were foretelling a seismic shift towards more trucks and SUVs. He’s been breaking down the auto industry action for me ever since. The following Q&A is from a recent conversation we had while he was visiting Salt Lake City, edited for space, clarity, and style.

Kevin, you’ve talked/written a lot about the constraints to the adoption of electric cars, especially for the US. Why haven’t we seen more electric vehicles yet?

For automakers, the issue of whether or not to build electric vehicles is completely a spreadsheet. If you’re an automaker, you ask yourself some questions: How much does it cost me to comply? How much does it cost me not to comply? An intern with Excel can figure it out. “Hey, we need to buy credits!”

Companies, especially Volkswagen, in Europe have additional motivation because of the embarrassment of the diesel cheating scandal. They don’t want to be NOT compliant.

If our government stays out of it, but governments in Europe or China are involved, the rates of adoption will be different.

Are our markets fundamentally different, though? Europe vs. the States – the role of vehicles vs. public transportation, size of vehicle, miles driven, etc.

Almost all the influence for electric vehicle adoption lies with the manufacturers; it’s what the manufacturer wants more than what the consumer wants.

We hear more about electrification than ever, but we’re buying more trucks than ever. We’re 80% light truck in the US.

And not only are we buying more trucks than ever, even the cars that we are buying from the domestic manufacturers are the fire-breathers – SRT Charger, Mustang GT, Corvette and Camaro. There are no more garden-variety cars anymore because it’s about profitability. It’s not an accident; it’s what is profitable for the manufacturers.

So, here’s the thing about electric cars, think about this scenario. Let’s say the fed tax credit is $7,500. Let’s even say it’s double. It’s now $15,000 to get you to drive an electric vehicle. The government says, “I’ll tell you what, Steve, not only will we give you a $15,000 tax credit for buying an EV, but we will also fund infrastructure. You’ll have a ChargePoint on every street corner.”

But I’m the manufacturer, and I look at my P&L and think to myself, “That EV that Steve wants to buy and the government wants to create infrastructure for loses me $15,000 for everyone I sell.” What do I, the manufacturer, do? I don’t make it. I don’t build it. So, the government can waive its $15,000 federal tax credit at me all day long, it can point to a charging station on every corner, but I, as the manufacturer, don’t have enough incentive.

“More trucks!"

Exactly. But, if the government says to me, the manufacturer, “Hey, look, Mr. Manufacturer, you lose $15,000 on each electric vehicle you sell, so I’ll subsidize you $15,000 for each one,” I’ll turn to you and say, “Ok, Steve, you want a good EV? Get ready. Here it comes.”

Is that what’s happening now? The 2030-ish targets?

At the end of the day, the idea of going electric by 2030 is in the hopes that the supply/demand balance is favorable and the cost structure of that technology is favorable.

What’s the over/under that we get there?

I don’t know. The industry is not going to be selling $25,000 EVs profitably anytime soon. You’re talking $40k+. I think Ford said they are profitable on Mach-E at $50k. The Mach-E average transaction price is $42k now, so we’re getting close. Can you imagine the average buyer having to spend $45k for the manufacturer to breakeven? It’s going to be difficult.

But one of the things that IS motivation for the manufacturers -- the first legit threat – is when Tesla showed Cybertruck.

I did not expect that to come out of your mouth.

Here’s why. Because T1 (full-size truck platform) to GM, F-Series to Ford, and Ram 1500 to Stellantis are everything. They’re everything. The domestic OEMs can’t afford to lose that market to Tesla.

If Tesla wants to make Model S, GM doesn’t care. “Tesla, you do what you want, I’m selling pickups all day long.” Then Tesla makes the X, whatever the heck that is, but GM is not threatened by that. Model 3? GM still doesn’t care. “That’s the unprofitable side of the business we’re getting out of.” Then Model Y, which they call it a crossover but it’s not, so still nobody cares.

But then Tesla shows the Cybertruck, and GM says, “Whoa, timeout…We make all our money in the pickup space, and even if that truck is a joke, that’s not a chance we can take.”

GM has done the work on electrification. They know the tech. They know the cost. Pickups are the segment they will fight to protect. “If you, Tesla, want to capture the mountains and the scrub brush with S, 3, Y, and X, knock yourself out. We’ll be over here selling trucks all day long. But if you come for pickups, we’re going to stand our ground.”

GMC Hummer EV & Ford F-150 Lightning

So, then GM makes GMC Hummer EV and Ford makes F-150 Lightning.

Exactly. I’ve seen the F-150 Lightning. It’s got a big trunk in the front, an electric drivetrain, electrical outlets everywhere, and can run your house for 3 days and all this wonderful shit, but the important thing is it’s a REGULAR F-150!

And why is that important? The full-size pickup market is like 2.5 million, and 30% of that is fleet buyers. You’re talking 750 thousand full-size pickup truck buyers that domestic OEMs are not going to lose. Fleet customers are not going to buy Cybertruck or Rivian, because they’re not proven.

The pick-up truck is the way to get electric vehicles adopted and infrastructure built?

I kinda always thought the commercial market was the way to go, more so than the passenger market. If I’m a logistics guy, and I have a fleet of delivery trucks, I know exactly where they need to go every day. I know the range to the mile. But if I’m a guy who lives in the suburbs and has an EV, I don’t have my trips planned out. That’s where range anxiety comes in.

The pickup truck is also the way to achieve breakeven. Average full-size pickup transaction prices are well into the fifties heading into the sixties. It’s going to be easier to break even and then make money selling $60k trucks vs. $25k urban cars.

Ok, you think we can get there in terms of having a market, but you said you don’t think we’ll be able to consume our way to sustainability?

The idea of buying six-figure Teslas to save the planet is asinine.

We have to dig up the minerals. We have to paint the cars. We have to dispose of them. We have to charge them. I don’t think we achieve sustainability by driving a $100,000 Tesla Model S into Manhattan everyday.

That’s not to say the alternative of NOT doing something is the answer. I think as long as there are humans, we’re screwing the planet one way or the other.

What car are you most excited for? What’s something you’re generally interested in?

I’m interested to see if the new electric stuff sparks interesting designs. The GMC Hummer and the Cadillac Lyric are interesting designs. I don’t get Cybertruck at all, but at least it’s not a jellybean compact SUV-thing that’s been happening for so long.

You said you liked the new Ford Bronco.

I do like the Bronco a lot, but I’m not a truck guy. I don’t like the high ride, the floating.

You’re a convertible sports car guy.

Yeah, yeah, I like to be low and feel. While in Detroit, I drove around in the new Ford Mustang GT 500, which was phenomenal. 760 hp. Incredible.

The industry keeps pushing forward, right?

Having done this for 20 years, this is the most dynamic the industry has ever been, and that’s including the bankruptcy period.

There is real structural change, and I don't just mean the drivetrain. Automakers are not going to be carrying 80 days of supply anymore. We’re to the point where automakers have seen what balancing supply and demand better can do for their enterprises. We’ll be close to the 60 days supply of only good profitable stuff.

Instead of selling hundreds of thousands of Chevy Cruzes for $20k and losing $10k each, GM can sell $30k Bolts and get to the same place in terms of regulatory compliance and not lose anywhere near as much money. It’s just a healthier industry. No more pushing out supply to cover fixed costs and then figuring out how to sell all the supply by throwing money at the problem. I hope we’re away from that for good.

Ford Mustang Shelby GT500

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