July 07, 2022 TradeUP Thursday Latest news and bulletin updates
Dow Jones 31,190(+0.57%)
S&P 500 3,858(+0.42%)
(Opening price as of 07/07/2022 compared to last close)
Market rallies after The Fed prepares another increase in Treasury rate
Recession fear drives crude oil below $100 earlier this week
Biden set to impose modest relief on China tariffs
Amazon and Grubhub declare partnership
Share Your Thoughts:
EV Ascendant: Traditional Car Markers Rush to Catch Up with Segment Specialists
Global sales of electric vehicles are rapidly approaching a watershed moment – recent industry research by Ernst & Young indicates that over half of the consumers desire to purchase an EV for their next automobile. Car buyers are transitioning away from traditional internal combustion engines for a variety of reasons, namely:
1. Elevated gasoline prices.
2. Government incentives and penalties, especially in Europe and East Asia.
3. Increased range, improved charging infrastructure and broader availability.
Electric vehicles in the domestic market during Q1 2022 represented 4.6% of new car registrations, almost double that of Q1 2021’s registration of 2.4%, creating a new record high.
While traditional car manufacturers are trying to enter the EV sector, segment-specific makers have already developed large market shares and established brand images. As of April 2022, companies like Tesla, BYD, and SAIC control 77% of global EV deliveries.
Established corporations are slow to catch up with the newer EV-focused market entrants. For several years, sustainable technology in automobiles was focused on the development of hybrid gas-electric vehicles. Only recently has the wider car industry coalesced around the battery-powered EV as the winning product. Even as companies in past years like GM and Ford vowed to invest $35B and $50B respectively into EV technology, the head start of pure EV makers like Tesla and BYD have proven decisive.
Most conventional makers are now several years behind in battery technology and factory infrastructure. The exception, however, is Volkswagen, who after the 2015 diesel emission deception scandal went to great lengths to become a global leader in the battery EV segment.
However, even for veteran manufacturers like Tesla, keeping pace with the exponentially growing industry has been difficult. As covered in last week’s release, Elon Musk recently tweeted that his factory expansions in Germany and Texas have lost him “billions of dollars” and are “money furnaces”. On Wednesday 7/6, it was announced the Berlin and Shanghai plants are to halt production in July to work on upgrades to boost output. Tesla is aiming to double its production rate in August.
While the brainchild of the South African billionaire has a firm grasp on the American and European markets, Tesla has found strong competition from domestic brands in China. Currently, the company holds a 6.6% market share of EV in China by volume, as compared to 78.6% in the US. BYD, a corporation backed by Berkshire-Hathaway, announced in Q2 2022 that it has overtaken Tesla in vehicle deliveries. Both auto makers vie for primacy in the Chinese EV market, the largest in any country.
Can established car manufacturers catch up with the segment-specific brands? Who do you think will prevail as the No. 1 maker of EV in China?
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#1. Market rallies intra-Wednesday after The Fed prepares another expected 50-75 bps increase in Treasury rate starting July
• The Fed discussed concerns of slowing economy and labor market growth but declared its priority was to combat high inflation becoming “entrenched.”
• The Fed explicitly acknowledged interest rates as a tool to stamp out inflation, even if it’s “particularly restrictive” to the economy.
#2. Recession fear drives crude oil below $100 earlier this week
• Beginning on Tuesday, WTI Aug’22 futures dropped to the lowest since May 11th. Energy traders are showing deep concerns over reduced demands and potential recession conditions as the Fed hikes interest rates.
• Citigroup analysts concurred with the wider opinion, publishing a report on Tuesday stating that the crude oil prices may fall to $65 by the end of the year.
#3. Biden set to impose modest relief on China tariffs
• President Biden is expected to loosen tariffs over a narrow set of trade goods to aid in the fight against inflation. Earlier reports indicated this relief to amount to $10B of the $360B of duties levied.
• Biden is likely to impose other “tough-on-China” measures simultaneously to avoid criticism from China hawks. This follows more than 400 requests taken to the US Trade Representative’s office to keep the current tariffs in place.
#4. Amazon and Grubhub declare partnership
• A deal was announced Wednesday that allowed Amazon Prime customers to order takeout through the food-delivery business with a 1-year Grubhub+ membership with no delivery fees.
• Amazon will receive a 2% stake in Grubhub, which will increase to 15% if the partnership goes positively.
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