A car CEO’s plan to fend off China
Tesla is scheduled to report first-quarter delivery data this week, a key update as investors grow concerned about Chinese rivals — especially Warren Buffett-backed BYD — gaining ground in the electric vehicle race.
Tesla stock has fallen nearly 30 percent this year, with short sellers circling.
Politicians and auto executives on both sides of the Atlantic are calling for more safeguards. After Tesla lost its crown to BYD as the world’s largest electric vehicle maker, Elon Musk indicated that trade barriers may be needed. Otherwise, Tesla’s CEO said, Chinese EV makers “will pretty much demolish most other companies in the world.”
Luca de Meo, CEO of Groupe Renault, is pushing for a more radical approach, reports Vivienne Walt for DealBook. Its answer to China’s threat: an EV alliance modeled after Airbus, the heavily state-backed plane maker.
“Europe’s prosperity is at stake,” he recently wrote in a 19-page open letter aimed at getting politicians’ attention ahead of EU parliamentary elections in June. The continent’s automotive sector employs 13 million people and generates 8 percent of the bloc’s GDP
Here’s what de Meo has in mind: European auto giants will join forces in battery and semiconductor production and research and development in a bid to lower EV manufacturing costs and better compete with their non-European rivals. “If they compete as they are, they are weaker against China,” Felipe Munoz, senior analyst at JATO Dynamics, an automotive consultancy, told DealBook. “Their electric cars are still very expensive. They have problems with battery production.”
Airbus is one of Europe’s great success stories, having overtaken Boeing as the world’s largest commercial airplane manufacturer. (Both companies accused the other of obtaining unfair competitive advantages, culminating in a WTO ruling that each had received preferential subsidies.)
Chinese companies have an operational advantage. Labor is cheaper in Shenzhen than in Detroit or Berlin. They have created operational efficiencies and receive massive government support. And China controls most of the world’s raw materials for EV batteries, such as lithium, which the West is frantically trying to source. “Chinese EV makers have a 25 percent structural cost advantage,” UBS auto analyst Patrick Hummel told DealBook.
Trade barriers are unlikely to slow China’s growth. “Any increase in tariffs will have an impact, but it won’t prevent them from arriving,” Munoz said. “This will be a war between tariffs on one side and subsidies on the other.”
An Airbus-style business can face headwinds. Volkswagen and Mercedes-Benz executives last month said they did not want to see an auto trade war. Both companies have strong operations in China and have tried to distance themselves from a European Commission investigation into whether China provides its domestic carmakers with market-distorting subsidies. “We support free trade,” said Arno Antlitz, CFO of Volkswagen
HERE’S WHAT’S GOING ON
A $20-an-hour minimum wage for fast-food workers begins today in California. The law, which has been strongly opposed by the industry, applies to most workers in the industry in the state and requires employers to also offer paid overtime and family leave. Under Gov. Gavin Newsom, a Democrat, California championed some of the most generous workers’ rights provisions, with all health care workers receiving a $25 minimum wage by 2028.
The Senate is reportedly planning to amend the House’s TikTok bill. Sen. Maria Cantwell of Washington, the Democratic chairwoman of the Commerce Committee, is expected to push for changes to a proposal that could bar implementation in the US, the Wall Street Journal reports. That could include giving ByteDance more time to divest TikTok or broadening the bill to address other social media platforms. Meanwhile, former Treasury Secretary Steve Mnuchin’s bid to buy TikTok is being met with increased skepticism.
Nippon Steel vows to move ahead with a $14 billion deal to buy US Steel. Tadashi Imai, Nippon’s new chairman, said the Japanese company would negotiate with US Steel unionists to win their support. The takeover has become a hot election issue, with President Biden signaling that US Steel should be domestically owned ahead of a summit with Japanese Prime Minister Fumio Kishida on April 10.
The debate is growing over the rebuilding of the Baltimore bridge
Workers removed the first section of the breached Francis Scott Key Bridge in Baltimore, a step toward reopening the shipping channel. The question now turns to who will have to pay to rebuild the vital transportation span with President Biden visiting the city this week.
Pete Buttigieg, the transportation secretary, yesterday urged Congress to approve the necessary money, stressing that the bridge’s collapse could have an impact on the wider economy. But with cost estimates of at least $2 billion, not everyone is in Washington.
“Your district could be next, and this has historically been bipartisan.” Buttigieg told CBS News’ “Face the Nation.” Biden said last week that the federal government would pay “the entire cost” of the rebuild — the Department of Transportation has secured a $60 million “down payment” but that’s not enough to complete the project.
But there is bipartisan hesitation. Representative Dan Meuser, Republican of Pennsylvania, called Biden’s funding pledge “obscene” and “a knee jerk reaction”.
Other lawmakers want to see the companies involved in the crash (and their insurers) pay at least part of the cost. “I don’t think it should be federal taxpayer money,” John Garamedi, Democrat of California and a senior member of the House Transportation Committee, told Bloomberg last week. “Let’s go to the insurance side first and then we’ll see what’s left.”
The industry is bracing for a heavy tab. John Neal, CEO of Lloyd’s of London, called the disaster “one of the greatest maritime losses in history”. Morningstar analysts, meanwhile, estimate it could cost insurers as much as $4 billion.
The collision puts the spotlight on the safety and size of shipping. Larry Hogan, the former Republican governor of Maryland who is running for the U.S. Senate, courted large ships during his tenure, from 2015 to 2023, according to Lever News. This is despite a report by Allianz, the insurer, which highlighted “risk management concerns” created by the giant ships.
The oversized ship that crashed on the Francis Scott Key Bridge was loaded with about 4,700 40-foot containers, an increasingly common sight amid a global shipping boom. By contrast, the ships that sailed by the time the bridge was built in 1977 had about half that.
An AI warning label
A big concern about AI involves tech companies using vast amounts of public data — including names, phone numbers and addresses — to train their AI models.
A recent Commerce Department report on improving AI accountability offered a proposal for how to debunk the technology. It featured an image most of us are familiar with: a nutrition label — but for data, not food.
The idea would be for tech companies to use the label to inform businesses and consumers about how they use their data for AI. the report said.
The week ahead
Jobs, inflation data and a big proxy fight looms. Here’s what to watch this week.
Wednesday: eurozone Consumer Price Index data is scheduled for release. Markets are pricing in a rate cut in June if inflation can remain under control.
Elsewhere, Levi Strauss, whose jeans make a prominent appearance on Beyoncé’s latest album, is reporting profits. Disney is holding its annual shareholder meeting, where its fight against activist investor Nelson Peltz is expected to come to a close.
Thursday: Donald Trump faces a deadline in his fraud case: post a $175 million bond or risk the New York attorney general’s asset freeze.
Friday: It’s a working day. Economists polled by Bloomberg predicted employers added at least 200,000 jobs in March. They also expect a slight slowdown in wage gains.
Market Quiz, Crypto Edition
Bitcoin was trading around $69,500 this morning after a rally that saw the cryptocurrency soar 67% in the first quarter. Much of the increase came after the SEC approved the creation of new exchange-traded funds in January, making it easier for investors to buy and sell the token.
Which of the following was performed? Even better in the first trimester?
-
A) The Nasdaq Composite
-
B) Japan’s Nikkei
-
C) Cocoa futures contracts
-
D) Brent crude
The answer: C, cocoa futures, which have more than doubled this year after an extremely poor cocoa bean harvest in West Africa.
READING SPEED
Agreements
-
Potential bidders could buy some of the world’s leading ice cream brands, with Unilever’s Ben & Jerry’s and the company behind Haagen-Dazs up for sale. (Bloomberg)
-
Huge investments in artificial intelligence are leading to hype and “giggles” reminiscent of the cryptocurrency boom, says Google’s head of artificial intelligence, Demis Hassabis. (FT)
Election 2024
The best of the rest
We’d love your feedback! Send your thoughts and suggestions to dealbook@nytimes.com.
