June 9, 2024
Stories for the week…..
1: Tesla slows down EV charging plans and it is a problem
Summary: Tesla laid off employees in its charging division and is slowing down plans to expand the EV charging network across the US.
Analysis: Advanced infrastructure is a key component of a supply chain and economy. In this case, you have to tie up power generation, utilities, etc. with easy charging stations that include convenient locations and the scale to charge lots of EVs. As of now there has been $7.5B spent on 7 chargers to date, which will not get the US to its goal. If this is the cost per charger, the electric and EV transition will not occur.
2: Households wince at the rising price of the Green Transition
Summary: Consumers are starting to pay for the transition, and they are not happy about it. Subsidies and tax benefits are being rolled back, or ended, and the result is much higher costs and regulations to meet.
Analysis: Significant rising costs and inflation were not counted on when calculations were being made on the affordability of the “green transition.” With 20-30% inflation in the US since 2020, we will see more projects canceled and the money that is spent will not have the bang for the buck that was expected.
3: BMW plans a $2.8B factory upgrade in China
Summary: BMW will spend nearly $3B to upgrade an existing factory to produce EVs in the China market.
Analysis: With a commitment to the China market and investment, BMW will try to play the high-value, local production angle, and take advantage of China’s leading EV ecosystem. It also adds to the capacity issue in China, and as an EU firm (whose country is going to tariff Chinese EVs), so the outcome is uncertain.
4: U.S. states take on China in the name of national security
Summary: Some states “aim to block Chinese individuals and companies from acquiring land, winning contracts, working on research, setting up factories…”
Analysis: The blocking of Chinese individuals and companies, especially without evidence, is unbecoming of the United States. Efforts to stop “Chinese influence” are bound to fail as they are not specifically targeted, and rely on hearsay, suspicion, and prejudice. Blocking the rights of individuals based on race or origin is stupid and illegal, and smacks of the Chinese Exclusion Act. This isn’t going to end well, and is clearly ineffective in achieving anything close to national security.
5: A port in Peru is at the center of a China feud
Summary: A Chinese company is operating the Chancay Port Terminal and the local government wants to change a contract and certain stipulations.
Analysis: Infrastructure is a critical component of a country’s development. Building ports contributes to that and is a specialized skill set. Chinese firms can build infrastructure often much cheaper than competitors, but that can come with a cost as well. Add to this countries becoming more aware of the power of their own self-determination and you get some interesting clashes. This is not the first time a government wants to renegotiate terms, and will not be the last. There is a growing body of literature and laws that countries and governments are looking at to help them in these types of cases, and also get more leverage to achieve desirable outcomes. This will be a continuing challenge as supply chains evolve further.
Something unique… The US offers sanction relief if it gets the critical minerals it wants. A unique case of leverage where someone on the sanctions lists can get out from under them if they sell their mineral interests. There is a large fear that this will become a modus operandi for governments to achieve their goals.